industry insights -issue 04

8/2/2019 Industry Insights -Issue 04

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Major Economic Indicators:

Quarterly Outlook

Inflation: Negative

Interest Rates: Stable

Exchange Rates: Stable

GDP Growth: Positive

Equity Markets: Negative

The Macro

Economy

The Nigerian economy continued to record

moderate growth despite a slowdown in key

industrial economies across the world and

political unrest in the Middle East and North

Africa (MENA) regions. Data provided by the

National Bureau of Statistics (NBS) reveals a

7.4% growth in real gross domestic product

(GDP) in Q3 2011, compared to the 7.86%

recorded in the corresponding quarter of

2010. The slight decline in Q3 2011 GDP rela‐

tive to the 2010 period is largely attributable

to a decrease in activities in the Oil & Gas sec‐

tor. The economy was largely driven by the

activities in the non‐oil sector (particularly

agriculture), which recorded an 8.81% growth

in the third quarter of 2011. The agricultural

sector benefited from favourable weather

conditions which resulted in a significant boost

in crop production during the period. Real

agricultural GDP growth stood at 5.82% in Q3

2011, as against 5.68% in the corresponding

quarter of 2010. In addition, the sector re‐

corded gains from various government inter‐

ventions, particularly the agricultural credit

schemes initiated by the Central Bank of Nige‐

ria (CBN)1.

In spite of the relative peace in the oil‐

producing Niger Delta region, crude oil pro‐

duction output declined, as a number of oil

producing companies faced operational chal‐

lenges. The average daily production dropped

to 2.36 million barrels per day (mbpd) in Q3,

compared to the 2.49 mbpd achieved in the

same quarter of 2010. As a result, the oil sec‐

tor contribution to real GDP declined to

14.27% in Q3 2011 (Q3 2010: 15.38%).

Gains recorded in other sectors of the econ‐

omy include manufacturing (8.15%), telecom‐

munications (35.11%), wholesale/retail trade

(11.84%) and finance & insurance (3.98%). Our

outlook on GDP for both Q4 2011 and Q1 2012

remains positive, as we expect oil production

to remain relatively stable and good perform‐

ance in the non‐oil sector.

Contents

The Macro Economy P.1

Maritime P.4

Downstream Oil & Gas P.6

Food & Beverage P.8

Private Medical Services P.10

QUARTERLY REVIEW OF NIGERIAN INDUSTR

Industry Insights

Agusto & Co.RESEARCH, CREDIT RATINGS, CREDIT RISK MANAGEMENT

ISSUE 04, DECEMBER 2011

1

In November 2011, the NBS disclosed plans to

change the base year for Nigeria’s GDP to 2008

from 1990 in January 2012. The GDP rebasing is

expected to

result

in

a significant

increase

in

the

size of the country’s economy. The Statistician‐

General noted that the change aims to reflect the

current structure of the Nigerian economy, taking

into account changes that had taken place since

1990, such as the emergence of a vibrant telecom‐

munications sector.



‘ ...lending rates

trended upwards

in line with

tighter money

market condi ‐

tions, to stand at

23.32% in Octo‐

ber

...’

Inflation

Inflationary pressures remain a major con‐

cern for monetary authorities, with head‐

line inflation rising to 10.5% in October2

from 10.3% recorded a month earlier.

Similarly, food

inflation

figures

trended

upwards, to stand at 9.7% in October

2011, compared to 8.7% recorded in Au‐

gust 2011. We expect inflation in Q4 2011

to remain elevated, given the festive end

year activities. In addition, given the high

global commodity prices, continued de‐

pendence on importation, particularly

food products and government’s planned

removal of fuel subsidy, we expect higher

inflation figures in Q1 2012.

