Future of the Nigeria Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2022

Table of Contents

1. Introduction 7

1.1. What is this Report About? 7

1.2. Definitions 7

1.3. Summary Methodology 9

1.4. About Strategic Defense Intelligence 10

2. Executive Summary 11

3. Market Attractiveness and Emerging Opportunities 13

3.1. Current Market Scenario 14

3.1.1. Primary Threat Perception 14

3.1.2. Military Doctrine & Strategy 16

3.1.3. Military Fleet Size 17

3.1.4. Procurement Programs 21

3.1.5. Social, Political and Economic Environment and Support for Defense Projects 22

3.1.6. Political and Strategic Alliances 22

3.2. Defense Market Size Historical and Forecast 23

3.2.1. Nigerian defense expenditure is projected to grow at a CAGR of

8.72% during the forecast period 23

3.2.2. Insurgency, piracy, oil smuggling, and peacekeeping operations are expected to drive defense expenditure 25

3.2.3. Defense budget as a percentage of GDP expected to average

0.3% over the forecast period 26

3.3. Analysis of Defense Budget Allocation 28

3.3.1. Capital expenditure allocation expected to increase at an average of

26.9% over the forecast period 28

3.3.2. Capital expenditure budget expected to grow at a CAGR of

4.84% over the forecast period 30

3.3.3. Defense budget allocation towards the army accounts for the majority out of the armed forces 32

3.3.4. Army expenditure to grow at a CAGR of

7.89% over the forecast period 34

3.3.5. Per capita defense expenditure expected to increase during the forecast period 38

3.4. Homeland Security Market Size and Forecast 40

3.4.1. Homeland security budget projected to increase during the forecast period 40

3.4.2. The threat from Boko Haram, drug trafficking, cybercrime, and money laundering are expected to drive the homeland security budget 42

