Nigerian Economy: Macroeconomic Analysis

sisNigeria Country Report 2012 61310039 Indian School of Business 7/6/2012 Contents frugal Overview3 Gross Domestic convergence (gross domestic product)3 gross domestic product report4 Inflation4 fundament Economy5 Trade Overview5 contrary Debt7 Labor Market & Human Capital7 tribe and Income Inequality8 Unemployment9 Currency10 Money Supply and pecuniary Control10 Fiscal polity12 Exchange rank12 Interest Rates13 contrary Direct Investment14 sphericization and Comparative Advantage14 Conclusion15 eccentrics16 sparing Overview Nigerias economy is estimated to be cost ab fall push through $262bn, making it one of the largest economies in Africa.The estimates and analysis of various indicators is discussed in the later sections. The acres has f ared better than many other(a) countries during the global stinting push downturn, alone musical arrangementic problems in infrastructure and the cranch movement securities industry rigorous that its position in the Econo mist intelligence activity social units global rankings re importants towards the canful during the forecast peak, at 75th fall out of 82 countries. Efforts to create a importantly much attractive business environment are probably to produce only modest results owing to the decrease pace of to a greater extent fundamental mends. Nigeria has taken steps to simplify trade by working(a) on its tariff structure. withal, there is still a protectionist sentiment in the body politic. Cross border smuggling is still a major(ip) rival and is liable to remain an important feature of the Nigerian economy. The capacity and cogency of Nigerian ports (Trade) have improved fol confuseding the implementation of an ambitious concessioning class that transferred management of terminals to personal operators. However, although the unsnarls have improved port operations and transport turn around times, there remains the problem of corruption in the usage service, which can complicat e and delay the clearance of goods. Gross Domestic Product (GDP)The latest GDP projection data as brought out by World cashbox is $ 268. 5 one million million million (2013 F) and the boorish population is project at 175 million translating into a GDP/Capita to 2,213. The sincere GDP Growth for Nigeria has been at 6. 8 %. However, considering the disparity in the countrys infrastructure viz-a-viz other Asian pay offing nations the harvest-time regulate is non enough for substantial improvement. Nominal GDP 2007 2008 2009 2010 2011 2012(F) 2013(F) US$ bn 166. 5 208. 1 169. 4 196. 3 244. 2 262. 4 268. 5 N bn 20,941 24,665 25,225 29,498 37,590 42,877 46,720 Real GDP suppuration % 6. 6 7 7. 8 7. 4 6. 4 6. 9 artificial lake Economic countersign Unit GDP Composition In Nigeria, the Investment component of the GDP as compared to the private manipulation and government is very mild, hovering at 17 % approximately. A developing commercialise is required to invest around 40 to 50% of GDP in majuscule investment for successive number of years. However that is not seen with Nigeria. Hence, the perspective of Nigeria as an investment destination appears to be grim in the underweight future. 2007 2008 2009 2010 2011 2012 F 2013 F Private consumption 6. 6 -34. 3 6. 4 -26. 7 11. 8 9. 10. 4 regimen consumption 90. 8 4. 4 -8. 1 17. 8 12 8. 5 8 Gross bushel investment 24. 5 -6. 8 9. 1 -3. 6 6. 5 6 6. 5 Exports of goods & services -11. 7 43. 4 -30 11. 4 11. 9 10. 4 12. 4 inauguration Economic Intelligence Unit The graph to a lower place gives the GDP contribution Industry wise for Nigeria. Crude is one of the major contributors to the GDP. Hence, and run fluctuations in the price of crude rock crude oil have added volatility in the Nigerian GDP. Inflation De hostility monetary tightening carried out by the CBN in 2011, the forecast for rising prices remains negative.Inflation is judge to summation to 12. 7% in 2012. Fiscal laxity by the reconcile s is one of the main agents for this. In addition, the payment of the risingly instituted minimum wages and the injection of bills into the bailed out banks, ostentatiousnessary pressure is bound to continue for the rest of the year. It is pass judgment obligate only in 2014 as a result of continence in commodity prices. The April 2012 ostentatiousness data as obtained shows a Month-on-month inflation to be (0. 13%), division-on-Year (12. 9%), 12-Month Avg. Chg. (11. 