Nigerian risk managers sighted tough macroeconomic conditions and market volatility as their top two risks. “Nigeria faces macroeconomic challenges including low commodity prices, the Chinese slowdown and the tightening of US monetary policy and also suffers their own internal pressures such as inflation, weak domestic demand and socio-political tensions. The country’s growth is held back by weaker macroeconomic environment, the struggling financial sector, underdeveloped infrastructure, insufficient health and education ,”
says Delphine Maïdou, CEO AGCS Africa at a press conference held in Lagos today.
To mitigate volatility risks and anticipate any sudden changes of rules that could impact markets, companies in Nigeria will need to invest more resources into better monitoring politics and policy-making around the world in 2017. According to trade credit insurer, Euler Hermes
, a subsidiary of Allianz SE, since 2014, there have been 600 to 700 new trade barriers introduced globally every year.
Corrupt was ranked fourth indicating that it is still a concern in the country. Corruption in Nigeria could cost up to 37% of GDP by 2030 if it’s not dealt with immediately. This cost is estimated to be nearly $2,000 per person by 2030. Corruption is ranked second as one of the most problematic factors for doing business in Nigeria in the Global Competitiveness Report. A significant reduction in corruption will boost current per capita income and improve the lives of many in Nigeria.
Political risks and violence is still a major challenge largely due to terrorism and kidnap for ransom (KNR). The overall risk for Nigeria in 2017 is high on crime, terrorism, conflict, political violence and kidnap. The resurgence of violence in the Niger Delta is expected to continue into 2017. Militant groups are likely to continue high-profile attacks on oil and gas infrastructure to press the federal government into meeting its demands, which include greater autonomy for the region and a greater share of the oil wealth, which may be untenable considering Nigeria's current fiscal woes. Greater military action risks increasing anti-government sentiment.
Kidnapping, primarily for the purposes of financial gain, will remain a complex and multifaceted security threat in Nigeria in 2017. The country was one of the world’s top five worst kidnapping-affected countries and the region’s kidnapping capital. However ongoing state military offensives over the past 18 months have led to the relative containment of Islamic State (IS) affiliate, Boko Haram, in north eastern Nigeria. According to available information, Boko Haram conducted no successful abductions of foreign nationals within the country in 2016. However the group is extending its operations into Chad and Cameroon and this could lead to an increase in KRE activity.
Globally, business interruption (BI) continues to lead the ranking for the fifth year in a row, primarily because it can lead to significant income losses, but also because multiple new triggers are emerging, especially non-physical damage or intangible perils, such as cyber incidents, and disruption caused by political violence, strikes and terror attacks. This trend is driven, in part, by the rise of the “Internet of Things” (IoT) and the ever-greater interconnectivity of machines, companies and their supply chains which can easily multiply losses in case of an incident. Companies are also facing potential financial losses with the changing political landscape leading to fears of increasing protectionism and anti-globalization.