Nigeria Nigeria at a Glance: 2002-03
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COUNTRY REPORT Nigeria Nigeria at a glance: 2002-03 OVERVIEW Nigeria is facing an uncertain future as outbreaks of ethnic and religious violence continue to place strains on a diverse nation. As the 2003 elections approach, the struggle between competing ethnic and regional groups for power and access to the country’s oil wealth is likely to intensify and test Nigeria’s fragile democracy, and it is uncertain whether the country can survive civilian-managed elections without descending into chaos and an eventual military coup, as happened to previous civilian republics. President Obasanjo’s administration is expected to continue with economic liberalisation, but the pace of reform will remain slow. Improving energy, transport and communications infrastructure and increasing private investment in the non-oil sector will remain the government’s main economic challenges. Although the rate of economic growth will gradually increase from 3% in 2001 to 4.1% in 2003, the government will struggle to reduce the fiscal deficit and restore macroeconomic stability over the outlook period, and inflation is forecast to remain in double digits. Key changes from last month Political outlook • Further clashes between Muslims and Christians have occurred in Kano state, further highlighting the precarious religious and ethnic balance in the country. Economic policy outlook • The government presented the first draft of the 2002 budget to the National Assembly. Although a broadly balanced budget is proposed, we still forecast that both capital and recurrent expenditure will breach the budget targets by a wide margin. Economic forecast • Nigeria produced significantly above its OPEC oil production quota of 1.911m barrels/day in August and September. According to IEA data, production was 2.07m b/d in August and 2.13m b/d in September. We now forecast production of 2.06m b/d in 2001 rising to 2.23m b/d in 2002 and 2.45m b/d in 2003. November 2001 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. The EIU delivers its information in four ways: through our digital portfolio, where our 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 3 Summary 4 Political structure 5 Economic structure 5 Annual indicators 6 Quarterly indicators 7 Outlook for 2002-03 7 Political outlook 8 Economic policy outlook 9 Economic forecast 12 The political scene 18 Economic policy 24 The domestic economy 24 Economic trends 27 Oil and gas 29 Industry 30 Financial services 30 Infrastructure and other services 32 Foreign trade and payments List of tables 10 International assumptions summary 11 Forecast summary 21 Central government finances 25 Agricultural and industrial production 25 Exchange rates 26 Inflation, 2001 26 Minimum rediscount rate 30 Nigerian Stock Exchange all-share index, 2001 31 Perception of NEPA’s services in the last year 32 Balance of payments 33 FDI inflows into Nigeria 33 Foreign-exchange reserves EIU Country Report November 2001 © The Economist Intelligence Unit Limited 2001 2 Nigeria List of figures 12 Gross domestic product 12 Real exchange rates 20 Fiscal deficit, Jan-Jun 2001 29 Gas exports 32 Trade balance EIU Country Report November 2001 © The Economist Intelligence Unit Limited 2001 Nigeria 3 Summary November 2001 Outlook for 2002-03 As the 2003 elections approach, the struggle between competing ethnic and regional groups for power and access to the country’s oil wealth is likely to intensify and test Nigeria’s fragile democracy, and it is uncertain whether the country can survive civilian-managed elections without descending into chaos and an eventual military coup, as befell previous civilian republics. President Obasanjo’s administration is expected to continue with economic liberalisation, but the pace of reform will remain slow. Improving energy, transport and communications infrastructure and increasing private investment in the non-oil sector will remain the government’s main economic challenges. Although the rate of economic growth will gradually increase from 3% in 2001 to 4.1% in 2003, the government will struggle to reduce the fiscal deficit and restore macroeconomic stability over the outlook period. The political scene Hundreds of people were killed in sporadic outbreaks of religious and ethnic violence, the worst of which was in the city of Jos. Troops were reported to have killed more than 200 civilians in Benue state in reprisal for the murder of 19 soldiers by Tiv militiamen. State governors and the National Assembly have remained in conflict over the timetable for municipal elections. Economic policy The IMF is likely to extend the current stand-by agreement until December. Heavy expenditure by independent-minded state administrations and trade union resistance to market reforms have undermined the government’s control of state spending, and a proposal for sharing federal revenue was condemned by sub-federal tiers of government. In an effort to curb corruption, the government has introduced measures to increase transparency in its procurement and contract system. The domestic economy The agricultural sector is estimated to have grown by 3.9% in the first half of 2001, whereas industry grew marginally. Inflation reached 18.1% in August. The CBN increased the minimum discount rate to 18.5% at the end of September. The CBN stepped up its efforts to eliminate foreign-exchange malpractices, in order to narrow the widening gap between official and parallel market exchange rates. According to the CBN the rate between the IFEM and the parallel rate was 16.7% in the first half of 2001. Nigeria’s oil production rose to 2.13m b/d in September, well above its OPEC oil quota of 1.911m b/d. Foreign trade and payments Nigeria’s current-account surplus fell in the first half of 2001 as a result of falling oil exports and growing imports, service and income debits. FDI inflows were US$1bn in 2000 according to UNCTAD, marginally lower than in 1999. Editors: David Cowan (editor); Pratibha Thaker (consulting editor) Editorial closing date: November 7th 2001 All queries: Tel: (44.20) 7830 1007 E-mail: [email protected] Next report: Full schedule on www.eiu.com/schedule EIU Country Report November 2001 © The Economist Intelligence Unit Limited 2001 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 elected by universal suffrage to serve a four-year term National elections February 1999 (legislative and presidential); next elections (presidential, legislative and municipal) due in March 2003 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 People’s Party (APP); Alliance for Democracy (AD) President & commander-in-chief of the armed forces Olusegun Obasanjo Vice-president Atiku Abubakar Key ministers Agriculture & rural development Adamu Bello Aviation Kema Chikwe Commerce in Africa Mustapha Bello Communications Muhammed Bello Culture & tourism Tonye Graham-Douglas Defence Lieutenant-General (rtd)