The economic outlook for West Africa is positive as Nigeria, its major economy continues its exits from the recession, says specialist global risk consultancy, Control Risks, in their annual political and security risk forecast, ‘RiskMap 2018’.
Control Risks indicated that investor sentiment across West Africa is likely to experience an uplift in 2018 amid political uncertainties ahead of Nigeria’s 2019 presidential elections, which alongside on-going security concerns are among the key risks for businesses operating in the region.
“2017 has been a tough and turbulent year for businesses in the region, however with Nigeria exiting recession, and foreign exchange shortages easing, we see a strong improvement in investor sentiment emerging.
“Another major engine of growth will be Cote d’Ivoire, where economic expansion is projected at around 7% next year. There will be only a handful of elections in the region in 2018, meaning continuity will largely prevail with policy decisions having the biggest impact on the business environment,” said Tom Griffin, Control Risks’ senior partner for West Africa
He, however, remarked that though presidential election in Nigeria is slated for 2019, campaigning has already started, which may be a downside to the outlook.
“The uncertainty that generates, as well as the need for cash that an election brings, mean that political instability and regulators whose actions will be difficult to predict remain among our top risks for businesses in the year ahead,” he pointed out.
Control Risks equally identified terrorism and militancy, irregular regulators and political instability as key risks facing businesses in the region in 2018
Business assets and personnel in West Africa will remain vulnerable to attacks by transnational or domestic militant groups. In particular, al-Qaeda and its affiliates will continue to pose a threat to operators in the Sahel, while the oil and gas industry in Nigeria’s Niger Delta will remain exposed to attacks by domestic militant groups,” the risk consultants said.
Control Risks noted that as countries in the region, notably commodity-dependent economies, face growing fiscal pressures, operators are likely to see regulatory bodies increasingly act as revenue-generating bodies, strengthening local content provisions, introducing stricter fiscal terms, reviewing contracts or erratically imposing fines in companies in the hope of boosting state finances.
This, according to it will periodically give rise to commercial disputes, legal challenges, and the need for businesses to engage with government stakeholders.
On political instability, it said protracted political and socio-economic grievances will continue to fuel popular discontent and a desire for regime change in parts of the region.
“Cameroonian President Paul Biya’s re-election bid amid a continued crisis in the Anglophone regions will exacerbate tensions, while Togolese citizens will continue to protest for the end of the 50-year Gnassingbé dynasty.
“Protests will pose security threats to businesses, while regime changes would prompt major institutional changes and complicate engagements for operators,” it stated.
It highlighted that many countries in Africa, Nigeria, and Cameroon among them, face the prospect of what could become a sovereign debt crisis, a decade after they followed Ghana’s lead in entering the international bond market.
“The problem is driven by high levels of external debt, persistent uncertainty over the recovery of commodity prices to fund repayments, and borrowing to fund recurrent expenditure. Countries dependent on oil revenues are particularly vulnerable to ballooning debt in 2018,” it said.
It specifically noted that plans to borrow heavily to finance long-term infrastructure projects in Nigeria and Ghana will not generate sufficient revenues in the coming year to finance debt repayments.
“Amid rising inflation and muted oil prices, Nigeria’s debt servicing payments, which in 2016, doubled to 66 percent of total revenues, are likely to rise further, placing extreme strain on an already stretched budget.
“With the government of President Muhammadu Buhari well over halfway through its term, yet to fulfill many of the promises that brought it to power and already entering campaign mode, businesses in Nigeria will remain acutely sensitive to political and operational instability in 2018,” Control Risks said.