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Product SynopsisThis report is the result of SDI's extensive market and company research covering the Nigerian defense industry, and provides detailed analysis of both historic and forecast defense industry values including key growth stimulators, analysis of the leading companies in the industry, and key news.Introduction and LandscapeWhy was the report written?The Future of the Nigerian Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2018 offers the reader an insight into the market opportunities and entry strategies adopted by foreign original equipment manufacturers (OEMs) to gain market share in the Nigerian defense industry.What is the current market landscape and what is changing?The Nigerian defense market, valued at US$2.3 billion in 2013, is expected to see a double digit growth rate over the forecast period, to reach US$4.4 billion by 2018. Piracy, oil smuggling in the Gulf of Guinea and a contribution to peacekeeping operations are expected to drive the country's military expenditure to register a growth rate of 13.62% over the forecast period. The growth in military expenditure will be assisted by the country's stable economic growth over the forecast period, which will a see rise in defense expenditure as a percentage of GDP from 0.8% in 2013 to 1.1% in 2018. Nigeria's capital defense expenditure is expected to increase from 0.4 billion in 2013 to 0.6 billion by 2018, although its share in total expenditure is expected to decrease from 15% during the review period to 14% over the forecast period. Defense equipment such as marine helicopters, fighters, patrol vessels, and armored personnel carriers are expected to be demand over the forecast period. An under developed domestic defense industry and availability of funds propel the Nigerian government to import from the countries producing low-cost defense equipment. The growing threat from Boko Haram and other extremist groups in northeastern states, and drug trafficking are expected to drive the Nigerian government's investments in homeland security over the forecast period. Police modernization and homeland security infrastructure developments are expected to be primary areas for investment by the government.What are the key drivers behind recent market changes?Nigerian military expenditure is expected to be mainly driven by peacekeeping operations and efforts to stop the smuggling of stolen oil.What makes this report unique and essential to read?The Future of the Nigerian Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2018 provides detailed analysis of the current industry size and growth expectations from 2014 to 2018, including highlights of key growth stimulators. It also benchmarks the industry against key global markets and provides a detailed understanding of emerging opportunities in specific areas.Key Features and BenefitsThe report provides detailed analysis of the current industry size and growth expectations from 2014 to 2018, including highlights of key growth stimulators, and also benchmarks the industry against key global markets and provides a detailed understanding of emerging opportunities in specific areas.The report includes trend analysis of imports and exports, together with their implications and impact on the Nigerian defense industry.The report covers five forces analysis to identify various power centers in the industry and how these are expected to develop in the future.The report allows readers to identify possible ways to enter the market, together with detailed descriptions of how existing companies have entered the market, including key contracts, alliances, and strategic initiatives.The report helps the reader to understand the competitive landscape of the defense industry in Nigeria. It provides an overview of key defense companies, both domestic and foreign, together with insights such as key alliances, strategic initiatives, and a brief financial analysis.Key Market IssuesAccording to the Corruption Perceptions Index 2010 of Transparency International, Nigeria is classified as a highly corrupt country. Corruption can result in unfair contract awards and has become a major obstacle for foreign companies aiming to supply arms to the Nigerian MoD. There is also widespread corruption in the Nigerian Police Force; embezzlement and mismanagement of the police budget has resulted in only a small portion of the budget being spent on protecting internal security, resulting in an increased internal threat to the country. In January 2008 the Chief of Army Staff, acting for and on behalf of the government of Nigeria, awarded contracts to Esquire Ventures Ltd., Profitel Ltd., Century Communications Ltd., and Jonny-Way Investments Ltd., for the supply of various specialist military items to be used by Nigeria's UN-backed troops, for NGN1,190.7 million (US$10.3 million). Materials valued at NGN660 million (US$5.7 million) were supplied and others worth NGN530.7 million (US$4.6 million) were ready for shipment, but the contractors were paid only NGN175 million (US$1.5 million), leaving the contractors underpaid, despite the country receiving funding for the project from the UN worth several million dollars. Issues such as this are causing the Ministry of Defense and Nigerian Police to maintain a high level of focus on anti-corruption activities.With a defense budget of US$2.3 billion in 2013, Nigeria invests only 0.8% of its GDP towards defense. During the review period an average of 14.9% of the defense budget was allocated for capital expenditure, representing a relatively low allocation for the purchase of equipment and high-technology arms and ammunition. As a result, the country's relatively small defense budget does not attract foreign defense companies, and the prohibition of FDI in the defense sector also acts as a barrier for market entry for foreign suppliers.Key HighlightsNigeria is the largest crude oil producer in Africa and generates about 80% of its revenues from oil exports. However, the country is plagued by piracy and oil theft, so loses about 10% of its oil exports. The expanding activities of criminal gangs have caused an upsurge in the number of oil ships attacked by the Nigerian pirates in Gulf of Guinea in the last two years. Pirates not only hold the ship and crew for ransom, but also strip the vessel of oil and other valuable items. A lack of stringent security measures in Gulf of Guinea and along its borders has also accentuated the threat of oil theft, which cripples the country's economy. In 2011, Nigerian soldiers destroyed nearly 500 illegal oil refineries in the Niger Delta region to stop the smuggling of stolen oil in the country. Recently, Nigeria had to withdraw its peacekeeping contingent form Darfur to counter the threat from oil smugglers in around of Niger Delta. The Nigerian government is expected to spend on strengthening its Navy and maritime patrol to deal with oil smugglers and procure necessary equipment over the forecast period. Nigeria's Navy is seeking government approval to acquire up to 49 ships and 42 helicopters over the next ten years to guard the nation's territorial waterways and Gulf of Guinea.Nigeria has a long history of internal conflicts marring its economic growth and stability. Although these conflicts have ethnic and religious connotations to them, the divisions have deeper reasons such as struggles for control over the oil. The recent emergence of the radical Islamic group, Boko Haram flared up the rebellion in northeast Nigeria leading to the announcement of emergency in these states by the President in May. Boko Haram is believed to be behind the kidnappings of foreign nationals for ransom and subsequent killings in the past two years. Nigerian government suspects that Boko Haram's leadership has ties with Al Qaeda in the Islamic Maghreb (AQIM) and other international terrorist groups; these suspicions have become stronger due to the sophisticated weaponery used by the Boko Haram during the conflict with Nigerian Army prior to the emergency declaration. The Nigerian government passed its first anti-terrorism act in February 2011, and is also expected to invest in surveillance and intelligence technologies to counter the threat posed by these extremist groups. Nigeria is expected to modernize its police force to enable them to handle the threats posed by these extremist groups armed with sophisticated equipment.Nigeria's defense imports peaked in 2010 due to the import of aircraft from China and fell back to 2009 levels during 2011. The sudden increase in imports in 2010 is primarily due to the import of 15 F-7 aircraft from China. During the forecast period, imports of defense equipment are expected to rise further as the country plans to increase its defense expenditure and spend more on equipment purchases. The underdeveloped domestic defense market will also lead to a rise in total defense equipment purchases during the forecast period.