Monetary Policy

Subsequent to the significant increase in

the monetary policy rate (MPR) in October

2011, the monetary policy committee

(MPC) retained the MPR at 12%. According

to the data released by the CBN, the aver‐

age interbank call and Open Buy Back

(OBB) rates both opened at 10.74% and

10.63% on 19 September 2011 and rose to

17.09% and

14%

respectively

on

15

No

‐

vember 2011. Similarly, lending rates

trended upwards in line with tighter

money market conditions, to stand at

23.323% in October 2011. Provisional data

from the CBN suggests stronger credit

growth in the economy, with aggregate

domestic credit (net) growing by 24.57% in

October 2011, translating to an annualized

growth rate of 29.48%. This growth is

largely attributable to the increase in pri‐

vate sector

credit.

Going

forward,

Agusto

& Co. expects interest rates to remain

relatively stable, but with occasional vola‐

tility as a result of the CBN’s monetary

policies.

Financial Markets

Investor apathy has had a severe negative

impact on the financial markets in the

second half of 2011. The Nigerian Stock

Exchange (NSE) All‐Share Index (ASI) de‐

clined by

over

19%

year

to

date,

falling

below the 20,000 mark to 19,841.31pts on

14 December 2011. Market capitalization

also declined by 19.2% to ₦6.27 trillion as

at the same date, partly due to the delist‐

ing of the nationalised banks4. The down‐

ward trend in the equity market is consis‐

tent with global trends, as investors seek

more guaranteed investment outlets. In

addition, upholding the MPR at a high 12%

translates to a negative outlook for the

equity market,

as

fund

managers

fly

to

safety in the face of a bearish stock mar‐

ket. The money market should continue to

benefit from this situation, particularly

given higher interest rates. Q3 saw the

issuance of two municipal bonds (Delta

and Niger) and three corporate bonds

(UBA, Lafarge Cement WAPCO and NA‐

HCO). We anticipate additional municipal

bonds issuance programs in Q1 2012. Our

outlook of the bond market is stable.

External Position

The domestic currency continued to be

pressured in the latter part of year. Data

from the CBN shows that the WDAS ex‐

change rate ranged between ₦150.25/US$

and ₦156.70/US$ from November to 12

December 2011, while the parallel market

rates ranged between ₦164.7/US$ and

₦160/US$ in the same period. In the face

of declining

oil

prices

and

the

change

in

the budgeted benchmark oil price to $70

per barrel5, the monetary policy commit‐

tee (MPC) had no choice but to devalue

the currency. The apex bank adjusted the

target official exchange rate from ₦150/

2



US$ to ₦155.00/US$ and maintained the dollar exchange rates within +/‐ 3%. This implies that

the domestic currency will float between ₦150/US$ to ₦160/US$. Nigeria’s gross reserves

stood at $33.1 billion as at 8 December 2011, representing 4.3% accretion, from September

2011. The recent currency devaluation by the CBN should alleviate pressures on the foreign

exchange market. In addition we are of the view that the devaluation should reduce arbitrage

opportunities for currency speculators going forward.

Due to the financial crisis that has affected most European economies; the CBN has disclosed

plans to convert some of Nigeria’s foreign reserves from Euro to the Chinese Yuan. Although

this is expected to reduce the country’s exposure to the Euro, no further details as to the im‐

plementation of this strategy have been publicized.

Political Developments and Outlook

President Goodluck Jonathan presented the 2012 budget to the National Assembly on 13

December 2011. The budget largely focuses on macroeconomic stability, structural reforms

and investments in key sectors of the Nigerian economy. The budget proposal reflects govern‐

ment’s intention

to

ensure

fiscal

prudence

in

the

face

of

global

economic

uncertainties.

Recur

‐

rent expenditure was reduced to account for 72% of the 2012 budget, while capital expendi‐

ture allocation was increased to account for 28% (2011: 26%). We are of the view that the

increase in the share of capital expenditure may not adequately support the government’s

plan to increase infrastructural developments in the country by 2012. Unlike previous years,

the 2012 budget excludes petroleum subsidy allocation. This validates the planned removal of

fuel subsidy in 2012. Agusto & Co. is of the view that the implied action of the government

could bring the pump price of fuel to over ₦130 per litre, resulting in an increase in the gen‐

eral price level in the economy.