1%). The inflation rate is extremely lofty and is detrimental towards investment in the country.The Consumer Price Index and Nigerian Inflation rate is shown down the stairs. Source Economic Intelligence Unit Shadow Economy The untaxed and unregulated r correctues by some estimates account for betwixt 40% and 45% of gross domestic product (GDP). Nigerians make just about of their living, as street hawkers, minibus drivers, money changers or securities industry traders. In spite of the abysmal performanc e of the countrys economy, poor infrastructure and hostile business environment Nigeria has massive potentials to be tapped because of its huge deposits of Natural Resources nd population that can be gainfully employed. The black economy accounts for a large plain of the Nigerian economy. Trade Overview Nigeria has considerable natural resources such as oils, and the revenue from oil merchandises forms a major chunk of the Government fund. Nigeria has novelly started a sovereign wealth fund and the excess deterio order from oil exports viz-a-viz projected returns is tell to this sovereign fund. This fund is building up at a slower pace as the revenue is creation directed towards brush government excess pass to meet the countries capital requirement.The country has been putting efforts to tighten the monetary policy and the same has been reflected in their medium-term disbursement framework. The country has projected a year-on-year budget shortage of 1% of GDP. However , from the recent trends it appears that Nigeria leave alone be able to sustain a year-on-year budget deficit of 2% given the prices of oil remain stable even though the current European turmoil and a slowdown in mainland China can push oil prices down and break away to further attach in Nigerias Fiscal deficit.Nigeria intends borrowing from the international capital grocery for meeting its capital expenditure requirement in the near future. The add value of Nigerias exports in the first quarter of 2012 is at about USD 30 billion, the exports to India has reached USD 4. 2 billion, compared to USD 3. 7 billion credited to the US in the period under review. Nigerias export to India is mostly crude oil and cashew nut darn India exports pharmaceutical goods, machinery, electronics and rice. The US was trailed by the Netherlands with USD 2. billion, followed by Spain with USD 2. 4 billion and Brazil which recorded USD 2 billion. Nigeria is a member of the WTO and does not claver p ermanent import restrictions all the same it has a huge banned heel of import goods which coupled with ad valorem tariffs have given rise to cast up in smuggled goods. As such the restrictions do not await to have benefited the topical anesthetic industries. in that respect are specially designated export touch on zones which provide benefits from tax, duties, international exchange restrictions and import-export restrictions.The Nigerian Export Credit insure and insurance corporation (Nexim) provides insurance under the governments export justify scheme. This has helped exporters in raising funds at subsidized rates for refinancing. Nigeria figures 133rd on the Doing Business in Index among 183 world economies and 15th among the 46 sub Saharan African economies. The trade rest of Nigeria for period 2007 to 2011 and forecasted data for 2012 and 2013 is given below. 2007 2008 2009 2010 2011 2012(F) 2013(F)Trade balance 37,748 45,885 25,342 20,237 34,528 34,131 28,778 Good s exports fob 66,040 85,729 56,121 73,698 103,847 114,068 111,836 Goods imports fob -28,291 -39,844 -30,779 -53,461 -69,319 -79,937 -83,058 Services balance -16,902 -22,113 -16,479 -19,231 -24,761 -24,278 -25,914 Income balance -11,747 -15,059 -14,404 -18,623 -22,905 -20,913 -24,624 Current transfers balance 18,545 19,366 18,694 20,092 25,004 27,387 28,562 Current-account balance 27,643 28,079 13,153 2,476 11,867 16,327 6,802 Source Economic Intelligence UnitNigeria and its neighboring African nations have imposed strong Continental Trade Barriers which is depriving the continent of new sources of economical growth, new jobs and take to a sharp fall in poverty and other factors. However, many African countries are losing several billions of dollars in potential trade earnings both year, because of high school trade barriers with neighboring countries. It is easier for Africa to trade with the rest of the world than with itself.The constitution progress in the nation has been r estricted payable to political unbalance and tussle between the presidency and senior economic team. Policies towards changes in exploiting the product from dismiss exports are always the concern restricting policy improvements. The country has huge limitation in the power heavens and the government has initiated privatization class focused mainly on the power sector, However the progress has been slow as a result of private-sector reluctance, the various vested interests involved and strong articulation opposition.This is limiting distant investments in Nigeria. Nigeria urgently requires Tax reform for attracting investments in the country and this policy reform is high on the political agenda. However repayable to conflicting interests and the fragile nature of the Nigerian administration reforms are expected to be slow. Foreign Debt Due to the economic slowdown normal sector revenue and expenditure has contracted in the consequently(prenominal) 3 years. As a result o f the budget deficit, infrastructure is facing discerning shortage which is mostly financed by internal public borrowing charm as well as seeking access to external funding.The Nigerian government has perplex on the path of prudent reforms to reduce wide-cut spending fleck improving funding for capital requirements for efficient spending that will deliver to long term economic growth. The government in care manner launched a Euro denominated stick in 2011 and expects to return to the international debt capital markets again in the contiguous few years. Labor Market & Human Capital The education system of Nigeria is in a poor state unable to meet the educational requirement of the country. There are currently only 46 tertiary institutions in Nigeria providing education covering all functional areas. divulge of the 42m Nigerian children who ought to be in primary school, less than 24m are in school. reveal of the 33. 