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Nigeria
SEB MERCHANT BANKI NG – COUNTRY RI SK ANALYSI S February 18, 2008

important your attention is drawn to the statement on the back cover of this report which affects your rights.
AnaIysl: Ienny Nordgren. TeI: +46 8 763 96 05. L-maiI: jenny.nordgren©seb.se

Country Risk Analysis

pãççíÜ=Äìí=ÇáëéìíÉÇ=ÉäÉÅíáçåëK In ApriI 2007, Nigeria leId presidenliaI, IegisIalive and
slale eIeclions, marIing lle firsl lransfer of pover from one civiIian adminislralion lo
anoller since independence. Tle ruIing IeopIe's Democralic Iarly's (IDI), and ils
IresidenliaI candidale, Yar'Adua, relurned lo pover vill a Iarge majorily of voles ÷ 70 °
according lo officiaI resuIls. Hovever, lle eIeclions vere described by lle LU as “nol
credibIe¨ due lo lle IeveI of rigging and vioIence. LIecloraI claIIenges lo Iresidenl Yar'
Adua's viclory couId succeed in forcing eIeclions lo be re-run and a courl ruIing on llis
issue is expecled Ialer llis spring.
=
oçÄìëí=ÉÅçåçãáÅ=ÖêçïíÜ. Tle economy expanded by around 6 ° in 2007 due lo a booming
non-oiI seclor driven by ligl governmenl spending and privale seclor demand fueIIed by
rapid credil grovll. Tle agricuIlure and
services seclors vere lle main conlribulors
lo GDI grovll vliIe lle lydrocarbon
seclor decIined by an eslimaled 6 ° due lo
a faII in oiI produclion lo aboul 2.2 miIIion
barreI per day (mbpd), veII beIov lle
polenliaI of 3 mbpd, due lo unresl in lle
Niger deIla. Tle infIalion rale las been
reduced lo singIe-digils lo aImosl 5 °
leIped by a slrong exclange rale of lle
naira and Iov food prices. Tle budgel
recorded a smaII surpIus in 2007 and pubIic debl lo GDI is moderale al beIov 20 °.
GDP (change)
0.0%
4.0%
8.0%
12.0%
2002 2003 2004 2005 2006 2007

cáëÅ~ä=~åÇ=ÉñíÉêå~ä=ëìëí~áå~Äáäáíó=Ü~îÉ=áãéêçîÉÇK=Tle aullorilies lave laIen advanlage of
lle ligl oiI prices lo buiId oiI savings eslimaled al USD 17 biIIion according lo lle oiI-price-
based fiscaI ruIe in pIace since 2004 and lo repay mosl exlernaI debl in lle Iasl lvo years.
Tlis vas compIemenled by Iaris cIub debl reIief in 2006 bringing dovn lle exlernaI debl lo
GDI lo around 3 °. Ioreign exclange reserves accumuIaled lo USD 54 bn al end-2007
covering around 10 monlls of imporls. Despile lle ligl oiI price, lle currenl accounl
surpIus decIined lo 1.4 ° in 2007 from 11.6 ° in 2006 as a resuIl of Iover voIumes of oiI
exporl and slrong domeslic demand for imporled capilaI goods and rav maleriaIs and lle
currenl accounl surpIus is expecled lo remain modesl. Hovever, pressure on fiscaI spending
is increasing and lle conslilulion provides for aII liers of governmenl ÷ federaI, slale and
IocaI ÷ lo slare in oiI revenues vlicl may compIicale fiscaI discipIine.

SEB Merchant Banking Country Risk Analysis February 2008

2
_ççãáåÖ=Ñáå~åÅá~ä=ã~êâÉíëK=In 2007, perceived improvemenl of lle macroeconomic
silualion and favourabIe gIobaI financing condilions resuIled in slrong capilaI infIovs ÷ boll
foreign direcl inveslmenls (IDI) and porlfoIio. Tle lydrocarbon seclor allracled lle majorily
of IDI infIovs bul Iarge inveslmenls lave aIso been made in mobiIe leIecommunicalions,
aIuminium produclion and banIs. Tle slocI marIel venl up by 75 ° during 2007 and banI
Iending is increasing rapidIy vill a doubIing of privale seclor credil since lle banIing
consoIidalion in 2006. Hovever, privale seclor credil lo GDI remains Iov al 19 °.