The People’s Democratic Party (PDP) gubernatorial candidate, Captain Idris Wada, emerged

winner of the Kogi state governorship elections in December 2011. Following the recently

concluded PDP primaries in Bayelsa and Sokoto states; Seriake Dickson and Aliyu Wamakko‐

the incumbent governor, have been declared winner of the party’s primaries of the respective

states. Politics is set to dominate a number of states – Adamawa, Bayelsa and Sokoto over the

next two quarters.

Heightened insecurity and political unrests in the northern parts of the country remain a con‐

cern to the nation. The Federal Government has increased funds allocated to security in the

2012 budget, in order to address these issues; In addition to fiscal prudence, and infrastruc‐

tural development, we also expect ensuring security of lives and property to be at the fore‐

front of the current governments agenda in 2012.

On the

basis

of

the

foregoing,

we

attach

a stable

outlook

to

the

Nigerian

economy.

3

1. National Bureau of Statistics 2011

Q3 GDP Report.

2. Inflation figures for the month of

November are yet to be published.

3. Average maximum lending rate

4. Spring

Bank

Plc

now

Enterprise

Bank

Limited , Bank PHB now Keystone

Bank Limited and Afribank Plc now

Mainstreet Bank Limited

5. The Minister of Finance reduced the

budgeted benchmarked oil price

from $75 to $70 per barrel.



Maritime Security - Terror on the high seas The Maritime Industry in Nigeria is rela‐

tively well established; the Industry sup‐

ports trade and general commerce and is

crucial to the manufacturing, oil & gas and

agricultural sectors,

which

jointly

account

for a significant portion of the country’s

Gross Domestic Product (GDP). Nonethe‐

less, criminal maritime activities continue to

undermine the Industry’s profile. The num‐

ber of reported cases place Nigeria firmly

on the International Maritime Bureau’s

(IMB) hotspot list. According to IMB, mari‐

time attacks in Nigeria rank the second

highest in Africa, after Somalia. Over the

last five years, maritime attacks have been

on the

rise

and

have

shown

no

signs

of

dis

‐

sipating. An estimated 340 attacks have

been carried out in Nigeria since 2006. It is

imperative to note that these figures may

have been understated, actual numbers

may be twice as high, as many incidents,

mainly those involving fishing and oil ves‐

sels go unreported1. In addition, these num‐

bers do not include incidents that occurred

in domestic/inland waterways.

There are various maritime security threats;

terrorism, bunkering, armed robbery, kidnap‐

ping and assault. In Nigeria, maritime terror‐

ism has not been pronounced, particularly

since the Niger Delta Amnesty was signed in

June 2009. Most maritime attacks in Nigeria

are armed robberies and assaults. Oil and

chemical tanker vessels are the most tar‐

geted, presenting greater financial value.

Other targets include floating storages, off ‐

shore production platforms and service ves‐

sels. The attacks are often violent; pirates

usually rob vessels, kidnap crew/staff along

the coast, rivers, anchorages, ports and sur‐

rounding waters2. Generally all waters in

Nigeria are high risk; however the most sus‐

ceptible areas are Lagos and Bonny River.

Lagos is the most dangerous area3, account‐

ing for about 60% of the reported maritime

attacks in Nigeria.

Piracy and other illegal maritime activities

have cost the Nigerian economy a total of

about ₦31.6 trillion (US$202 million @

156.7/ US$) in the last three years4. Ships

coming into Nigeria’s territorial waters are

charged higher insurance premiums, because

of the risk involved, with far reaching infla‐

tionary and economic implications. In addi‐

tion, the Nigerian fishing industry, the third

highest contributor to the agricultural sec‐

tor’s GDP,

has

suffered

from

maritime

inse

‐

curities. Most domestic and international fish

trawlers are wary about patronizing Nigerian

waters as a result of the incessant pirate

attacks.