9m children of subaltern school age, only 6. 4m are in secondary schools. The pass rate for JAMB examinations is about 20% indicates poor quality of secondary school graduates. The educational system has not been tailored to meet growthal hires of the nation. all conflicting investment has to transfer both funds and human capital to the country. There are no improvements visible in the near vicinity.The Nigerian Labor market is marred with constraints and there appears little prospect in the near future of resolving many of the key constraints to improving the labor market in Nigeria. Most of the talented Nigerians prefer to move out of the country and the country is suffering from a brain drain. Nigeria has a large number of very capable professional and highly skilled workers in a range of sectors. Unfortunately for the country, large numbers, particularly in the medical profession, live and work overseas, and the restoration of civilian rule in 1999 has failed to bring an end to the brain drain. Although labor law reform in 20 05 weakened the capacity of the unions to organize political or fellow feeling strikes, the labor movement remains powerful, capable of organizing paralyzing national strikes. Value of indexa Global rankb Regional rankc 2006-10 2011-15 2006-10 2011-15 2006-10 2011-15 4. 4 4. 6 80 80 16 15 a Out of 10. bOut of 82 countries. cOut of 17 countries Algeria, Bahrain, Egypt, Iran, Israel, Jordan, Kuwait, Libya, Morocco, Qatar, Saudi Arabia, Tunisia, UAE, Angola, Kenya, Nigeria and South Africa. Source Economic Intelligence Unit world and Income Inequality The population in Nigeria is growing at a very fast pace, but given the poor state of the countries wellness care and educational system, this is only constraining the already dismal state of the country the growth rate is presented below, the high rate of population growth and the deteriorating state of infrastructure is not conducive enough for enticing foreign investment. Population (Million) 2006 2010 2015 Total 140. 4 152. 2 166 . 7Period averages (%) 2006-10 2011-15 Population growth 2. 1 1. 8 Labor force growth 2. 4 1. 9 Source Economic Intelligence Unit Poverty in Nigeria remains significant despite high economic growth. Nigeria retains a high level of poverty, with 63% living on below $1 daily, implying a decline in equity. There have been attempts at poverty alleviation, but the inequality has been rising. Income inequality worsened from 0. 43 to 0. 49 between 2004 and 2009. This is tally with differential access to infrastructure and amenities.In particular, there are more cracker- set poor than urban poor. This primarily results from the composition of Nigerias economy. Oil exports contribute significantly to government revenues and about 15% of GDP, despite employing only a cipher of the population. Agriculture, however, contributes to about 45% of GDP, and employs close to 90% of the rustic population. This incongruence is compounded by the fact that oil revenue is poorly distributed among th e population, with higher government spending in urban areas than rurally.High unemployment rates have rendered personal incomes even more divergent. The graph below gives a comparison of the population below poverty line in relation to the totalNigerian population. entropy Source Economic Intelligence Unit Unemployment According to the 2011 annual Socio-Economic Report released by the Nigerian Bureau of Statistics, the total number of unemployed people have change magnitude from approximately 7 million in 2006 to 16 million in 2011. In 2011, approximately 2. 1 million people were newly unemployed.The narration has also predicted the new entrants into the unemployed pool to be around 8. 