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

  • Presidential elections on February 14 will be the most closely fought since Nigeria's return to democracy in 1999. While a victory for incumbent President Goodluck Jonathan and his ruling People's Democratic Party (PDP) is the most likely outcome, victory is not assured. Regardless of outcome, we expect little major deviation in policy trajectory given the personality-based nature of Nigerian politics.

  • Currency concerns will be the central issue for the Central Bank of Nigeria in 2015. Following aggressive tightening of monetary policy in November, we believe that further tightening measures will be necessary to anchor inflation expectations and reassure jittery markets.

  • The economic outlook for Nigeria has deteriorated. While we maintain our broad view that falling oil prices will not have a major impact on headline GDP growth...

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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 infrastructure and frequent strike action affects 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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Nigeria is currently taking steps towards re-establishing local auto production, following a period where the industry had been reduced to just a handful of small-scale producers. The country's new approach is encapsulated in the Nigerian Automotive Industry Development Plan (NAIDP), which was unveiled in October 2013.

This plan aims to relaunch the Nigerian auto industry, by providing an institutional framework to boost the local production of cars, tyres and spare parts, while at the same time increasing import tariffs in order to give further support to locally produced vehicles. In September 2014, the Nigerian Automotive Industry Development Plan (Fiscal Incentives, Assurances and Guarantees) Bill passed its second reading in the Senate.

In mid-October 2014, Engineering News reported on comments from the director general of the Nigerian Automotive Council, Aminu Jamal, who stated that a total of 23 automakers have...

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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: 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. Overall, given Nigeria's population size and demographic and economic profile, we expect private consumption to be a positive contributor to headline growth in the years ahead. Nigerians currently spend more on food per capita than their counterparts in Ghana and Kenya - two of the other relatively stronger recipients of foreign direct investment in Africa from global consumer companies.

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 investment in vital infrastructure over our forecast period and beyond, which will greatly benefit the food and drink...

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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 oil-producing African nations draw a large portion of government revenues from petroleum exports, exposing them to the sharp decline in crude oil price in late 2014 and early 2015. This will weigh on public spending and private investment in the short-term, including investments in new IT products and solutions.

Headline Expenditure Projections

Ghana

Computer Hardware Sales: GHS866mn in 2014 to GHS1.027bn in 2015, +18.5% in local currency terms. The government's ambitious Basic Schools Computerisation project and e-governance initiative will be the main growth driver.

Software Sales: GHS176mn in 2014 to GHS220mn in 2014,...

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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: The Nigerian insurance market remains at an embryonic stage of development with the combined assets of the country's insurers comprising only a tiny percentage of GDP and total premiums lagging behind more developed markets such as South Africa. That said, the past few years have seen considerable expansion in the sector, as rapid economic/population growth and rising prosperity have boosted demand for life and non-life products. However, future growth will be mitigated by currency market movements linked to falling oil prices.

By all measures, insurance remains a relatively undeveloped segment of Nigeria's financial services sectors, comprising just 0.3% of overall GDP in 2014 in terms of the value of gross premiums written. This low rate of penetration is reflective of a number of factors which have combined to undermine purchases of...

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Medical Devices

Nigeria Medical Devices

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BMI 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 2014. 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 Bill, which has finally been given...

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Oil & Gas

Nigeria Oil & Gas

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BMI View : Taking into account staggering onshore production, continued instability and investment delays/cancellations due to regulatory uncertainty and the falling crude oil prices, we forecast Nigerian oil production to increase only slightly from its current levels, from 2.38mn b/d in 2014 to a peak of 2.48mn b/d by 2020. Both downside and upside risk exists, largely depending on an improvement in the business environment, and the content and adoption of the PIB. Should the current situation endure without an adoption of the PIB, project investments and cancellations could see Nigerian production head downwards in the medium-to-longer term, as new production fails to offset decline rates at mature onshore and shallow-water fields. A more substantial increase in production is unlikely until the PIB is passed.

Headline Forecasts (Nigeria 2012-2018...

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Petrochemicals

Nigeria Petrochemicals

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Growth in gas production is set to spur downstream petrochemicals industries, particularly fertiliser and methanol, but BMI's latest Nigeria Petrochemicals report warns that the business environment remains uncertain and will no doubt be affected by the turbulence that comes with presidential elections, which are due in February 2015.

In 2014, 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). Nigeria's petrochemicals sector is characterised by low capacity utilisation, frequently disrupted plant operations and a lack of proper resources to operate and maintain facilities.

The government is attempting to attract foreign direct investment (FDI) into the country's petrochemicals sector. However, a lack of skilled...

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Pharmaceuticals & Healthcare

Nigeria Pharmaceuticals & Healthcare

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BMI View: Nigeria's pharmaceutical and healthcare markets are vastly underdeveloped by Western standards as poor infrastructure, a weak regulatory system and lack of specialised facilities weaken growth potential. However, the Nigerian government's continuing efforts to expand healthcare access through national health insurance by introducing mobile registration and a community-based healthcare programme will provide revenue-earning opportunities for drug-makers. We believe developments along with new efforts to reduce the volume of counterfeit medicines in circulation will help boost pharmaceutical expenditure in the country.

Headline Expenditure Projections

  • ...

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Power

Nigeria Power

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BMI View:  Strong macroeconomic fundamentals, progress in gas-fired and renewable power generation and the mobilisation of domestic and international financing continue to support our long-term optimistic outlook for Nigeria's power sector. We emphasise, however, that natural gas shortages, inefficient infrastructure and a...

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Shipping

Nigeria Shipping

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BMI View: Nigeria's biggest ports are set for modest growth in 2015, with the Port of Lagos forecast to grow 2.0% year-on-year (y-o-y), which is slightly below growth rates at the ports of Harcourt and Tincan Island (2.5% and 2.4%, respectively). Meanwhile, the Port of Sapele is leading the way in terms of y-o-y growth, with 3.0% growth expected.

Nigerian seaports registered a 12.5% year-on-year (y-o-y) rise in cargo throughput to 22.3mn metric tonnes in Q314, compared to 19.8mn metric tonnes in Q313, according to the Nigerian Ports Authority (NPA). This bodes well for the Nigerian shipping industry going forward. In the reported period, the seaports posted a 41.7% y-o-y rise in general cargo throughput to 4.21mn metric tonnes, while a 0.6% y-o-y and a 5.8% y-o-y increase was recorded in dry bulk cargo and liquefied natural gas (LNG) volumes to reach 2.6mn metric tonnes and 5.1mn metric tonnes...

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Telecommunications

Nigeria Telecommunications

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BMI View: Airtel 's decision to sell its cell towers in Nigeria to ATC will increase competition and raise the prospects of consolidation in the local towers market The Airtel-ATC deal comes after rivals MTN and Etisalat reached separate agreements with independent tower firm IHS Towers for the majority of their respective tower assets. Given these developments, we reiterate our view that Globacom (Glo), the only remaining major operator in the country yet to announce a tower outsourcing strategy, will have to move quickly in the same direction to avoid lagging behind in the area of operational efficiency, which would impact on competitiveness in terms of service quality and...

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Water

Nigeria Water

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BMI View: This quarter, we have maintained our forecasts, and continue to view the Nigerian water sector as extremely underdeveloped, with limited mains water access, extremely poor sanitation, and an incoherent regulatory system. However, over the longer term, we take a more positive view, and expect that the substantial investment into sanitation and mains distribution, as well as new regulations to prevent open defecation, should have a significant impact on the quality and availability of water in Nigeria.

Africa's need for infrastructure is well known, with the African Development Bank (AfDB) stating that the annual financing need for African infrastructure is about USD95bn, of which only...

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