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Nigeria’s defence budget expected to grow by 22% over next four years

altNigeria’s defence expenditure, estimated to be US$2.1 billion this year, is expected to grow at 22% a year to reach US$4.76 billion by 2016, according to a new report.

Nigeria’s cumulative defence expenditure over the forecast period is expected to be US$16.38 billion, of which US$14.55 billion is expected to be invested in personnel and others, while the remaining US$1.83 billion is expected to be spent on equipment and infrastructure development costs. This is according to a new report entitled ‘The Nigerian Defence Industry - Market Opportunities and Entry Strategies, Analyses and Forecasts to 2016’ and released by ICD Research/Strategic Defence Intelligence.

As the Nigerian economy is dependent on the export proceeds of crude oil, increasing oil prices resulted in a high growth in GDP, even during the economic recession. This caused defence expenditure to increase during both the review period and the forecast period, the report notes.

With a defence budget of US$2.1 billion in 2011, Nigeria invests only 0.9% of its GDP towards defence, but this is expected to grow to 1.3% of GDP by 2016. During the review period an average of 16.5% of the defence 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 defence budget does not attract foreign defence companies, and the prohibition of foreign direct investment in the defence sector also acts as a barrier to market entry for foreign suppliers.

According to Jane’s Sentinel Security Assessment, Nigeria's defence budget will actually decrease by 6.45% in real terms this year as inflation is factored in. Jane’s said that, according to figures released by the Nigerian Federal Budget Office, the proposed 2012 defence expenditure amounts to N326 billion (US$2.001 billion), excluding N60 billion (US$368 million) for pensions and gratuities.

On the surface, this is an increase of N10 billion (US$61 million) over the previous year’s defence budget, but after inflation is factored in, it represents a reduction from US$2.17 billion to US$2.03 billion, according to Jane’s.

The air force budget dropped more than that of the other two services, down from N85 billion (US$521 million) to N64 billion (US$392 million) for 2012. Some of the budget will be spent on refurbishing Air Force aircraft, including reactivating six Alpha Jets and six L-39ZAs. In addition, N720 million (US$4.4 million) has been allocated to purchase a dozen AW109 helicopters, some of which have already been delivered.

The Nigerian Army has been allocated N122 billion (US$749 million) and the Navy N69 billion (US$423 million) this year, according to the Nigerian Budget Office. The Nigerian armed forces today number around 76 000, according to Nigerian Intel. The army is the largest arm and is given the most attention in terms of defence spending. It numbers around 60 000 personnel while the navy has about 7 000 and the air force 9 000.

Military spending in Nigeria has been increasing over the last several years as the government continues with a programme to improve professionalism within the military, combat domestic security threats, modernise its equipment and expand peacekeeping operations. The increase in spending, fuelled by oil wealth, will focus on internal security operations against rebel groups in the Niger Delta and the Islamist terrorist group Boko Haram.

Other drivers of defence spending are peacekeeping operations and efforts to prevent oil smuggling – in March 2011 Nigerian soldiers destroyed 500 illegal oil refineries in the Niger Delta region.

Nigeria’s domestic defence industry is under-developed, according to the report, as most of its major equipment is imported. The country's defence capabilities are limited to the production of small arms and ammunition, and aircraft maintenance and repair services. The domestic defence industry comprises state-owned companies including Defence Industries Corporation of Nigeria (DICON), specializing in the production of small arms and ammunition, and Dornier Aviation Nigeria AIEP Limited (DANA), which provides aircraft maintenance and services. As a result, the country imports defence equipment such as aircraft, missiles, and armoured vehicles, which domestic suppliers do not supply. As the country does not spend a significant amount of its defence budget on advanced technology, and research and development, the domestic defence market remains under-developed, the report said.

However, this is slowly changing – Nigeria recently unveiled the first of at least two indigenously produced Seaward Defence Boats and a locally manufactured armoured personnel carrier and local defence and security firm Mekahog is in the process of setting up an armoured vehicle factory.

One challenge facing Nigerian defence expenditure is corruption. According 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, the report notes.

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.

For example, in January 2008 the Chief of Army Staff, acting for and on behalf of the government of Nigeria, awarded contracts to Esquire Ventures, Profitel, Century Communications, and Jonny-Way Investments for the supply of various specialist military items to be used by Nigeria's UN-backed troops, for N1 190.7 million (US$10.3 million). Materials valued at N660 million (US$5.7 million) were supplied and others worth N530.7 million (US$4.6 million) were ready for shipment, but the contractors were paid only N175 million (US$1.5 million), leaving the contractors underpaid, despite the country receiving funding for the project from the UN worth several million dollars.

Nigeria's homeland security consists of the budgets of the ministry of police affairs, and police formation and command. The country's homeland security budget, which stood at US$5.9 billion during the review period, is estimated to increase to US$12.0 billion during the forecast period, driven by extremism, drug trafficking, cybercrime and money laundering, according to the report. In order to counter the threats posed by these criminal activities, Nigeria is expected to invest in surveillance and intelligence technologies such as electronic identification documents, e-passports, automated border crossing systems, and CCTV (closed circuit television) systems. The rate of growth is forecasted to decline to 8.95% by 2016.

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