Nigeria at a Glance: 2001-02
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COUNTRY REPORT Nigeria At a glance: 2001-02 OVERVIEW President Obasanjo’s administration is approaching the half-way mark of its first term with an unimpressive record of achievement, and to put Nigeria on the road to recovery within its two remaining years in power will be a daunting task. Sectarian political campaigning in the run-up to elections in 2003 is liable to make the job of tackling the constellation of ethnic, regional, religious and class conflicts that threaten national unity increasingly difficult. Meanwhile, the government is also likely to remain cautious about implementing the tough market reforms needed to mend an economy crippled by corruption, mismanagement and decaying infrastructure. The economy will remain dependent on the energy sector, and producers in the non-oil sector will struggle to survive in an unfriendly economic climate. The EIU expects real GDP growth to rise from an estimated 2.8% in 2000 to 3.5% in 2001 and 4% in 2002. But increased government spending and a falling naira will keep inflation in double digits. With lower oil prices and rapid import growth, the current-account surplus is expected to fall sharply in 2001-02. Key changes from last month Political outlook • Nigeria’s three service chiefs have been retired by the government as it seeks to consolidate its position. However, a military coup remains unlikely at present. Economic policy outlook • The debt rescheduling deal, agreed with the Paris Club in December 2000 and which was due to be implemented on April 15th, has still not been concluded. Senior government officials say the problem lies in agreeing new performance targets and decline to state when it is likely to be agreed. Although the deal is likely to be concluded quite quickly, the delay further indicates that reform will be a very slow and erratic process in Nigeria. Economic forecast • The current account surplus will fall from 8.4% of GDP in 2000 to 0.9% of GDP in 2001 and 0.2% of GDP in 2002, as oil prices fall back and import growth picks up rapidly. May 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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ISSN 0269-4204 Symbols in tables “n/a” means not available; “–” means not applicable Printed and distributed by Redhouse Press Ltd, Unit 151, Dartford Trade Park, Dartford, Kent DA1 1QB, UK Nigeria 1 Contents 3 Summary 4 Political structure 5 Economic structure 5 Annual indicators 6 Quarterly indicators 7 Outlook for 2001-02 7 Political outlook 8 Economic policy outlook 9 Economic forecast 12 The political scene 19 Economic policy 23 The domestic economy 23 Economic trends 26 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 25 Official inflation rate 26 Nigerian interbank offer rate, 2001 33 Investment inflows List of figures 12 Gross domestic product 12 Real exchange rates 20 Petrol prices in West Africa 24 Exchange rate 24 Real effective exchange rate, 1999 26 Oil production and quota 30 Nigerian Stock Exchange, 2001 © The Economist Intelligence Unit Limited 2001 EIU Country Report May 2001 Nigeria 3 Summary May 2001 Outlook for 2001-02 President Obasanjo’s administration is approaching the half-way mark of its first term with an unimpressive record of achievement, and to put Nigeria on the road to recovery within its two remaining years in power will be a daunting task. Sectarian political campaigning in the run-up to elections in 2003 is liable to make the job of tackling the constellation of ethnic, regional, religious and class conflicts that threaten national unity increasingly difficult. Meanwhile, the government is likely to remain cautious in implementing the tough market reforms needed to mend an economy crippled by corruption, mismanagement and decaying infrastructure. The economy will remain dependent on the energy sector, and producers in the non-oil sector will struggle to survive in an unfriendly economic climate. The EIU expects real GDP growth to rise from an estimated 2.8% in 2000 to 3.5% in 2001 and 4% in 2002. But increased government spending and a falling naira will keep inflation in double digits. With lower oil prices and rapid import growth, the current-account surplus is expected to narrow sharply in 2001-02. The political scene The government has launched a national debate on Nigeria’s constitution as part of the process of amending the one bequeathed by the military rulers. Federal and state governments are locked in a legal battle over sharing national revenue. Nigeria’s three service chiefs have been retired simultaneously in what appears to be a shake-up of the armed forces. Economic policy The administration has continued to face resistance to its economic liberali- sation policies. The unions staged a week-long demonstration in response to the government’s announcement that it intended to remove domestic fuel subsidies. A revised timetable has been announced for the second phase of the administration’s slow-moving privatisation programme. The IMF has expressed concern over the government’s proposed level of capital spending in 2001. The domestic economy Heavy demand for hard currencies forced the Central Bank to devalue the naira and to introduce a number of measures, including raising interest rates, to try to shore-up the currency and narrow the gap between the official and parallel market exchange rates. Nigeria’s OPEC quota has been reduced. Shell has awarded major contracts for the development phase of the deepwater Bongo oilfield, which has renewed concern about local participation in oil investment projects. The government has pressed ahead with projects to resuscitate the dormant steel sector and has announced plans for breaking up the giant electricity utility in preparation for privatisation. Foreign trade and payments Recent official statements put Nigeria’s total external debt at US$28.64bn at the end of 2000. The IMF has advised Nigeria not to overemphasise its demands for debt cancellation. Editors: David Cowan (editor); Pratibha Thaker (consulting editor) Editorial closing date: May 1st 2001 All queries: Tel: (44.20) 7830 1007 E-mail: [email protected] Next report: Full schedule on www.eiu.com/schedule © The Economist Intelligence Unit Limited 2001 EIU Country Report May 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 (legislative and presidential) due in February 2003; municipal elections due in 2002 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 Mohammed Arzika Culture & tourism