The Nigeria Maritime Administration and

Safety Agency (NIMASA) is the focal point for

consultation and policy direction on strategic

maritime security matters, while the Nigerian

4

‘Lagos is the

most dangerous

area, accounting

for about 60% of

the reported

maritime attacks

in Nigeria.’

Figure 1: Piracy Map of Africa for 2011

Source: IMB Piracy Reporting Centre



Navy has the constitutional responsibility to secure Nigeria’s territorial waters. These

agencies have been fraught with various challenges which have restricted their ability

to effectively carry out assigned duties.

These include:

⇒ Paucity of funding and resources

⇒ The security agencies are ill equipped for combat

⇒ Dearth of adequate surveillance and intelligence gathering equipment to detect

and deter security threats relating to maritime security.

⇒ Restricted access to neighbouring territories limits the ability to arrest and inves‐

tigate marine incidents that have ventured into neighbouring waters.

Nigeria is heavily dependent on imports to sustain its economy. Currently, nearly 80%

of global

trade

is

transported

by

water.

Consequently,

it

is

imperative

that

internation

‐

ally recommended protective measures are urgently adopted to curb security inci‐

dents affecting marine vessels and port facilities. Nigeria’s maritime defence capabili‐

ties must be strengthened and regional cooperation between countries must take

centre stage. The constitution of a paramilitary maritime authority is just as impor‐

tant. In countries such as Indonesia, United Kingdom and Pakistan, coastal guards

support navy activities.

Plans are underway to establish an additional maritime security agency to comple‐

ment the activities of the Navy and provide further security for sea fearers. The Mari‐

time Security Bill is currently awaiting the approval of the senate. When approved, the

bill should

improve

the

security

profile

of

Nigeria’s

territorial

and

inland

water

ways.

It

is however important to note that effective implementation will require consistent

cooperation between all the maritime regulatory agencies.

5

1. ASI global Maritime Response – Quar ‐

terly Report

2. International Commercial Crime Ser ‐

vices

3. Bergen Risk Solutions

4. Nigeria Management Administration

and Safety Agency (NIMASA)



The second half of 2011 has been fraught with arguments for or against the removal of

the subsidy on petroleum products as contained in the Federal Government’s 2012‐2015

Medium Term Expenditure Framework (MTEF). In 2011, the Federal Government (FG)

estimates the annual cost of subsidizing Premium Motor Spirit (PMS) and Dual Purpose

Kerosene (DPK) at ₦1.2 trillion. As a result of the subsidy, PMS retails at ₦65 per liter ‐

one of the lowest in the ECOWAS region. Since 2008, changes in fuel prices have not

moved in tandem with key indicators such as inflation, exchange rates and international

oil prices. Fuel prices and subsidy allocations have been set by the FG and are largely sub‐

ject to political manipulation. Despite the FG’s clamor that the fuel subsidy is unsustain‐

able, Nigeria’s expenditure on fuel subsidy as a percentage of GDP is still one of the low‐

est amongst energy subsidized countries.

On 1 December 2011, the clause for the fuel subsidy removal in the MTEF Bill was shelved

by the National Assembly. However, less than two weeks later on 13 December 2011, the

President excluded spending on the fuel subsidy from the 2012 budget. In view of the

clamor and recent happenings, it appears that the removal of the subsidy is inevitable.

Should the removal of the subsidy be effected, we believe the downstream Oil & Gas

industry would be affected in the following ways;

⇒

Currently,

consumption

of

fuel

is

exaggerated

on

account

of

the

subsidy.

PMS

con‐

sumption is estimated above 43 million liters per day, while kerosene consumption is

estimated above 9 million liters per day. We believe that once the subsidy is re‐

moved, price adjustment would lead to a reduction in fuel consumption, particularly

in the DPK market where people can switch to alternative cooking fuels. This could

lead to a reduction in Industry revenue, depending on the magnitude of the decline

in volume of products sold.

