Nigeria’s economy is going through a double (if not triple) whammy - the global economic growth being below par, oil prices dropping and Naira under intense pressure. This has resulted in the economy teetering on the brink as the government is grappling with the lack of oil revenues (which accounts for over 95% of the country’s Forex, and 80% of its revenues), combined with various internal issues such as immediate requirement to improve infrastructure, fight terrorism, etc.


The government has unveiled its austerity measures, which are populist in nature, with only the affluent being taxed, and the general tax rate not being affected - this could have something to do with the fact that elections are around the corner.


In our view, this can at best be a stop gap solution, with the long term solution to encourage foreign investors to enter the country, encourage the affluent business to expand, and bring down the dependency on oil revenues.


The 2015 budget has been based on the oil at $65 per barrel, which means that at the current rate the country will not be able to save any additional funds for its ECA (excess crude account). The government plans to use around 50% (~$2Bn) of its current funds under the ECA ($4 Bn currently) to fund critical projects.


We believe that sectors which cater to the large population such as FMCG manufacturers, agro businesses, banks, and essential infrastructure providers will be the ones growing in such a market.

Other sectors such as telecom are likely to be stagnant for the year, while companies that operate in other areas - especially luxury goods, are expected to be hit by the new taxes and reduced spending by the people.

http://www.proshareng.com/news/25640/Sectors-of-Growth-during-Austere-Times-