Our comprehensive assessment of Nigeria's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Nigeria, as well as the latest industry developments that could impact Nigeria's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Nigeria before your competitors.

Country Risk

Nigeria Country Risk

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Core Views

  • Although we continue to forecast robust economic growth in 2015 and the years thereafter, the risks to the Nigerian economy have increased over recent quarters thanks to shifting dynamics in global oil markets.

  • Nigeria's balance of payments position will come under renewed pressure as February 2015 elections approach. A balance of payments crisis is unlikely however owing to a healthy level of foreign exchange reserves. Over the longer term, Nigeria's external accounts will become increasingly susceptible to negative shocks owing to a subdued outlook for oil export growth.

  • September's hawkish monetary policy statement will calm lingering fears that new central bank governor Godwin Emefiele will prematurely loosen policy. This is important for macro stability given that food prices, rising banking sector liquidity and higher...

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Nigeria Operational Risk Coverage (9)

Nigeria Operational Risk

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BMI View: Nigeria offers investors one of the most difficult and dangerous operating environments in Sub-Saharan Africa. The major risks to businesses stem from the deteriorating domestic security situation, which is characterised by rampant criminal activity and frequent terrorist attacks. These risks pose dangers to the safety of foreign workers and business interests, and also cause disruption to the country's utilities infrastructure and transport network, both of which are struggling to meet the needs of an expanding economy and population. Corruption is also endemic across both the public and private sectors, complicating government bureaucracy and deterring foreign direct investment (FDI). The government faces huge challenges in addressing these issues in order to maintain strong FDI inflows and economic growth.

Due to its strong performance with regard to the extent of its transport...

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Nigeria Crime & Security

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Nigeria's operating environment is characterised by a multitude of risks, the chief of which are domestic terrorism, endemic corruption, and criminality. Foreign workers are highly vulnerable in Nigeria, with risks posed by a wide range of crimes from petty theft to serious fraud and violent crime, as well as terrorist attacks. Nigeria's highly unstable domestic security situation is somewhat mitigated by its secure international position, which means that the country ranks 27th out of 44 Sub-Saharan African (SSA) states in the BMI Crime And Security Risk Index, with a score of 34.0 out of 100. However, we note that the only countries in Sub-Saharan Africa with greater threats to foreign workers are Mali and Sudan.

Nigeria is one of the most unsafe locations in the world for foreign workers and businesses, with even extensive security precautions and hired security services failing to provide sufficient protection. The...

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Nigeria Labour Market

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BMI View:   Overall, Nigeria has a large pool of skilled and unskilled labour relative to other countries in Sub-Saharan Africa ( SSA ) owing to its population size, demographics and the sheer number people completing various levels of education. However, poor infrastruc ture and frequent strike action affect s the quality of products from the country's educational institutions, especially at the tertiary level, leading businesses to retrain graduate employees or recruit foreign trained graduates at an extra cost. Nigeria has a total Labour Market Risk score of 47.7 out of 100 in our Operational Risk Index. This puts it in sixth place in SSA, between Mauritius and South Africa, and 7.1 points behind regional...

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Nigeria Logistics

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Despite a healthy economic growth outlook, Nigeria's attractiveness to investors is stymied by the country's poor logistics sector. The transport network suffers from undercapacity with delays prevalent, and the utilities sector is vastly inadequate and unable to keep pace with growing demand. Trade bureaucracy is elevated, further adding to the time and monetary cost of importing and exporting goods. Nigeria therefore receives a low overall score in the BMI Logistics Risk Index, with 38.6 out of 100 ranking it 15th out of 44 Sub-Saharan African (SSA) countries.

Although Nigeria offers a large and expanding market size, this poses more risks to investors than it does opportunities. This is because the utilities infrastructure is already overburdened, with the mains power and water supply failing to reach the majority of the population, and electricity, fuel, and water plagued by frequent shortages. Any expansion in...

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Nigeria Trade & Investment

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Nigeria's business environment is challenged by a number of factors capable of increasing business risks for investors, from government bureaucracy and corruption in state institutions to poor enforcement of intellectual property protection and a weak legal framework. However, the large domestic market and key government incentives on business ownership and profit repatriation make it a top foreign direct investment (FDI) destination in Sub-Saharan Africa (SSA).

Nigeria ranks poorly in the BMI Trade And Investment Market Risks Index with a below average score of 27.2 out of 100. This puts the country in 33rd position out of 44 countries in SSA, along with its northern neighbour, Niger, and between Gabon with a score of 29.1, and Guinea with a score of 26.9. Regional leader Mauritius scores 68.5 out of 100, followed by South Africa with a score of 60.5 out of 100.

The greatest risk facing...