⇒ In an energy subsidized economy like Nigeria, the government has significant buyer

power, which allows it to dictate both the price at which PMS and DPK are sold as

well as the profit margins on such sales. Following the subsidy removal, the domestic

price of fuel will be set by market forces and thus fluctuate in line with international

oil prices and other macro‐economic variables. As a result, oil marketers’ profit mar‐

gins could become more volatile, exceeding the current government approved profit

margin during favorable periods and vice‐versa.

⇒ Consequently, the removal of the subsidy would foster the entry of new players,

ideas, technology and services in a more competitive market. Without price regula‐

tions, black marketers could switch to the formal market and contribute to the in‐

creased competition. Consequently, oil marketers are likely to struggle to retain mar‐

ket share. 6

Oil & Gas Downstream: In invisible hands

‘Nigeria’s expenditure on fuel subsidy as a percentage of GDP is still one of the

lowest amongst energy subsidized countries’



⇒ Service quality and innovation is likely to improve, as marketers attempt to dif ‐

ferentiate themselves knowing that they can earn a premium for doing so. In

the PMS market for instance, some consumers may be willing to pay a higher

price for an express ‘fill‐up’ through a priority lane (as currently obtains illegally

during periods of scarcity). In the medium term, we anticipate the introduction

of additional

variants

of

fuels

such

as

leaded

and

unleaded

petrol,

which

would

provide opportunities for premium pricing and higher profit margins.

⇒ In May 2010, the FG initiated the issuance of Sovereign Debt Notes (SDN) – a

tradable debt instrument paid to oil marketers who do not receive fuel subsidy

funds within 45 days of importation. This initiative is intended to reduce the

cash conversion cycle of oil marketers and reduce the strain on their working

capital. The removal of the subsidy would ensure that oil marketers trade on a

cash basis in the open market, effectively shortening their cash conversion cy‐

cles to less than 45 days. In our opinion, this would improve the working capital

position of many oil marketing companies.

⇒ Under a subsidy regime, the oil marketers’ sales are guaranteed by the FG and

this offers comfort to creditors especially with the issuance of the SDN. Without

this guarantee, oil marketers may not have access to as favorable credit terms

or interest rates.

While the removal of the subsidy should increase the profit margins of some opera‐

tors, ultimately, it also increases the risk profile of the downstream oil & gas players.

In our opinion, the industry’s outlook with the subsidy removal would be character‐

ized by increased sensitivity to international oil prices, lower demand and continued

import dependence. Over the medium term, we anticipate entry of new players to

spearhead price correction and recovery in demand.

7



Agricultural output in Nigeria remains low

relative to domestic consumption, partly

due to farmers’ insufficient capital and req‐

uisite

skills

for

acquiring

and

managing

modern technology. As a result, the Nige‐

rian Food & Beverage (F&B) Industry contin‐

ues to depend on importation. We estimate

that at least 40% to 50% of the Industry’s

inputs are imported from Europe, Asia and

the Americas. The Industry is, thus, nega‐

tively impacted by increases in international

commodity prices.

Over the last ten years, most F&B compa‐

nies have had to grapple with soaring inter‐

national food prices, due to shortfall in har‐

vests occasioned by extreme weather con‐

ditions in major exporting countries1. Prices

soared to

record

high

in

2008

owing

to

food

crisis. Following a mild recovery in 2009,

prices surged again in both 2010 and 2011

and are currently almost at 2008 levels.

Particularly, in November 2011, the price of

rice exports from Vietnam, the largest sup‐

plier of relatively cheap rice in the interna‐

tional commodity market, increased by 22%

to $467 from $380/tonne in January 20112.

Though the Nigerian F&B in‐

dustry’s profitability remains

satisfactory compared

to

other

industries in the manufactur‐

ing sector, we consider the

continuous rise in commodity

prices to be a major threat to

the Industry in the medium

term.

In dealing with the increasing global food

prices, governments of some exporting

countries have began to protect domestic

food production,

by

raising

tariffs

on

crop

export. Argentina, Russia, and China for

example have continued to raise tariffs on

crop export, thereby increasing costs for

importing countries such as Nigeria. Some

F&B companies have been able to hedge

against the price hikes through inventory

build‐up. However, in Agusto & Co’s opin‐

ion, this is not sustainable, given possible

strain on working capital and storage con‐

straints.

