_________________________________________________________________________________________________________________________________________________________ Country Report Nigeria Generated on December 7th 2017 Economist Intelligence Unit 20 Cabot Square London E14 4QW United Kingdom _________________________________________________________________________________________________________________________________________________________ The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For 60 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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ISSN 2047-5462 Symbols for tables "0 or 0.0" means nil or negligible;"n/a" means not available; "-" means not applicable Nigeria 1 Nigeria Summary 2 Briefing sheet Outlook for 2018-22 5 Political stability 6 Election watch 6 International relations 7 Policy trends 7 Fiscal policy 7 Monetary policy 8 International assumptions 9 Economic growth 9 Inflation 10 Exchange rates 10 External sector 11 Forecast summary Data and charts 12 Annual data and forecast 13 Quarterly data 14 Monthly data 15 Annual trends charts 16 Monthly trends charts 17 Comparative economic indicators Summary 17 Basic data 19 Political structure Recent analysis Politics 21 Forecast updates Economy 25 Forecast updates 30 Analysis Country Report December 2017 www.eiu.com © Economist Intelligence Unit Limited 2017 Nigeria 2 Briefing sheet Editor: Philip Walker Forecast Closing Date: November 17, 2017 Political and economic outlook Ongoing uncertainty over the president's health, violent unrest in many parts of the country and severe economic difficulties will remain sources of serious instability throughout 2018-22, but instability will probably peak around the 2019 elections. Nigeria's democracy is expected to prove sufficiently robust to survive the instability, but there are small risks of parts of the country becoming ungovernable or elements of the army attempting a coup. Policy reform will be slow as efforts to introduce market-oriented reforms and diversify the economy away from oil come up against vested interests, ideological opposition and bureaucratic inefficiency. Real GDP growth will be slow to recover from the recession of 2016, given an ongoing period of historically low oil prices and the weak policy response from the authorities, which will sap confidence in the economy more generally. Although inflation will come down from the highs seen in early 2017, price pressures from election spending and a weak currency will persist. Prospects for the current account will remain largely tied to prevailing oil prices; a slightly higher surplus equivalent to 2.3% of GDP in 2018 falling back with oil prices to 1.2% of GDP in 2020, before recovering to 1.7% of GDP at the end of the forecast period. Country Report December 2017 www.eiu.com © Economist Intelligence Unit Limited 2017 Nigeria 3 Key indicators 2017a 2018b 2019b 2020b 2021b 2022b Real GDP growth (%) 0.7 2.2 1.7 2.3 2.8 3.1 Consumer price inflation (av; %) 16.5 14.2 14.4 11.6 11.3 9.8 Government balance (% of GDP) -2.3 -2.4 -2.5 -2.3 -2.1 -2.0 Current-account balance (% of GDP) 2.3 2.3 2.0 1.2 1.4 1.6 Money market rate (av; %) 13.5 13.0 13.8 11.0 11.0 9.8 Exchange rate N:US$ (av) 305.1 345.0 379.5 402.3 410.3 426.7 a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts. Key changes since October 23rd The president has been seen in public more often, lessening doubts about his imminent demise due to ill-health. But although the likelihood of Muhammadu Buhari staying in power during 2018 has risen, we still think he will step down after his term ends in 2019. We have moderately increased our oil price forecasts for 2018-22. Although prices are still low compared with the previous five years, the upward revision has prompted us to edge up our current-account surplus forecast. Higher oil prices will also give the authorities more ammunition to defend the naira's dollar peg and so we now expect the naira to fall at a slower pace than previously forecast in 2018-22. We have raised the level of external borrowing that we expect the country to undertake in 2018- 22 by 5-10% a year. This reflects both government efforts to rebalance away from more costly domestic debt and robust private-sector external borrowing. The month ahead November 20th and 21st—Monetary policy committee meetings: The Central Bank of Nigeria remains in a difficult position, under pressure from many in the political establishment to spur growth with looser policy while at the same time attempting to rein in inflation. November 22nd—Real GDP (Q3; by output): Nigeria formally escaped recession in the second quarter, but only just. The third-quarter data looks likely to show slightly stronger growth, in part owing to higher oil production, but a major rebound is unlikely. Major risks to our forecast Country Report December 2017 www.eiu.com © Economist Intelligence Unit Limited 2017 Nigeria 4 Scenarios, Q3 2017 Probability Impact Intensity Nigeria posts negative real GDP growth Moderate High 12 The banking sector undergoes another crisis Moderate High 12 Muhammadu Buhari suddenly leaves office, creating a dangerous power Moderate Moderate 9 vacuum Peace returns quickly to north-eastern Nigeria Low High 8 Growing Biafran separatism sees a return to civil war Low High 8 Note. Scenarios and scores are taken from our Risk Briefing product. Risk scenarios are potential developments that might substantially change the business operating environment over the coming two years. Risk intensity is a product of probability and impact, on a 25-point scale. Source: The Economist Intelligence Unit. Country Report December 2017 www.eiu.com © Economist Intelligence Unit Limited 2017 Nigeria 5 Outlook for 2018-22 Political stability During the next five years The Economist Intelligence Unit expects Nigeria to face the biggest challenges to its constitutional democracy since the return to civilian rule in 1999. Slow progress on tackling numerous security and societal challenges at a time of economic difficulty means that we forecast ongoing severe outbreaks of instability. Risks in 2018 19 are heightened by what we expect to be acrimonious preparations for a change of the presidency. The incumbent, Muhammadu Buhari, spent much of the first half of 2017 in the UK receiving treatment for an undeclared but presumably serious medical ailment. Although he is now back in Nigeria and appears to be performing his duties, there remains a notable prospect of Mr Buhari leaving office before the official end of his current term in 2019. Under such a scenario, we expect him to be replaced by his vice-president, Yemi Osinbajo, who would serve the remainder of the term as stipulated in the constitution. Such a power transfer has happened before, in 2010, when the then president died after lengthy illness, but would lead to a period of tension as lines of patronage are broken and re-established, not least because of the move from a northern president to a southern one—an important and often fraught geopolitical divide in Nigeria. Even assuming Mr Buhari is able to remain in power until 2019, there is far from universal support within his party, the All Progressives Congress (APC), for him to stand for re-election after a largely ineffectual first term. Manoeuvring to succeed him will therefore increase in 2018 19 regardless of whether the president attempts to seek a second term in office. Amid political instability and weak economic conditions, it will prove impossible to bring a permanent peace to large parts of Nigeria hit variously by Islamist insurgency in the north, ethno- nationalism in the main oil-producing region and secessionism in the Biafra region, as well as inter-religious tensions and disputes over land access across the centre of the country.