Economic Growth: Nigeria Rated Among Top 10 Emerging Markets of Future
BMI Research, a Fitch Group company and financial market analysis firm, has recently identified 10 emerging markets from the Asian and African region that are set to become new drivers of economic growth over the next ten years. Nigeria made the cut. Other countries on the list include Bangladesh, Ethiopia, Egypt, Kenya, Indonesia, Myanmar, Pakistan, Philippines, and Vietnam.
The report says that construction and manufacturing will play an important role in driving the economies of these countries. Pakistan, Bangladesh, and Myanmar will specifically see a strong growth in the manufacturing industry. All countries are set to see the construction sector thrive, particularly to assist urban growth and the manufacturing industry. Mining and Gas industry will play a far smaller role than it has in the past years, while the commodity-driven model is not expected to make a comeback.
Real GDP growth in Nigeria will be weak in 2016 – BMI put a forecast at 3.1% expansion – as the naira peg and capital controls will continue to weigh on economic activity through the course of the year, exacerbating the global oil price slump’s effects on the Nigerian economy. While 3.1% growth would mark acceleration on 2015’s 2.8%, it is nevertheless a downward revision from our previous forecast of 3.6%. This revision is due to delays to the planned expansionary budget and a recent data release, which has shown the extent to which businesses are being hampered by capital controls.
The Nigerian government’s move to secure USD6bn in loans from China signals two things: strengthening relations with the Asian giant and reluctance to comply with the stipulations on economic policy which would likely have accompanied an IMF loan.
The IT markets in Ghana, Kenya and Nigeria all contracted sharply in 2014 and 2015 as a depression in the commodities complex hurt economic performance and resulted in steep currency depreciation against the US dollar that eroded already weak purchasing power. This was as a reality check on previous optimism regarding their economic growth trajectory and IT markets, as a lack of structural and institutional strength was laid bare. The fortunes of the three markets are not however tied that closely, with Ghana and Nigeria more susceptible to further negative shocks in the short-term if the commodities markets take another turn downwards.
The ongoing economic malaise has compounded BMI’s already negative outlook for the Nigerian power sector. A combination of sabotage to gas pipelines, a scarcity of access to foreign exchange and a lack of liquidity in the distribution segment to weigh on much-needed private investment in the sector – entrenching slow growth in capacity and generation.
There is however a positive outlook for the Nigerian mobile market and the country’s telecoms sector in general. This is despite an increasingly challenging economic climate which, in Q116, saw a 0.4% contraction in real GDP – largely attributable to falling crude prices and oil production. Subscription growth in the mobile market continues to be driven by factors including operators’ promotional activities, multiple SIM ownership and the extension of network coverage to underserved areas. Meanwhile broadband penetration remains very low. There continues to be significant demand for traditional voice and data services, and to a large extent this demand has remained untapped.
Nigeria has a large pool of skilled and unskilled labour relative to other countries in Sub-Saharan Africa
(SSA) owing to its vast population and the sheer number people completing various levels of education. However, corruption, poor infrastructure and frequent strike action negatively affect the quality of offerings at the country’s educational institutions, especially at the tertiary level, leading businesses to invest extensively in training or the recruitment of skilled foreign workers.
Primary sector: Oil, Agric Business, Telecom.
Key exports: Oil, Cocoa, Entertainment
2015 GDP growth: 3.4%.
Unemployment rate: 20.5%.
Exchange rate: 335 Nigerian naira per dollar.