Despite the introduction of backward inte‐

gration policy by the Federal government in

2002, only a handful of F&B companies

have made efforts to cultivate agricultural

inputs. However, none has achieved the

70% self

‐sufficiency

intended

by

the

gov

‐

ernment. The Dangote Group owns about

6,330 hectares (HA) of land in Numan,

Adamawa State, which has the capacity of

producing between 316,500 and 443,100

tonnes of sugarcane annually. Flour Mills of

Nigeria Plc owns 15,000 HA of land in

Kaboji, Niger State that produces between

750,000 MT and 1 million MT of sugarcane

8

‘...at least 40% to 50% of the Industry’s inputs are imported from Europe, Asia

and the Americas’

Food & Beverage -

Price Trends ... A taste of things to come



per annum. BUA Group’s 7,750 HA of land in Lafiagi, Kwara State has a capacity of produc‐

ing between 375, 000 MT and 500,000 MT of sugarcane annually. Cadbury Nigeria Plc via its

subsidiary – Stanmark Cocoa Processing Company Ltd ‐ owns about 300,000 HA of land in

Akure, Ondo State, which produces 69,822 MT of cocoa annually. For some of these com‐

panies, this is far below what is required annually.

The use of rudimentary technology in farm cultivation is a major impediment to backward

integration in the F&B Industry, as well as in the agricultural sector. The recent increase in

import duties on wheat and rice crops to 20% and 30% respectively in December 2011

should make F&B companies intensify their backward integration effort. In addition, local

farmers have begun to mark‐up local prices of agricultural commodities, in line with global

trends. According to the Central Bank of Nigeria (CBN), food inflation rose in the country to

9.7% in October 2011 from 8.7% in August 2011.

Continued shortfall in food supply is expected going forward due to climatic changes in

major exporting countries, increasing use of cereals for bio‐fuel production and the decline

in arable land for agriculture due to urbanization. We thus foresee a decline in F&B margins

going forward though the magnitude would vary across sub‐segments. F&B companies

operating in the breakfast cereals, dairy and soft drinks markets may not be able to fully

pass on increment in costs of raw materials, given the low purchasing power of the masses.

Therefore, in our opinion, sustained higher food prices in the international food market,

does not bode well for sales and profitability of the Nigerian Food & Beverage Industry,

without backward integration.

9

1. Drought in Russia; unfavorable weather

in the United States of America (US) and

Europe; and heavy rains/flood in Paki ‐

stan

2. Food and Agriculture Organization

(FAO) of the United Nations



Despite the increasing number of private

hospitals in Nigeria and continued invest‐

ments by a number of them, Nigerians seek‐

ing foreign medical treatment (ranging from

routine checkups

to

lifesaving

surgeries)

is

still on the rise. In the past, this was more

common amongst the elite, top government

officials and politicians. However, today, this

group has expanded to include members of

the middle class, as well as a few in the lower

income bracket, who are sponsored for medi‐

cal treatment abroad by either philanthro‐

pists, non‐governmental organizations (NGO)

or federal and state governments. In a recent

key note address by the Minister of Finance,

Mrs. Okonjo

‐Iweala,

Nigerians

spend

about

₦30 billion ($200 million) annually on foreign

medical services. We believe this estimate is

quite conservative given that a good number

of people do not source foreign exchange for

such expenses from the official foreign ex‐

change market. Top destinations targeted by

Nigerians for medical treatment include

Egypt, United States of America, United King‐

dom, India, Germany and Saudi Arabia. Nige‐

rians are now reported to be the largest

medical tourists

to

India.

The increase in the number of Nigerians

seeking foreign medical treatment is due to a

loss of confidence in the Country’s health

care system. Nigeria has a life expectancy of

49 years, which is below African average of

52 years, as well as the global average of 66

years. Life expectancy is a major indicator of

a nation’s healthcare system. Nigeria’s low

expectancy is a pointer to the deplorable

state of the country’s health care system.