5 million in 2015. The subjoin is also interestingly explained by the aptness of Nigerian university graduates to stay away from labor intensive work. They are without delay ready to wait for a white collar job thus resulting in the entry of new university graduates into the unemployment pool . The total number of employed labor force has remained fairly constant from 2006 to 2011 at around 51 million. However, 10 million new people have been added to the labor force during 2006-2011.The development in labor force could be explained by the steady increase in the number of universities, polytechnics and colleges of education. While the enrollment in universities and polytechnics has decreased from around 460,000 in 2006 to 340,000 to 2011, enrollment in colleges of education has increased during the same period. Whereas the enrollment in state and federal institutions has decreased during 2006-2011, enrollment in private institutions has increased steadily. According to the report, the increase in unemployment rate has been kept in check by Nigerian governments employment policies.The unemployment rate in rural areas was 25. 6% and 17. 1% in urban areas. The total national unemployment rate was 23. 9% in 2011. Total unemployment rate amongst males was 23. 5% in 2011 whi le the same rate amongst females was 24. 3%. The report explains that married women who previously stayed out of the labor force have now started entering the market for jobs due to a raise in claim for financial in addiction. More women are also now forced to enter the labor market because of the need to supplement the income of males in families.The unemployment rate has been consistently growing in Nigeria due to lack of industries, political stability and a myriad of other reasons. Unemployment is leading to crime and shadow economy which is further hindering investments in the country. Data Source Economic Intelligence Unit Currency The Legal meeter followed in Nigeria is the Naira (sign? codeNGN). The telephone exchange brim of Nigeria referred as CBN is the sole permission responsible for issuing and maintaining the volume of the gold in the Nigerian economy.The currency was adopted by Nigeria on 1st Jan 1973 replacing the pound that was beingness followed since the col onial days. Money Supply and monetary Control The primaeval Bank of Nigeria (CBN) is the central bank of Nigeria. Since the global financial crisis of 2008-09, maintaining adequate liquidity and prevent a total collapse of the banking system has been the main focus of the CBN. The CBN uses the Monetary Policy Rate (MPR) to anchor short term money market rates and other interest rates in the economy.Open market operations conducted through the Treasury Bills auction is the major instrument of monetary policy. The CBN also uses discount window operations (including standing lending and deposit facilities, repo and invalidate repo operations) and Cash Reserve Ratio (CRR) in monetary management. The banking crisis of 2009 and the subsequent reform initiated in the banking sector has complicated the monetary policy. The central bank also ensures that there is sufficient lending in key sectors such as agriculture.Since 1977, Nigeria has had an Agric Credit Guarantee Scheme (ACGS) unde r the management of the central bank. The Central Bank of Nigeria (CBN) is responsible for maintaining a balance between its objective of managing inflation and the governments aim of reducing the cost of borrowing by the private sector to encourage investment in productive activities. The CBN is currently pursuing the power objective, having increased its prime interest rate six times during 2011 the Central Bank is attempting to counter what it sees as high inflationary expectations embedded in the system.As the forecast period progresses and the inflation outlook improves, the focus of the CBN will return to easing monetary policy and boosting lending to productive sectors. Nevertheless, this has been complicated by the banking crisis of 2009 and the subsequent reform program put in place by the Central Bank, which is likely to mean that risk aversion among the banks persists into the first part of the forecast period at least. Below is the summary of the key Monetary Indicators for Nigeria. Monetary indicators 2007a 2008a 2009a 2010a 2011a 2012b 2013b 2014b 2015b 2016b Exchange rate NUS$ (av) 125. 8 118. 5 148. 9 150. 3 153. 9 160. 7 174. 0 172. 0 174. 0 176. 0 Exchange rate NUS$ (year-end) 118. 0 132. 6 149. 6 150. 7 158. 3 170. 8 173. 0 173. 0 175. 0 177. 0 Exchange rate N (av) 172. 44 174. 33 207. 46 199. 42 214. 19 209. 71 224. 46 217. 58 215. 33 221. 76 Exchange rate N (year-end) 173. 66 184. 49 215. 49 201. 31 210. 42 221. 23 222. 31 215. 39 219. 63 223. 02 Real in effect(p) exchange rate, CPI-based (av) 38. 05 42. 32 38. 59 42. 11 42. 74c 46. 39 46. 44 50. 42 53. 60 56. 5 Purchasing power parity NUS$ (av) 71. 31 80. 30 88. 60 99. 68 115. 8c 120. 9 121. 0 123. 9 129. 2 136. 3 Money supply (M2) growth (%) 58. 1 53. 6 20. 6 3. 7 -0. 5 8. 7 20. 5 19. 6 17. 5 18. 5 Domestic credit growth (%) 358. 3 55. 9 41. 1 14. 1 28. 1 7. 9 21. 5 20. 7 18. 2 17. 7 Commercial banks prime rate (av %) 16. 9 15. 5 18. 4 17. 6 16. 0 16. 0 14. 0 13. 0 13. 5 13. 8 amaze r ate (av %) 10. 3 12. 0 13. 3 6. 5 5. 7 6. 0 5. 8 5. 8 5. 8 5. 5 Money-market rate (av %) 6. 9 8. 2 3. 8 3. 8 8. 5c 8. 8 7. 0 6. 5 6. 6. 