kÉï=ìåêÉëí=áå=íÜÉ=káÖÉê=
ÇÉäí~K=Tle Iong-slanding
confIicl over lle slaring of
lydrocarbon revenues in lle
DeIla region fIared-up in lle
run up lo lle eIeclions. Tle
unresl las caused disruplion
lo oiI produclion of around
0.6 mbd of crude oiI
produclion Ieading lo a
slorlfaII of lydrocarbons
exporl revenues of around
USD 1 biIIion. Tle Iresidenl
las Iauncled an ambilious
reform process lo unIocI lle
polenliaI of lle oiI and gas
seclor, incIuding resoIving
lle confIicl in lle Niger DeIla. Vice-Iresidenl GoodIucI Ionallan, vlo is from lle region,
las been engaged in a peace process lo manage lle confIicl bul progress las been Iimiled
and vioIence las resumed afler a promising slarl. Suslained unresl in lle Niger deIla viII
cause furller disruplions lo oiI produclion, Ieading lo fiscaI and exporl revenue Iosses.


-˘--


Nivcric is c |iv||u ci|-!cpcn!cnt cccncmu t|ct |cs ccnc|itc! |rcm sccrinv ci| priccs cut c|sc scun!
cccncmic pc|iccs |ci! cut cu t|c prcticus Prcsi!cnt in c|csc cccpcrcticn uit| t|c |MI. Rcccr! |iv| ci|
priccs cn! strcnv ccpitc| in||cus (cct| ID| cn! pcrt|c|ic) |ctc c||cuc! c cui|!-up c| |crcivn cxc|cnvc
rcscrtcs cs uc|| cs ci| sctinvs cn! t|c cxtcrnc| !cct pcsiticn |cs imprctc! mcr|c!|u |c||cuinv c
numccr c| !cct ccncc||cticns cn! rcpcumcnts in 2006 cn! 200¯. Hcuctcr. Nivcric is sti|| c |cu-
inccmc ccuntru mcrrc! cu t|c |cnv-stcn!inv ccn||ict in t|c Nivcr !c|tc cn! pc|iticc| unccrtcintics
rc|ctc! tc t|c ccntcstc! Prcsi!cntic| c|ccticn rcmcin. 1|c rctinv cvcncics |irst rctc! Nivcric in 2006
in 88- un!crsccrinv Nivcric´s strcnv cn! imprctinv |incncic| rctics. rc|crm prcvrcss cn! rccust
vrcut|. cn! |cs |ctcr nct c|cnvc! t|c “stcc|c¨ cut|cc|.









SEB Merchant Banking Country Risk Analysis February 2008

3
hÉó=ÑáÖìêÉë
OMMU
IopuIalion (miIIions)
151
GDI/capila ($) 1096
GDI (clange) 9.0°
InfIalion 7.4°
Curr.Acc. baIance/GDI 5.3°
Reserves/imporls (monlls) 10
Budgel baIance/GDI
6.2°
Governmenl debl/GDI
13°
dê~éÜW Nigeria's risI profiIe is veaIer llan lle
average of aII emerging marIel counlries accepl for lle
slrong resuIl on Iiquidily. Lvenl risI veigl on lle
raling due lo lle Niger deIla.
bñíÉêå~ä=ê~íáåÖëW=
Iilcl: BB-
S&I: BB-
Moody's: N.R.
mÉÉêëW
Iran
Llliopia
TurIey
-1
1
3
5
7
9
11
13
Resilience
Liquidity
Information
Absence of event
risk
Macro balance
Average EM Nigeria
How to read the chart?
Moving out from the center
reduces risk.





Box 1. Sensitivity to a negative oil price shock
Nigeria is an oil-dependent economy with oil accounting for 98 % of total export revenues. To assess
the sensitivity of the economy to a potential oil price collapse we assume oil prices reduced by 50 %
and estimate the following consequences to the external balance:

2008 2008 (oil price 50% down) Change
Merchandise exports 73.5 36.8 -36.7
Merchandise imports 43.4 39.1 4.3
Imports of services* 34 20 14
Other services and income 9.9 9.9 0
Current account 8.8 -9.6 -18.4
FDI 5.8 1.8 -4
Portfolio 2.4 0 -2.4
Other capital (net) 1.5 1.5 0.0
Balance of payments 18.5 -6 -24.8
*Around 70 % is assumed to be oil related, drilling etc.


According to this scenario, the external current account would turn into a deficit of some 6 % of GDP
and the balance of payment worsen by USD 25 billion implying a depletion of reserves from $54 billion
to $29 billion at the end of 2008, still sufficient to cover 4 months of imports. The tentative conclusion is
that Nigeria should have at least one year to adjust economic policies to meet such a negative term of
trade shock, which is comparable to peers.