The Nigerian health system comprises both

public and private sectors, with about 10,000

hospitals, which are classified according to

the level of care they provide ‐ primary, sec‐

ondary and tertiary. Most hospitals focus on

primary healthcare, while provision of secon‐

dary and tertiary health care is lagging be‐

hind in both private and public hospitals.

Overall, the Nation’s health system is faced

with a myriad of challenges including:

⇒ Lack of access to adequate funding

⇒ Use of obsolete technology

⇒ Dearth of skilled medical professionals

due to poor welfare package and work‐

ing condition

⇒ Inadequate facilities

⇒ Poor record keeping

⇒ High operating costs on account of poor

infrastructure including inadequate

power supply, bad roads.

As a result, there is decay in the health sys‐

tem. Unlike many countries focusing on im‐

proving their health system by investing in

10

‘...the Country

spends about

₦ 30 billion ( $200

million ) annually

on foreign medi ‐

cal services’

Medical Tourism - On the rise

Table 1: Top Destinations for Medical Treatments by Nigerians



research, training of medical personnel and investments in modern technology, the Na‐

tion’s system is bereft of such progress and is believed to be one of the sectors that has

received little attention from the Government. Over the last 5 years (2007‐2011), an

average of 5% of the Country’s budget has been allocated to health sector, which is be‐

low the targeted 15% declared in the African Union’s meeting of 2001 in Abuja. In addi‐

tion,

the

recent

scorecard

released

by

the

World

Health

Organization

revealed

that

Nige‐

ria is among the 38 countries that are off ‐track in meeting the health related United Na‐

tion’s‐set Millennium Development goals (MDG’s) by 2015. Based on the recent 2012

budget proposal presented by President Goodluck Jonathan, the allocation to health

sector is 6%, which is still considered low.

Although the Federal Government has plans to revive the health sector as based in its

2011‐2015 medium term framework, the pace of implementation is slow and yet to

impact positively on the sector. The deplorable state of the public hospitals has led to

preference for private hospitals by many Nigerians. Some private hospitals are capable of

treating some of the more complex medical cases. However, many Nigerians prefer for‐

eign medical care, which provide better pre and post medical care than what is obtain‐

able locally. Nevertheless, we believe that the private medical service sector is in the

best position to contribute to the development and revival of the Nigerian healthcare

system. The sub‐sector can be strategically positioned to fill the inherent healthcare gap

caused by the poor state of the public healthcare system.

In the absence of further development of private medical services, we believe that the

country will continue to be faced with dearth of skilled medical professionals as Nigerian

healthcare workers continue to migrate to other countries and expect the performance

of the Nation’s health sector to remain subdued. Consequently, the number of Nigerians

seeking foreign medical treatments will continue to increase.

11



12

Agusto & Co. Limited

Agusto & Co. is the foremost credit

rating agency in Nigeria, specializing

in financial institutions, corporate

and bond ratings. We are also a

research

organization

providing

business information for our various

clients.

As business information service

providers, we publish industry

reports containing unbiased expert

analysis of various industries in the

Nigerian Economy. We gather infor‐

mation about the market size and

potential of an industry, its key

players, competitors, products and

financial condition amongst others.

In providing a broad overview of the

industry and its key players, our

analysts

interpret

data

collected

and assign each industry a risk

rating, taking into cognizance Nige‐

ria’s risk profile.

We also conduct client specific

detailed research.

The copyright of this document is reserved by Agusto & Co. Limited. No matter contained herein may be

reproduced, duplicated or copied by any means whatsoever without the prior written consent of Agusto

& Co. Limited. Action will be taken against companies or individuals who ignore this warning. The infor‐

mation contained in this document has been obtained from sources which we consider to be reliable

but do

not

guarantee

as

such.

The

opinions

expressed

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industry insights -issue 04

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