Boston, MA -- (SBWIRE) -- 02/19/2014 -- The defection of 37 members of the House of Representatives from the People's Democratic Party (PDP) to the opposition All Progressives' Congress (APC) deprives the ruling party of its lower house majority for the first time and indicates that its woes are worsening.

The challenge for President Goodluck Jonathan and his advisors will be to stop the haemorrhaging of members and to re-galvanise the party ahead of the 2015 elections. Despite its gains and the PDP's woes, the APC is facing its own challenges and is by no means a shoo-in in 2015. It will also battle to unify its disparate support base and will have to confront the PDP's significant advantages of incumbency.

We are forecasting that the Nigerian economy will expand by 7.0% in 2014, up from an estimated 6.7% in 2013 thanks to continued strong expansion in non-oil sectors. The positive impact of agriculture mean that this important sector should contribute strongly to private consumption growth.

Despite relatively benign inflation, we believe that tight monetary policy will remain in place due to rising core inflation and signs of depreciatory pressure for the currency. With that said, outgoing governor Sanusi Lamido Sanusi's successor has not yet been appointed and this introduces an element of uncertainty to the medium-term outlook.

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Although Nigeria will continue to post large current account surpluses, significant net errors and omissions and lower financial account inflows will keep the balance of payments position under pressure. The authorities have adequate foreign exchange reserves to fend off any immediate threat but risks will grow if the underlying causes of balance of payments pressures are not addressed.

Major Forecast Changes

No major forecast changes

Key Risks To Outlook

The volatility of the price of oil poses a significant risk to export revenues and government receipts. A significant deterioration in the economies of Europe, the US, or other major markets could see the price again head below our current projections, with negative implications for Nigeria's economy.

While we believe that security risks will eventually be contained, if the situation significantly deteriorates, this would potentially affect investment, exports, and growth.

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