Nigeria at a Glance: 2006-07
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Country Report Nigeria Nigeria at a glance: 2006-07 OVERVIEW Following the failure of the widely unpopular bid to change the constitution, which would have allowed the president, Olusegun Obasanjo, to stand for a third term, most potential candidates are actively starting to campaign for the 2007 elections, which they expect will be more open and closely contested than the polls in 1999 or 2003. Nigeria faces considerable political uncertainty in the run-up to the presidential and legislative elections next April. The situation is complicated by the fact that Mr Obasanjo has little time for either of the two heavyweight northern candidates who are currently best placed to secure the presidential candidacy for his party, the People’s Democratic Party. As a result, the president is likely to step up efforts to find alternative candidates who are more committed to reform, although none is likely to have the financial resources or political networks of the leading contenders. Although the Economist Intelligence Unit expects economic growth to remain robust in the non-oil sector, ongoing unrest in the Niger Delta will continue to constrain oil production in 2006, pushing down overall GDP growth to 4.2%. However, with oil production set to pick up strongly in the second half of 2007, growth should pick up to 5.6% in 2007. Key changes from last month Political outlook • There has been no major change to our political outlook. Economic policy outlook • There has been no major change to our economic policy outlook. Economic forecast • New data from the Central Bank of Nigeria show that foreign investment into Nigeria was strong in 2005. Net foreign direct investment (FDI) inflows increased to US$2.3bn, helped by non-oil investment. Portfolio inflows rose even more dramatically, to US$2.9bn, largely because of the recapitalisation of the banking sector. Although provisional data show that investment inflows remained strong in early 2006, we expect them to fall back sharply as political uncertainty mounts in the run-up to the April 2007 elections. August 2006 The Economist Intelligence Unit 26 Red Lion Square London WC1R 4HQ 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. The Economist Intelligence Unit delivers its information in four ways: through its digital portfolio, where the latest analysis is updated daily; through printed subscription products ranging from newsletters to annual reference works; through research reports; and by organising seminars and presentations. The firm is a member of The Economist Group. 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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 2006-07 7 Political outlook 9 Economic policy outlook 11 Economic forecast 13 The political scene 22 Economic policy 26 The domestic economy 28 Oil and gas 31 Manufacturing 32 Agriculture 32 Infrastructure 33 Finance and other services 33 Foreign trade and payments List of tables 11 International assumptions summary 13 Forecast summary 23 Federal government budget 25 Domestic debt stock by instrument 26 Breakdown of GDP 28 Naira exchange rates 30 Gas production and main uses 34 Foreign investment into Nigeria 34 Federal government external debt to private creditors List of figures 13 Gross domestic product 13 Consumer price inflation 28 Official and parallel exchange rates, 2006 29 Monthly oil production Country Report August 2006 www.eiu.com © The Economist Intelligence Unit Limited 2006 Nigeria 3 Nigeria August 2006 Summary Outlook for 2006-07 Following the failure of the widely unpopular bid to change the constitution, which would have allowed the incumbent president, Olusegun Obasanjo, to stand for a third term, most potential candidates are actively starting to campaign for the 2007 elections, which they anticipate will be more open and closely contested than was the case in 1999 or 2003. Nigeria faces considerable political uncertainty in the run-up to the presidential and legislative polls, both of which are scheduled for next April. Although the Economist Intelligence Unit expects economic growth to remain robust in the non-oil sector, ongoing unrest in the Niger Delta will continue to constrain oil production in 2006, pushing real GDP growth down to 4.2%. However, with oil output set to pick up strongly in the second half of 2007, GDP growth is forecast to recover to 5.6% in 2007. The political scene Candidates have begun election campaigning following the decision by the Senate not to amend the constitution to allow Mr Obasanjo to run for a third presidential term. The president has reshuffled the cabinet, which ultimately led to the resignation of the finance minister, Ngozi Okonjo-Iweala. He has also implemented a major shake-up of Nigeria’s military leadership. Economic policy The administration has announced plans to lay off 33,000 civil servants by the end of the year. The president and his economic team have continued to assure local and foreign investors that the administration’s reforms will survive the political transition in 2007. The administration has announced plans to settle the government’s outstanding domestic debt arrears before leaving office. The domestic economy The Central Bank of Nigeria (CBN) estimates that real GDP grew by 6.2% in 2005, helped by strong growth in the agricultural sector. The CBN has raised the minimum rediscount rate by 100 basis points to 14% to help keep inflation in check. The year-on-year inflation rate was 10.5% in May, down from 12.6% in April. The premium between official and parallel exchange rates has narrowed sharply since the CBN’s liberalisation of the foreign-exchange market. Oil production has begun to pick up following problems in the Delta region in late 2005 and early 2006. The third attempt to privatise the telecommunications parastatal, Nigeria Telecommunication, has suffered a setback as Transcorp has struggled to make the initial payment. Foreign trade and payments CBN data shows that foreign direct investment amounted to US$2.3bn in 2005, helped by increased investment in the non-oil sector. Editors: David Cowan (editor); Pratibha Thaker (consulting editor) Editorial closing date: August 4th 2006 All queries: Tel: (44.20) 7576 8000 E-mail: [email protected] Next report: Full schedule on www.eiu.com/schedule Country Report August 2006 www.eiu.com © The Economist Intelligence Unit Limited 2006 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 April 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); Advanced Congress of Democrats (ACD); All Nigeria People’s Party (ANPP); Alliance for Democracy (AD); All Progressive Grand Alliance (APGA); National Democratic Party (NDP); 37 political parties are currently registered