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Nigeria Industry Coverage (16)

Agribusiness

Nigeria Agribusiness

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BMI View:   With the 2013/14 cocoa season complete we maintain our view that production will recover after two lean years. We expect this rebound to set the stage for healthy production growth over the next five years as investment continues to pour into the sub-sector. Plans for the country's first chocolate factory suggest that consumer demand could also gather pace. Rice and sugar will benefit from a new irrigation scheme and more generally from the government's more nuanced efforts to incentivise local production: favouring financial incentives over the previous rather clumsy policy of merely hiking up tariffs. Investment has also been forthcoming for the dairy segment, although we caution that issues with storage and infrastructure may limit any short - term gains here. Feed costs are expected to continue to be a burden on livestock producers and...

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Autos

Nigeria Autos

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According to figures from the International Organization of Motor Vehicle Manufacturers (OICA) new vehicle sales in Nigeria totalled 52,000 units in 2013, up from 50,000 in 2012. The headline figure is broken down into 40,000 passenger cars (PC) and 12,000 commercial vehicles (CV).

Looking forward, there are indications that 2014 should prove a stronger year for new car sales, with BMI targeting 8% growth. There are a number of reasons for our near-term optimism on the local sales market, which we outline below.

First, we expect new car sales to be boosted by the launch of more significant amounts of local auto production across 2014, a result of the newly-introduced Nigerian Automotive Industry Development Plan (NAIDP). Increased local production should lead to cheaper prices for new cars in the country. Moreover, manufacturers are looking to concentrate on producing low-cost cars in the first...

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Commercial Banking

Nigeria Commercial Banking

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Commercial Banking Sector Indicators 
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Food & Drink

Nigeria Food & Drink

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BMI View:  Despite revised data showing that the Nigerian economy grew more slowly over the last three years than the original figures suggested, we have not altered our forecast of 7.0% real GDP growth for 2014 and 7.4% for 2015. The positive impact of agriculture means that this important sector should contribute strongly to private consumption growth.

Similarly to much of the African continent, Nigeria is experiencing a growing middle class, accompanied by economic growth. The increasing spending power of this middle class is being targeted by multinationals who are continuing to invest in the country's food and drink sector. 

The long-term outlook remains very bright. We are forecasting average annual real GDP growth of 7. 0 % over the next 10 years, and expect the Nigerian government to prioritise...

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Freight Transport

Nigeria Freight Transport

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There will be strong growth in freight transport volumes in Nigeria in 2015 and beyond. Strong real GDP growth, increasing demand for consumer goods by an expanding middle class and a growing manufacturing sector will all raise intermodal container volumes. The country's ongoing population growth will power this. The growth in demand is driving investment into the sector, with substantial interest not only in developing new ports and expanding old ones, but also reinvigorating the country's dilapidated rail network. Road and air freight infrastructure are also seeing new investment.

Headline Industry Data

  • 2015 air freight tonnes-km forecast to grow by 10.7% and to average 9.6% to 2019.

  • 2015 port of Lagos tonnage throughput is forecast to increase by 5.9% and to average 5.3% to 2019.

  • 2015 rail freight tonnes-km to...

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Information Technology

Nigeria Information Technology

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BMI View:   The increase in economic activity and improvements in data connectivity will drive investments in new IT services and solutions by businesses in Africa. One of the key growth areas is financial services, with emphasis on e-commerce and customer service. With businesses across key consumer-centric industries such as retail, aviation, telecoms and public utilities looking to build up their e-commerce capabilities, we see the regions' banks investing in solutions to enable them cope with new demand from corporate and individual customers.

Headline Expenditure Projections

Ghana

Computer Hardware Sales: GHS718mn in 2013 to GHS866mn in 2014, +22.1% in local currency terms. The government's ambitious Basic Schools Computerisation project and e-...

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Infrastructure

Nigeria Infrastructure

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BMI View : In our view Nigeria represents a high reward market, now the largest in Africa, and has an impressive growth trajectory over our 10-year forecast period   which sees construction industry real growth averaging 12%. Improving power supply and transport links will also be a driver of growth, but the infrastructure sector is more exposed to the numerous risks in Nigeria's business environment.

The potential of Nigeria's infrastructure market has long been known, however a chronic lack of investment and the countries laborious business environment has limited its growth prospects. Now reforms and development plans implemented under President Goodluck Jonathan, although slow to get off the ground. are beginning to...

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Insurance

Nigeria Insurance

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BMI View: As of late 2013, it is clear that some of the objectives of the Market Development & Restructuring Initiative of NAICOM, Nigeria's insurance regulator, were overly ambitious. Nevertheless, positive changes are underway, and should benefit the country's leading insurers. The coming year or so will show whether the MDRI actually produces a meaningful rise in non-life penetration, as it should.

When NAICOM, the insurance regulator of Nigeria, launched its Market Development & Restructuring Initiative (MDRI), the ambitious objectives were due to have been achieved by the end of 2012. A year later, successes are hard to identify and to quantify. In terms of premiums written, we think that the entire insurance sector is only about one third of the size envisaged by the architects of the MDRI. It is not at all clear that Nigerians have confidence in...