SEB Merchant Banking Country Risk Analysis February 2008

4
Key data: 2002 2003 2004 2005 2006 2007 2008 2009
GDP (Bill. US$) 47 58 72 100 122 139 166 175
GDP/capita (US$) 356 433 522 706 841 938 1096 1127
GDP (change) 1.5% 10.7% 10.5% 6.5% 6.0% 6.3% 9.0% 8.3%
Investments/GDP 26% 24% 22%
Budget balance/GDP 0% -3% 6% 8% 8% 1% 6% 5%
Govt debt/GDP 94% 80% 66% 34% 16% 15% 13% 13%
CPI inflation (%) 13.6% 14.0% 15.0% 17.9% 8.2% 5.8% 7.4% 7.9%
Money demand (%) 8% 10% -1% -2% 28%
Stock prices (%change) 11% 66% 16% 3% 38% 75%
Interest rates 19% 15% 14% 8% 10% 10%
Exch. Rate ($) 120.6 129.2 132.9 131.3 128.7 127.4 128.5 131.0
Trade/GDP (%) 94% 106% 109% 110% 107% 101% 96% 94%
Oil price (Brent) 25 29 38 54 65 73 87 7
Billions US $
Export of goods 20 31 41 59 71 69 82 83
Imports of goods 24 31 38 51 60 71 77 80
Other: -2 -2 0 1 3 4 4
Current account -5.4 -2.1 3.0 9.0 14.1 1.9 8.8 7.1
(% of GDP) -11.5% -3.6% 4.1% 9.0% 11.6% 1.4% 5.3% 4.0%
FDI 2.4 2.7 4.2 4.8 5.0 5.7 5.8 5.7
Loan repayments 4.9 6.0 7.8 3.5 1.7 1.5 2.1 2.1
Net other capital flows -5.0 -6.8 -5.2 -6.0 -6.8 0.0 1.8 -2.6
Balance of payments -3.1 -0.2 9.8 11.3 14.0 9.1 18.5 12.2
Reserves 7.3 7.1 17.0 28.3 42.3 51.4 69.9 82.1
Total debt 30.5 34.7 37.9 22.2 5.0 4.2 5.6 5.6
o/w short term debt 2.0 2.8 4.5 1.5 1.3 1.2 1.7 1.7
Sources: Oxford Economics and SEB estimates
Rating history
Fitch (eoy) BB- BB-
Moody's (eoy) N.R. N.R.
S&P (eoy) BB- BB-
Type of government:
Next elections Presidential and legislative, April 2011
Other:
Latest PC deal 2005
Latest IMF arrangements PSI 2005
7
4
Stock market
S ou rce: Re uters Ec oWi n
02 03 04 05 06 07
I
n
d
e
x
10000
20000
30000
40000
50000
60000
70000
Excha nge r ate
Sou rc e : R e ute rs E coWi n
0 2 03 04 05 06 07 0 8
U
S
D
/
N
G
N
110
115
120
125
130
135
140
145
150






SEB Merchant Banking Country Risk Analysis February 2008

5

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fãéçêí~åí> Tlis slalemenl affecls your riglls.


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AII researcl (reporls, sludies and pubIicalions) is produced for inslilulionaI inveslors onIy. AII researcl (reporls,
sludies and pubIicalions) is produced for privale informalion of recipienls and SIandinavisIa LnsIiIda BanIen AB
(pubI), (lle BanI) is nol soIiciling any aclion based upon il.

Opinions conlained in aII researcl (reporls, sludies and pubIicalion) represenl lle banI's presenl opinion onIy and
are subjecl lo clange villoul nolice. AII informalion las been compiIed in good faill from sources beIieved lo be
reIiabIe. Hovever, no represenlalion or varranly, express or impIied, is made vill respecl lo lle compIeleness or
accuracy of lle conlenls and il is nol lo be reIied upon as aullorilalive.
Recipienls are urged lo base lleir inveslmenl decisions upon sucl invesligalions as lley deem necessary. To lle
exlenl permilled by appIicabIe Iav, no IiabiIily vlalsoever is accepled for any direcl or consequenliaI Ioss arising
from use of llese eIeclronic or prinled documenls or lleir conlenls.

Your allenlion is dravn lo lle facl llal a member of, or any enlily associaled vill, lle banI or ils affiIiales, officers,
direclors, empIoyees or slareloIders of, sucl members may from lime lo lime lave a Iong or slorl posilion in, or
ollervise parlicipale in lle marIels for, lle currencies and securilies of counlries menlioned lerein.

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