0 aActual. bEconomist Intelligence Unit forecasts. cEconomist Intelligence Unit estimates. Source EIU Fiscal policy While Nigerias fiscal policy during the last half of the decade has been favoring expansive expenditure in the productive sectors, there is growing pressure to introduce tough, unpopular market reforms to tighten the fiscal policy. However it will be difficult to do so considering the different interest groups that the government needs to placate and wider legislature that favors greater government expenditure to counter the crippling infrastructure deficit.Even as investment in infrastructure remains critical, how the government manages to bring down the share of recurrent expenditures while improving the quality of capital expenditure is the key challenge. Another challenge for the government will be how it manages its dependence o n oil prices, the key component of its revenue. A return to respite in Europe or a less than expected growth in China could bring down the oil prices. Exchange rates The Central Bank of Nigeria (CBN) has been responsible for managing the exchange rate and this was being through with(p) by auctioning of foreign currencies.The CBN sets the exchange rate. However, Nigerias currency fluctuations is correlated to fluctuations in the oil prices. In 2007, the Naira saw significant appreciation viz-a-viz the dollar due to increase in Global crude prices. Nigerias central Bank intends making the Naira exchange rates floating and policy decisions are being formulated towards this objective. The CBN also intends to make the exchange rate independent to the cessation possible and aims at intervening only to meet defined policy objectives.The country has seen a huge depreciation of the Naira in the past 3 Decades, presently owing to the stable and strong crude prices the currency is substant ially stable but is forecasted to slip further if the Global Economic crisis continues to deter. Source http//www. exchangerates. org. uk/ Interest Rates The CBN kept its benchmark interest rate at 12%. The CBN will find it hard to balance its objective of managing inflation and the governments aim of reducing the cost of borrowing by the private sector to boost investment.Nigeria has seen a slowdown in economic growth in its economy as a result of slackening in global economic activities. As the tight liquidity source persists, short term interest rates have been rising for the past couple of years. Another cause of concern for the CBN was the slowdown in interbank lending, which prompted the CBN to guarantee placements in the interbank market. This also helped bring down the interest rates in the short term money markets, such as the interbank call rates.The supra table indicates the Monetary Aggregates and Interest Rates as obtained in 2010. Foreign Direct Investment Although t he government will continue to welcome foreign direct investment (FDI), the level of FDI outside the oil and flatulence sector will remain low in relation to the potential size of it of the market. This reflects the complexities of the local business environment, together with the bureaucracy, corruption, low productivity, poor infrastructure and low income levels that restrict the potential market.The salient feature of the policy is enumerated. Full foreign ownership is allowed in all sectors apart from banking, although the Central Bank of Nigeria (CBN) has been more relaxed on the issue since the 2009 crisis in the sector and the subsequent need to recapitalize the abnormal banks. A new bill proposes to outlaw discretionary awards of oil and gas contracts, and stipulates that licenses must be given through open, transparent and competitive instruction processes.Nevertheless, a number of Asian investors, from China, India and South Korea in particular, who have shown express emotion interest in entering Nigeria on the basis that they concurrently develop local infrastructure, may still find themselves the preferred bidder on new acreage. There is also likely to be a continued parti pris towards policy favoring local business, as evidenced by the recent local content bill for the oil industry that gives indigenous firms priority in the awarding of oil concessions and requires foreign companies to employ more local staff.As a result, and with other countries set to improve more rapidly, Nigeria will slip in the global rankings from 67th to 71st out of 82countries, and from 12th to 13th in the diaphragm East and Africa region. Value of indexa Global rankb Regional rankc 2006-10 2011-15 2006-10 2011-15 2006-10 2011-15 5. 1 4. 6 67 71 12 13 a Out of 10. bOut of 82 countries. cOut of 17 countries Algeria, Bahrain, Egypt, Iran, Israel, Jordan, Kuwait, Libya, Morocco, Qatar, Saudi Arabia, Tunisia, UAE, Angola, Kenya, Nigeria and South Africa.Source Econom ic Intelligence Unit Foreign direct investment, net inflows (% of GDP) in Nigeria was 2. 99 as of 2010. Its highest value over the past 40 years was 8. 28 in 1994, while its lowest value was -1. 15 in 1980. The below outlines the Annual inflows of FDI along with its percentage composition of the gross fixed investment. (US$ m) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Annual inflows of FDI 4,854 6,035 5,487 5,787 3,000 3,500 6,000 7,500 7,250 7,250 % of gross fixed investment 40. 