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Medical Devices

Nigeria Medical Devices

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Espicom Industry View:   Despite budget constraints, the Nigerian medical device market is exhibiting encouraging growth after several years of stagnation. Virtually all of the market is supplied by imports, which reached a high of US$154.4mn in 2013   and have continued to grow during the early part of 201 4. The long term growth prospects of the Nigerian medical device market will be strongly influenced by the government's policies in regards to investment under the National Strategic Health Development Plan (2010-2015), the shortage of healthcare personnel and a need to effectively address the poor healthcare indicators of the country.   The implementation of the National Health Bi l l ,...

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Oil & Gas

Nigeria Oil & Gas

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BMI View : Nigeria's hydrocarbon sector continues to struggle amid a worsening political and business environment. The weak output flows in 2012 and 2013 were the consequence of flooding, repeated oil thefts and regulatory uncertainty. Total oil production for 2013 declined to about 2.4mn barrels per day, and we expect production to remain feeble over the coming year. Output should ramp-up significantly as many large fields come online after 2015, more than offsetting current depletion. Adoption of the Petroleum Industry Bill (PIB), which we do not expect before the Nigerian 2015 election at the earliest , would be a strong signal for investors that Nigeria's hydrocarbons sector is ready to move forward. Without the adoption of the PIB, offshore projects delays will occur, resulting in a stagnation of Nigerian production.  

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Petrochemicals

Nigeria Petrochemicals

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Nigeria has the potential to be a major petrochemicals producer in Africa, but is held back by the infrastructural problems and major political challenges, according to BMI's latest Nigeria Petrochemicals Report. While plans are afoot to raise polymers and fertiliser capacities, these are susceptible to delays and cancellations.

In 2013, Nigeria had olefins production capacities of 550,000 tonnes per annum (tpa) ethylene and 125,000tpa propylene with thermoplastic resins capacities of 240,000tpa linear low-density polyethylene (LLDPE) and 95,000tpa polypropylene (PP).

One of the many problems facing the Nigerian petrochemical industry is the lack of competitively priced and reliable feedstock supplies. While Nigeria is only just beginning to tap into its potential in natural gas, which can serve as an important source of competitively priced feedstock, the country's refining sector is still...

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Pharmaceuticals & Healthcare

Nigeria Pharmaceuticals & Healthcare

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BMI View:   The Nige rian government remains committed to improving healthcare quality and infrastructure across the country. The formation of the National Health Insurance Scheme (NHIS) has seen a growing number of citizens enrolled since its formation i n 2005, albeit lower than previously anticipated. We believe Nigeria ' s pharmaceutical market has the capacity for considerable future growth in the long term due to its increasing population and high burden of disease. Despite this, scant   healthcare funding, weak patent protection and low per capita spending will continue to impede the market ' s potential.

...

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Power

Nigeria Power

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BMI View:   We have maintained our optimistic forecasts for average annual growth in power generation of 9% between 2014 and 2023 in Nigeria ,   as a result of strong macroeconomic fundam entals, progress in gas- fired and renewable power generation and the mobilisation of international financing . We emphasise , however that gas shortages, inefficient   infrastructure and   a challenging...

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Shipping

Nigeria Shipping

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We believe that restrictions on movement in West Africa at the time of writing, as a result of the Ebola outbreak, will disrupt economic activity and lead to major delays and increased supply chain costs for shippers in transporting their goods to and from the region, which will result in downside risks being presented to our forecasts over the short term.

The restrictions on movement introduced in four West African countries - Liberia, Guinea, Sierra Leone and Nigeria - are causing severe delays to supply chains, and consequently adding an excess financial burden to the movement of goods. The contact-borne virus Ebola has swept through West Africa, resulting in 1,427 deaths and 2,615 infections since March 2014.

On August 25 2014, the Democratic Republic of the Congo (DRC) became the fifth country to have confirmed cases of the deadly virus. Shipping authorities are restricting shore leave and crew changes for...

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Telecommunications

Nigeria Telecommunications

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BMI View:   Although there remains considerable growth potential in Nigeria's telecoms market, with mobile penetration still below 75%, capturing these opportunities will depend on further price competition between operators and potentially expensive network expansion to underserved areas. At the same time, operators must encourage greater use of data services and differentiate themselves by enriching their value added services (VAS) portfolios. As a means of achieving greater operational efficiencies and in order to ensure their ability to continue investing in greater quality and breadth of services, in Q214 mobile operators began offloading their tower assets to independent towers firms. This...

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Water

Nigeria Water

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BMI View: There has been a chronic lack of investment in the country's water infrastructure. However, reforms and development plans implemented under President Goodluck Jonathan are beginning to take effect, with the sell-off of the state-run Power Holding Company of Nigeria virtually complete and increasing numbers of Public Private Partnerships (PPPs) entering the market. We note security risks remain high and political turmoil in the governing party threatens investor confidence over the medium term. We also continue to highlight persistent risks hampering the implementation of major projects, ranging from deep-rooted corruption and violence perpetrated by militants to inefficient bureaucracy.

The government has recognised the issues prevailing within the sector and aim to target them as a key way of alleviating poverty within Nigeria and to coincide with the UN Millennium Development Goals...

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