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Nigeria H2'21 Outlook - No country for old policies

The Nigerian economy further confirmed its recovery from the pandemic-induced recession following the 0.51% growth recorded in the first three months of 2021. While we expect the economy to ride on more growth in subsequent quarters – driven by the low base witnessed last year, we note that persisting challenges such as infrastructural deficit, heightened inflationary pressures, and more recently, the insecurity crisis in some states may slow down the pace of recoveries across several sectors.

 

In this outlook report, we revise our expectations for our coverage sectors and companies alike, bearing in mind the developing trends in the macroeconomic environment. For the oil & gas sector, we see the oil market boom translating to improved oil receipets for both the government and corportates this year, even as we highlight downside concerns stemming from the possibility of increased crude supply from Iran in the second half. As for the other sectors, our views point to disparate recoveries. For instance, in the consumer goods space, we expect increased cost of raw materials, increased excise duties, and general inflationary pressures to keep pricing elevated, while we see sales volumes picking  up in the second half as business activities draw closer to pre-pandemic levels. Whereas for industrials, we expect capex disbursement to remain strong, with overall 2021 spend expected to surpass 2020. The stronger spend will be supported by improving oil and tax receipts as global economies open up, crude prices rebound, and OPEC gradually tapers the existing cut agreement. We also expect private sector capital spend to improve in 2021, albeit at a slower pace compared to public sector spend.