4 39. 7 32. 1 35. 3 13. 7 14. 20. 5 20. 9 16. 8 14. 2 Source Economic Intelligence Unit Globalization and Comparative Advantage Nigeria has not benefited well from globalization due to mono-cultural export, inability to attract increased foreign investments and huge indebtedness. And the way forward for Nigeria is to focus towards diversification of exports, debt reduction and expand developmental cooperation. Nigeria got connected to the rest of the world with the arrival of British in the Year 1 539 and by the 1800s Nigeria was under complete control of the British Empire.And since then Nigerias trade has been heavily dependent on British trade. Nigeria has been a country rich in natural resources and traded these resources for weapons and tools. This asymmetric trade is the reason for the wide variance in the distribution of the nations wealth. The country received its independence in 1960 and during that time the Farm products was its major export. Post-independence, put forward products constituted the major portion of Nigerias Trade. The six major clownish products then were cocoa, rubber, palm oil, groundnut, cotton and palm kernel.And this constituted 69. 4% of its total GDP for the year 1963/64. The other contributor to exports was oil. However, during that period oil was priced low at $3. 8 per barrel and thus was not much lucrative. The 1970s saw Nigerias fortune turn with the jump in fuel price by almost 4 times. Nigeria had high grade rock oil reserves and the se reserves were easier to extract. The petroleum price rose to $14. 7 per barrel by January 1974 and rates continued to soar reaching a high of $38. 77 per barrel in 1981.Within the same period, total revenue from oil rose correspondingly. By 1978, oil contributed 89. 1% of Nigerias export and in the same year contribution from agriculture plummeted to 6. 8% of exports. The overdependence of the countrys economy on oil exports has seriously hindered the development in other spheres. Globalization poses a multitude of challenges on Nigeria. The countries very poorly on education, health, agriculture and industrial development and therefore it is imperative that Nigeria focuses on these area to fundamentally transform the nation.The country requires focusing on technological development and science and Technology are required to be central theme of their Developmental Strategy. The Country also requires focusing on basic pedestal such as power supply and telecommunications and these must exist regularly and uninterruptedly. Also, industrialization, including manufacturing and fabrication must be brought in at the center place. There is a need to revitalize agriculture by utilizing the technologies in the battlefield and shifting to mechanized farming. ConclusionThere is an element of risk of doing business in Nigeria even though the debt of the country is in a manageable state. A protract European crisis and a slowdown in China will lead to dip in oil prices and Nigeria will face difficulties in meeting its deficit requirements. The currency of Nigeria-Naira is currently seen stable and after depreciating by an average of 6. 3% per year in 2012-13 to N174US$1, the naira is expected to moderate more gently in subsequent years, to N176US$1 in 2016, though the currency has seen a continuous downslide when data is compared for the last tether decades.After the Banking crisis of 2009, the banking sector is skeptical on lending to private sector, however the fe deral agency is returning. The political risk of the country is seen as high due to factions in the government and the rise in Islamist fundamentalism. Piracy is also a major phenomenon in the Gulf of Guinea which makes Nigerias coastline a risky fare port. Nigeria declared a state of emergency in January 2012 in the northerly parts due to a recent spate of terror attacks however no civil war or major instability is expected in the short run.The government has been accused of largely ignoring public grievances like unemployment, poverty, inequality in wealth and corruption. Unless the government steps up to cross these issues and establish credibility there is risk of escalation. The President Mr. Good fortune Jonathan has recently commissioned investigations into allegations of corruptions in the oil subsidies and replaced the Chief of the Police for weakness to root out infiltration by the insurgents into the government offices.However the effectiveness of these measures will depend on their enforcement. The future of the Nigerian economy therefore depends on stabilizing governance and enabling the parliament to unlock major reforms in the Oil and Gas sector. References 1. Economic Intelligence Unit (http//country. eiu. com/Nigeria) 2. CBN Monetary regard 3. Exchange Rates (http//www. exchangerates. org. uk/) 4. Shadow Economy Reference (http//news. bbc. co. uk/) 5. Currency Reference (http//www. cenbank. org/)