Country Report Nigeria Nigeria at a glance: 2004-05 OVERVIEW The president, Olusegun Obasanjo, faces the daunting task of containing simmering political tensions, ethnic and religious unrest, and mass disillusion- ment with the government, while at the same time implementing challenging economic reforms that may, in the short term, alienate more volatile sections of Nigerian society and the political elite. Because the president's party, the People's Democratic Party, has overwhelming control of all tiers of government, the administration should just about be able to maintain support for its reform programme. However, the deep divisions in the country will act as a constant brake on the reform process and political animosity could explode into the open at any time. Despite the reform effort, oil and gas production will continue to drive economic growth, with real GDP growth forecast to fall back from 4.2% in 2003, when oil production expanded rapidly, to 3.4% in 2004 and 3.1% in 2005 as the pace of increase in oil production slows. Key changes from last month Political outlook • There have been a number of arrests in what seems to have been a coup plot against the government. Most of those arrested seem to be disgruntled members of the army, which highlights the fact that many within the military remain unhappy about the civilian administration's inability to resolve many of the pressing problems facing Nigeria. Economic policy outlook • The government has officially published its National Economic Empowerment and Development Strategy for a month of public consultation. However, the delay in its publication has substantially reduced the amount of time available in which it can be implemented before election campaigning starts again. • Charles Soludu has been appointed the new governor of the Central Bank of Nigeria. The appointment is unlikely to have any immediate impact on monetary policy, but it does support the president's efforts to push ahead with economic reform. Economic forecast • There has been no major change to the Economist Intelligence Unit's economic forecast. May 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 2004-05 7 Political outlook 9 Economic policy outlook 10 Economic forecast 13 The political scene 20 Economic policy 28 The domestic economy 28 Economic trends 30 Oil and gas 34 Agriculture 34 Financial markets 35 Infrastructure 37 Foreign trade and payments List of tables 10 International assumptions summary 12 Forecast summary 22 Selected macroeconomic and sectoral targets in NEEDS 24 Key Nigerian interest rates 25 NEEDS monetary sector projections List of figures 13 Gross domestic product 13 Consumer price inflation 31 Monthly oil production 35 NSE market returns by sector in 2003 36 NEEDS power generation targets Country Report May 2004 www.eiu.com © The Economist Intelligence Unit Limited 2004 . Nigeria 3 Nigeria May 2004 Summary Outlook for 2004-05 The president, Olusegun Obasanjo, faces the daunting task of containing simmering political tensions, ethnic and religious unrest, and mass disillusion- ment with the government, while at the same time implementing challenging economic reforms that may, in the short term, alienate more volatile sections of Nigerian society and the political elite. Because the president's party, the People's Democratic Party (PDP), has overwhelming control of all tiers of government, the administration should just about be able to maintain support for its reform programme. But the deep internal divisions in the country will act as a constant brake on the reform process and political animosity could explode into the open at any time. Oil and gas production will continue to drive economic growth, with real GDP growth forecast to fall back from 4.2% in 2003, when oil production expanded rapidly, to 3.4% in 2004 and 3.1% in 2005 as the pace of increase in oil production slows. The political scene Several military officers and civilians have been arrested in connection with what officials have described as a "serious breach of security", but which many political analysts believe was a coup plot. The PDP has won control of most local governments in elections held in 30 states. Observers have said that the polls were marred by violence and widespread fraud. Federal government troops have clashed with militants in the oil-producing Niger Delta. Hundreds of people have been killed in renewed religious fighting in Plateau state. Economic policy The 2004 budget has been passed, but only after a delay caused by Mr Obasanjo's initial refusal to accept amendments to his original proposal made by the National Assembly. The National Economic Empowerment and Development Strategy (NEEDS) reform programme has been published for a period of national consultation. The Central Bank of Nigeria has come under renewed pressure to reduced interest rates. The Bureau of Public Enterprises has revised the timetable for Nigeria's slow-moving privatisation programme. The domestic economy There are considerable discrepancies in estimates of real GDP growth in 2003. Inflation has continued to rise, reaching 15.3% in February, owing mainly to increases in domestic fuel prices. Nigeria has continued to produce oil at well above its OPEC production quota, and the government has requested an increase in its OPEC quota. Legislators and trade unions have warned Shell against implementing a plan to cut jobs as part of a cost-cutting strategy. Foreign trade and payments The government has announced that it has reached an agreement with the Paris Club to reduce Nigeria's debt-service payments to US$1bn a year. Editors: David Cowan (editor); Pratibha Thaker (consulting editor) Editorial closing date: May 1st 2004 All queries: Tel: (44.20) 7830 1007 E-mail: [email protected] Next report: Full schedule on www.eiu.com/schedule Country Report May 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); All Progressive Grand Alliance (APGA); National Democratic Party (NDP); United Nigeria People's Party