Asoko Insight Nigeria Economic Outlook Japanese Nigeria Trade & Investment Mission March 2, 2017 Presented by: Olayinka Omolere Research Analyst
Why Nigeria? Largest population in Africa Biggest African economy NIGERIA Huge untapped potential
Economic Overview Largest population in Africa with over 180 million people Nigeria is Africa s top oil producer and has the biggest economy Drop in oil prices led to recession Oil accounts for 8% of GDP but 90% of export revenue and 70% of government revenue (Q3 2016) Low oil prices Scarce FX Banned items from official FX market High Inflation Nigeria s economy contracted by 1.5% in 2016 Inflation at 11-year high - 17.9% in January FX scarcity affects businesses especially Manufacturing, FMCG, Trade, and Aviation. Government aims to stimulate Nigeria out of recession with expansionary budgets in 2016 and 2017 Focus is on infrastructure investments, agriculture, mining and manufacturing
Corporate Narratives Import Substitution Backward Integration Cost Optimisation Product Diversification Capacity expansion
Recent Developments - Infrastructure Nigeria s core infrastructure stock (Power, Transport, Water, Telecommunications) is estimated at 20-25% of GD Ideal target is 70% Nigeria has infrastructure deficit of $300bn - AdB, 2013 Needs over $25bn annually for more than a decade to bridge gap 30% of proposed 2017 budget allocated to Infrastructure - $7.34bn (N 2.24 trillion) Largest items are: $1.7bn on Power, Works and Housing and $860m on Transportation Government plans to fund infrastructure through direct spending, loans and public-private partnerships. It has signed contracts with foreign firms for roads, rails, power projects Lekki - Ikoyi Link Bridge developed with public private partnership, Lagos
Recent Developments - Infrastructure Transport Highlights 197,000 km road network is primary means of transport Many roads are either in need or repair or unpaved Nigeria has about 5 international and 19 domestic airports Less than 5,000km of rail tracks Vast opportunity to expand ports and improve performance Power Highlights Installed capacity of about 10,000MW Most of Nigeria s active power plants are gas-fired As recently as February, Nigeria generated less than 4,000MW compared to South Africa which generates over 44,000MW for a population three times smaller
Recent Developments - Infrastructure Water Highlights Less than 65 percent of the population has access to safe drinking water Only about 30 percent have access to proper sanitation Nigeria has excellent potential for irrigation but less than 10 of suitable land% is actually under irrigation (FAO) Telecommunication s Highlights Contributes 10% to GDP Has seen massive growth over the past decade Low broadband penetration Over 90m mobile internet users
Recent Developments Manufacturing Manufacturing Highlights Manufacturing contributes 9% to GDP Nigeria s Manufacturing is dominated by Food & Beverage and Textiles Recently, the sector has been hampered by higher imported input costs, scarcity of FX,and higher power costs. It contracted by about 4% in 2016 As a solution, manufacturers are embracing import substitution and backward integration High potential areas include: palm oil, textiles, basic metals, automobile assembly, petrochemicals, and plastics and rubber Investments Palm oil producer PZ Wilmar unveiled an $80 million refinery, while Dangote Group plans to invest in a $100 million truck assembly facility
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