3.4.3. Nigeria falls under the ‘worst affected category’ by terrorist attacks 43

3.4.4. Nigeria faces a very high level of threat from foreign and domestic terrorist organizations 44

3.4.5. Nigeria has a Terrorism Index Score of

9.3 46

3.5. Benchmarking with Key Global Markets 47

3.5.1. The country’s defense budget is expected to increase during the forecast period 47

3.5.2. Nigerian military expenditure is limited compared to the countries with the highest global defense expenditure 49

3.5.3. The country allocates a lower percentage of GDP to defense than other African counties 50

3.6. Market Opportunities: Key Trends and Growth Stimulators 51

3.6.1. Multirole Aircraft 51

3.6.2. Infantry Fighting Vehicles (IFV) 52

3.6.3. Attack Helicopters 53

4. Defense Procurement Market Dynamics 54

4.1. Import Market Dynamics 55

4.1.1. Limited capability of the domestic defense market drives imports 55

4.1.2. Defense imports expected to increase during the forecast period 56

4.1.3. China, the US, and Russia account for the majority of the country’s defense imports 57

4.1.4. Aircraft and ships are the highest imported military hardware 58

4.2. Export Market Dynamics 59

4.2.1. Nigeria does not export arms due to its underdeveloped domestic arms industry 59

5. Industry Dynamics 60

5.1. Five Forces Analysis 60

5.1.1. Bargaining Power of Supplier: Low to Medium 61

5.1.2. Bargaining Power of Buyer: Medium to High 61

5.1.3. Barrier to Entry: Medium 61

5.1.4. Intensity of Rivalry: Low 61

5.1.5. Threat of Substitution: Low 61

6. Market Entry Strategy 62

6.1. Market Regulation 62

6.1.1. Nigeria does not disclose any offset obligations imposed by the country 62

6.1.2. FDI in the defense sector is prohibited by the Nigerian government 62

6.2. Market Entry Route 62

6.2.1. Budgeting Process 62

6.2.2. Defense procurement process 63

6.2.3. Direct selling is the preferred market entry route for foreign OEMs 64

6.3. Key Challenges 65

6.3.1. Corruption acts as an obstacle for market entry 65

6.3.2. Small defense budget discourages major suppliers 66

6.3.3. Unorganized, mismanaged industry jeopardizes the development of the domestic industry 66

7. Competitive Landscape and Strategic Insights 67

7.1. Competitive Landscape Overview 67

7.2. Key Domestic Companies 68

7.2.1. Defense Industries Corporation of Nigeria: Overview 68

7.2.2. Defense Industries Corporation of Nigeria: Products and Services 68

7.2.3. Defense Industries Corporation of Nigeria: Recent announcements and Strategic Initiatives 69

7.2.4. Defense Industries Corporation of Nigeria: Alliances 69

7.2.5. Defense Industries Corporation of Nigeria: Recent Contract Awards 70

7.2.6. Dornier Aviation Nigeria AIEP Limited: Overview 71

7.2.7. Dornier Aviation Nigeria AIEP Limited: Products and Services 71

8. Business Environment and Country Risk 72

8.1. Economic Performance 72

8.1.1. Gross Domestic per Capita 72

8.1.2. Gross Domestic Product, current US$ 73

8.1.3. Exports of Goods and Services 74

8.1.4. Imports of Goods and Services 75

8.1.5. Gross National Disposable Income (US$ Bn) 76

8.1.6. Local Currency Unit per US$ 77

8.1.7. Market Capitalization of Listed Companies (US$ Bn) 78

8.1.8. Market capitalization of Listed Companies (% GDP) 79

8.1.9. Government Cash Surplus/Deficit as a % of GDP (LCU) 80

8.1.10. Goods Exports as a % of GDP 81

8.1.11. Goods Imports as a % of GDP 82

8.1.12. Services Imports as a % of GDP 83

8.1.13. Services Exports as a % of GDP 84

8.1.14. Net Foreign Direct Investment 85

8.1.15. Net FDI as a Percentage of GDP 86

8.1.16. Mining, Manufacturing, Utilities Output (LCU Bn) 87

9. Appendix 88

9.1. About SDI 88

9.2. Disclaimer 88

List of Tables

Table 1: Nigeria Ground Forces Strength 17

Table 2: Nigeria Air Force Strength 19

Table 3: Nigeria Navy Strength 20

Table 4: Nigeria – Ongoing Development and Procurement Programs 21

Table 5: Nigeria – Future Procurement Programs 21

Table 6: Nigerian Defense Expenditure (NGN billion & US$ billion), 2013-2022 23

Table 7: Nigerian GDP Growth vs. Defense Expenditure as Percentage of GDP Growth, 2013-2022 26

Table 8: Nigerian Defense Budget Split between Capital and Revenue Expenditure (%), 2013-2022 28

Table 9: Nigerian Defense Capital Expenditure (NGN Billion & US$ Billion), 2013-2022 30

Table 10: Nigerian Defense Budget Split Between the Army, Air Force, Navy, and Others, 2013-2022 32

Table 11: Nigeria Defense Budget Split Between Military Services (Army, Air Force, Navy and Others), 2013-2022 34

Table 12: Nigeria Defense Budget Split Between Military Services (Army, Air Force, Navy and Others), 2013-2022 36

Table 13: Nigerian Per Capita Defense Expenditure (US$), 2013-2022 38

Table 14: Nigerian Homeland Security Expenditure (NGN Billion & US$ billion), 2013-2022 40

Table 15: Terrorism Index, 2016 44

Table 16: Benchmarking with Key Markets – 2013-2017 vs. 2018-2022 47

Table 17: Nigeria Budget Formation Timetable 62

Table 18: Competitive Landscape of the Nigeria Defense Industry 67

Table 19: Defense Industries Corporation of Nigeria – Main Products 68

Table 20: Defense Industries Corporation of Nigeria: Alliances 69

Table 21: Defense Industries Corporation of Nigeria: Recent Contract Awards 70

Table 22: Defense Industries Corporation of Nigeria – Main Products 71

List of Figures

Figure 1: Nigerian Defense Expenditure (in NGN Billion), 2013-2022 24

Figure 2: Nigerian Defense Expenditure (in US$ Billion), 2013-2022 24

Figure 3: Nigerian GDP Growth vs. Defense Expenditure as Percentage of GDP Growth, 2013-2022 27

