COUNTRY REPORT Nigeria At a glance: 2001-02 OVERVIEW President Obasanjo’s administration faces the difficult task of uniting a nation divided by regional rivalries, ethnic conflicts and religious tension. Sectarian political campaigning in the run-up to elections in 2003 is likely to accentuate these divisions and further undermine the ability of the state to take decisive steps to tackle the myriad problems arresting national progress, including corruption, mismanagement and decaying infrastructure. The economy will continue to be propelled by the oil sector: strong world oil prices will keep real GDP growth strong. However, the non-oil sector of the economy will remain stagnant in the absence of much-needed reforms. The EIU forecasts that the rate of real GDP growth will rise from 2.8% in 2000 to 3.5% in 2001 and 3.9% in 2002. Although inflation will rise over the outlook period, it will not accelerate out of control. With oil prices buoyant in 2001-02, the current account will remain in surplus. Key changes from last month Political outlook • On January 24th the president sacked his cabinet. At the end of January a new one had not been appointed. Although it will contain new faces it is unlikely to signal a change in policy. Latest reports indicate that at least ten existing ministers will be dropped. Economic policy outlook • Economic policy is expected to be unchanged. However, there are signs of increasing strains with the IMF, which could affect the debt rescheduling deal reached with the Paris Club in December 2000. Economic forecast • The EIU has revised our oil forecasts. We now expect Brent crude to average US$24.3/barrel in 2001 and US$23.1/b in 2002. This impacts on our forecasts for both the current and the fiscal accounts. 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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 18 Economic policy 22 The domestic economy 22 Economic trends 24 Oil and gas 28 Industry 29 Financial services 31 Infrastructure and other services 32 Foreign trade and payments List of tables 9 International assumptions summary 10 Forecast summary 23 Nigerian interbank offer rate, 2000-01 24 Nigeria’s OPEC quota 25 Oil licence awards, 2000 List of figures 12 Gross domestic product 12 Real exchange rates 18 Investment inflows 22 Exchange rate 25 Oil price 30 Nigerian Stock Exchange 31 Nigeria and South Africa: the mobile phone market 33 Foreign-exchange reserves © The Economist Intelligence Unit Limited 2001 EIU Country Report February 2001 . Nigeria 3 Summary February 2001 Outlook for 2001-02 President Obasanjo’s administration faces a difficult task to unite a nation divided by regional rivalries, ethnic conflicts and religious tension. Sectarian political campaigning in the run-up to the elections in 2003 is likely to accentuate these divisions and further undermine the ability of the state to take decisive steps to tackle the myriad problems arresting national progress, including corruption, mismanagement and decaying infrastructure. The economy will continue to be propelled by the oil sector: strong world oil prices will keep real GDP growth strong. However, the non-oil sector will remain in the doldrums in the absence of much needed reforms. The EIU forecasts that the rate of real GDP growth will rise from 2.8% in 2000 to 3.5% in 2001 and 3.9% in 2002. Although inflation will rise over the outlook period it will not accelerate out of control. With oil prices remaining buoyant in 2001-02 the current account will remain in surplus. The political scene President Obasanjo dissolved the cabinet to revamp his administration for the start of election campaigning amid growing public dissatisfaction at the slow pace of progress after 19 months of civilian rule. Political leaders in southern Nigeria have persisted with their demands for greater regional autonomy, while the introduction of sharia (Islamic law) in some northern states has continued to fuel religious tension. Economic policy Although the administration has reaffirmed its commitment to economic liberalisation, it has maintained fuel subsidies in its budget for 2001 and its wide-ranging privatisation scheme is behind schedule. There are also signs of a rift between the Nigerian authorities and the IMF over the expansionary nature of the 2001 budget and its failure to reach agreed policy targets. The domestic economy Heavy demand for hard currencies has weakened the naira. The Central Bank cut the minimum rediscount rate to lower bank lending rates, but banks have been slow to respond. Nigeria’s oil production has increased, but has remained below its October 31st OPEC quota. The US oil multinational Chevron has received a prized oil concession when the government awarded the majority of blocks on offer in its 2000 licensing round. The NCC has awarded digital mobile licences to three firms after a successful auction. The recovery of the stockmarket has pushed shares to record highs. Foreign trade and The Paris Club has agreed to reschedule US$23.4bn of Nigerian debt, but it will payments only come into effect in April 2001 on condition that the government keeps to its agreed programme of reforms with the IMF. Foreign reserves reached US$9.26bn by mid-December, representing seven months of import cover. Editors: David Cowan (editor); Pratibha Thaker (consulting editor) Editorial closing date: February 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 February 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. The entire cabinet, listed below, was sacked on January 24th 2001, and had yet to be replaced by January 30th 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 Agriculture & rural development Hassan Adamu Aviation Kema Chikwe Commerce in Africa Mustapha Bello Communications Mohammed Arzika Culture & tourism Tonye Graham-Douglas Defence Lieutenant-General