Following Nigeria’s exit from recession in 2017, investor sentiment across West Africa is likely to experience uplift in 2018, a report has stated.
The report, however, pointed out that political uncertainty ahead of Nigeria’s 2019 presidential elections and on-going security concerns were among the key risks for businesses operating in the region.
The specialist global risk consultancy Control Risks stated this in their annual political and security risk forecast ‘RiskMap’.
Control Risks’ Senior Partner for West Africa Tom Griffin stated: “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 seven per cent 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.
“In Nigeria however, although presidential elections are next slated for 2019, campaigning has already started. 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.”
Control Risks in the report identified key risks facing businesses in West Africa in 2018 to include terrorism and militancy, irregular regulators, political instability, among others.
They explained: “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.
“Failure to resolve the underlying political and socio-economic grievances at the root of these movements will see the threat persist in 2018.”
Continuing, the report noted that as countries in the region, notably commodity-dependent economies, face growing fiscal pressures, operators were 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, it stressed would periodically give rise to commercial disputes, legal challenges, and the need for businesses to engage with government stakeholders.
“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.
“From Senegal’s offshore potential to Nigeria’s embryonic mining sector, some countries in West Africa will be making forays into previously-undeveloped sectors in 2018. “Prospective investors need to monitor closely how government’s ability to oversee these sectors evolves and what the associated risks around these projects become.
“Many of the major risks and challenges businesses face in West Africa are the on-going practical impediments to day-to-day operations,” it added.
According to the report, 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.