Nigeria Business Outlook: The Road Ahead
Business World: It is estimated that there will be a gradual pickup in global business activity during 2016. In advanced economies, a modest and uneven recovery is expected to continue with a gradual further narrowing of output gaps. The picture for emerging markets and developing economies is diverse but in many cases challenging. The slowdown and rebalancing of the Chinese economy, lower commodity prices, and strains in some large emerging market economies will continue to weigh on growth prospects in 2016 and 2017.
The Nigerian economy was forecasted to grow by 5.54% in 2015 and 5.7% on the average between 2015 and 20171. However in 2015, actual GDP growth slowed to 3.96%2 in Q1 and 2.35%3 in Q2, down from a peak of 6.54%4 recorded in Q2 of 2014. With declining oil prices, the depreciating Naira, and increasing financial market volatility, downside risks to the outlook for Nigeria have risen. Nigeria’s economic growth is estimated at 3% for 2015 and 4.1% in 2016.
The vast majority of CFOs surveyed do not expect the prospects for growth in their industry or the Nigerian economy as a whole to be better in 2016 compared to 2015. 53% of the respondents are either less confident about the country’s economic outlook or are of the opinion that it will remain the same. Surprisingly, about 62% of CFOs surveyed are more confident in the growth prospects of their organisation. This implies they have delinked their organisation’s growth from that of their industry and the economy as a whole. Perhaps this is a reflection of a strong sense of ‘Self belief’. Further engagements with the CFOs suggest that the strong sense of ‘Self belief’ being expressed in their individual companies is anchored on the view that their companies are already well positioned to manage the headwinds and have proactively taken steps to mitigate the emerging risks in the business environment.
58% of the respondents believe that regulatory inefficiency is likely to impede the growth and profitability of their organisations, while 44% believe the unavailability of foreign exchange and the instability of the exchange rate will likely affect the organisation’s growth and profitability in the years ahead.
The above is an excerpt from the KPMG Nigeria CFO Survey. Please feel free to download here.