Nigeria Nigeria at a Glance: 2005-06
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Country Report Nigeria Nigeria at a glance: 2005-06 OVERVIEW Faced with militant ethnic and religious groups fighting for self-determination and strong trade union opposition to the government!s proposed economic reforms, the president, Olusegun Obasanjo, has a daunting task to unify this divided society and build public confidence in its fledgling democracy. In addition, although the president!s party, the People!s Democratic Party, has overwhelming control at all tiers of government, powerful vested interests are likely to continue to hamper the government!s ability to implement the far- reaching reforms needed to achieve sustained economic growth. To date, the government!s reform efforts have been helped by high world oil prices and increased oil production. This boosted real GDP growth in 2003-04, and the Economist Intelligence Unit expects growth to remain reasonably high, at 3.2% in 2005 and 3.5% in 2006. However, the lack of growth outside the oil sector means that the impact in terms of creating jobs and improving standards of living will be limited, particularly as rising domestic fuel prices and loose monetary policy mean that inflation is expected to remain in double digits throughout the forecast period. Key changes from last month Political outlook • There has been no change to our political outlook. Economic policy outlook • Mr Obasanjo has presented the annual budget for 2005. As in 2004, this is based on a cautious oil price forecast of US$27/barrel. Although the government plans to increase spending, notably on infrastructure, with oil prices remaining high we still expect the government to be able to make payments into the fiscal stabilisation account and to run a modest deficit of 1.8% of GDP in 2005, little changed from the 1.6% of GDP estimate for 2004. Economic forecast • We have revised up our oil price forecast for 2005, with Brent crude now expected to average US$37.5/b, before falling back to US$29/b in 2006. As a result, we now expect Nigeria to run a current-account surplus equivalent to 6.4% of GDP in 2005. With export earnings falling back in 2006 but imports remaining high, the current account is expected to move sharply into a deficit of 4.6% of GDP in 2006. November 2004 The Economist Intelligence Unit 15 Regent St, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. 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Nigeria 1 Contents Nigeria 3 Summary 4 Political structure 5 Economic structure 5 Annual indicators 6 Quarterly indicators 7 Outlook for 2005-06 7 Political outlook 9 Economic policy outlook 10 Economic forecast 13 The political scene 22 Economic policy 26 The domestic economy 26 Economic trends 27 Oil and gas 29 Manufacturing 30 Financial and other services 31 Infrastructure 32 Foreign trade and payments List of tables 10 International assumptions summary 12 Forecast summary 23 Federal government finances 26 Inflation 27 Naira exchange rates 33 Balance of payments 34 External debt 35 Foreign direct investment inflows into Nigeria List of figures 12 Gross domestic product 12 Consumer price inflation 18 Domestic petrol prices 27 Oil production and OPEC quota Country Report November 2004 www.eiu.com © The Economist Intelligence Unit Limited 2004 . Nigeria 3 Nigeria November 2004 Summary Outlook for 2005-06 Faced with militant ethnic and religious groups fighting for self-determination and strong trade union opposition to the government!s proposed economic reforms, the president, Olusegun Obasanjo, has a daunting task to unify this divided society and build public confidence in its fledgling democracy. In addition, although the president!s party, the People!s Democratic Party, has overwhelming control at all tiers of government, powerful vested interests are likely to continue to hamper the government!s ability to implement the far- reaching reforms needed to achieve sustained economic growth. To date, the government!s reform efforts have been helped by high world oil prices and increased oil production, which have boosted real GDP growth. However, high inflation and lack of growth outside the oil sector mean that the impact in terms of creating jobs and improving standards of living will be limited The political scene The government has agreed a ceasefire deal with two Ijaw militia groups to end gang warfare over access to oil resources in the volatile Niger Delta region. A government report has claimed that nearly 54,000 people have died in ethno-religious clashes in Plateau State in less than three years. The Senate has passed a controversial bill to democratise the labour movement, which unions say is designed to emasculate them. Nigeria has been named the third most corrupt of 145 countries surveyed in Transparency International!s 2004 report. Nigeria missed the September deadline to hand over the Bakassi Peninsula to Cameroon. Subsequent talks to fix a new date have been deadlocked. Economic policy Mr Obasanjo has presented a prudent 2005 budget proposal to the National Assembly. The IMF has praised the government!s home-grown economic strategy (NEEDS), but called for acceleration of outstanding structural reforms. Mr Obasanjo has outlined plans to relax Nigeria!s restrictive tariff system. The domestic economy Nigeria!s OPEC oil-production quota has been raised from 2.142m barrels/day to 2.224m b/d, but the government has been lobbying for an even bigger allocation. The government has announced a new oil-licensing round for early 2005. The government has announced that the controversial multi-billion dollar Ajaokuta steel complex has produced coil wire for the first time. The government has launched a second attempt to sell a 51% stake of the state telecommunications company, Nitel, following the earlier botched privatisation. Foreign trade and payments New IMF data estimate that Nigeria ran a current-account deficit of 2.7% of GDP in 2003, a sharp reduction compared with 2002, owing to rising oil exports. Editors: David Cowan (editor); Pratibha Thaker (consulting editor) Editorial closing date: November 5th 2004 All queries: Tel: (44.20) 7830 1007 E-mail: [email protected] Next report: Full schedule on www.eiu.com/schedule Country Report November 2004 www.eiu.com © The Economist Intelligence Unit Limited 2004 4 Nigeria Political structure Official name Federal Republic of Nigeria Form of state Federal republic, comprising 36 states and the Federal Capital Territory (FCT, Abuja) Legal system Based on English common law National legislature National Assembly, comprising the 109-seat Senate and the 360-seat House of Representatives; both are elected by universal suffrage for four-year terms National elections Most recent legislative election, April 12th 2003, most recent presidential election, April 19th 2003; Olusegun Obasanjo was re-elected to the presidency, while his party, the PDP, won a majority of seats in both houses of the National Assembly; he was sworn in on May 29th 2003; next national elections scheduled for 2007 Head of state President, elected by universal suffrage to serve a four-year term State government State governors and state houses of assembly National government The Federal Executive Council, which is chaired by the president; appointed June 30th 1999 Main political parties People!s Democratic Party (PDP); All Nigeria People!s Party (ANPP); Alliance for Democracy (AD);