Figure 4: Nigerian Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2022 29

Figure 5: Nigerian Capital Budget Allocation (NGN Billion),2013-2022 31

Figure 6: Nigerian Capital Budget Allocation (US$ billion), 2013-2022 31

Figure 7: Nigerian Defense Budget Split Between the Army, Air Force, Navy, and Others, 2013-2022 33

Figure 8: Nigerian Defense Budget in NGN Billion – Breakdown by Services (Army, Navy, Air Force and Others) 2013-2022 35

Figure 9: Nigerian Defense Budget in US$ Billion – Breakdown by Services (Army, Navy, Air Force and Others) 2013-2022 37

Figure 10: Nigerian Per Capita Defense Expenditure (US$), 2013-2022 39

Figure 11: Nigerian Homeland Security Budget (NGN billion), 2013-2022 41

Figure 12: Nigerian Homeland Security Budget (US$ billion), 2013-2022 41

Figure 13: Terrorism Heat Map, 2017 43

Figure 14: Terrorism Index, 2017 46

Figure 15: Benchmarking with Key Markets – 2011-2015 vs. 2016-2020 48

Figure 16: Defense Expenditure of the World’s Largest Military Spenders (US$ Billion), 2017 and 2022 49

Figure 17: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2017 50

Figure 18: Multirole Aircraft Market Size (US$ Million), 2016-2027 51

Figure 19: Infantry Fighting Vehicles (IFV) Helicopters Market Size (US$ Million), 2017-2026 52

Figure 20: Attack Helicopters Market Size (US$ Million), 2017-2027 53

Figure 21: Nigerian Defense Import Trend, 2012-2016 (US$ Million) 56

Figure 22: Nigerian Defense Imports by Country (%), 2012-2016 57

Figure 23: Nigerian Defense Imports by Category (%), 2012-2016 58

Figure 24: Industry Dynamics – Porter’s Five Forces Analysis 60

Figure 25: Nigeria’s GDP per Capita (US$), 2015-2025 72

Figure 26: Nigeria’s Gross Domestic Product (current US$ Billion), 2015-2025 73

Figure 27: Nigeria’s Exports of Goods and Services (LCU Billion), 2005-2014 74

Figure 28: Nigeria’s Imports of Goods and Services (LCU Billion), 2005-2014 75

Figure 29: Nigeria’s Gross National Disposable Income (US$ Bn), 2005-2013 76

Figure 30: Nigeria’s LCU per US$, 2015-2024 77

Figure 31: Nigeria’s Market Capitalization of Listed Companies (US$ Bn), 2005-2012 78

Figure 32: Nigeria’s Market Capitalization of Listed Companies (% GDP), 2005-2012 79

Figure 33: Nigerian Government Cash Surplus/Deficit as a % of GDP (LCU), 2005-2012 80

Figure 34: Nigeria’s Goods Exports as a % of GDP, 2005-2012 81

Figure 35: Nigeria’s Goods Imports as a % of GDP, 2005-2012 82

Figure 36: Nigeria’s Services Imports as a % of GDP, 2005-2012 83

Figure 37: Nigeria’s Services Exports as a % of GDP, 2002-2012 84

Figure 38: Nigeria’s Net Foreign Direct Investment (BoP, current US$ Billion), 2005-2012 85

Figure 39: Nigeria’s Net FDI as a Percentage of GDP, 2005-2012 86

Figure 40: Nigeria’s Mining, Manufacturing, Utilities Output (LCU Bn) 2005-2014 87