As Nigeria exits the recession
of 2017, investor sentiment across West Africa is likely to experience uplift
in 2018. Still, political uncertainty ahead of Nigeria’s 2019 presidential
elections and on-going security concerns are among the key risks for
businesses operating in the region, says specialist global risk consultancy
Control Risks in their annual political and security risk forecast
‘RiskMap’
“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.”
“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 has identified the following as the key risks facing
businesses in West Africa in 2018:
- Terrorism
and militancy: 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.
- Irregular
regulators: 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 will periodically give rise to commercial
disputes, legal challenges, and the need for businesses to engage with
government stakeholders.
- Political
instability: 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.
- New
sectors, new risks: 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.
- On-going
operational risks: Many of the major risks and challenges
businesses face in West Africa are the on-going practical impediments to
day-to-day operations. Shortages of or difficulties in sourcing fuel,
foreign currency, equipment and skilled labour; the infrastructure
deficits that persist in the vast majority of the region, such as in
electricity and transport, will continue to mean higher costs, higher
demands on management resources a tougher capital-raising environment,
and greater uncertainty for businesses than in other regions.
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