By NBF News
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The non-oil sector will drive Nigeria's economic growth in 2012, with the country's Gross Domestic Product, GDP, expected to grow at 8.1 per cent, says analysts at FBN Capital Limited.

The firm, in ITs report, titled: '2012 outlook: the upside from holding firm,' also predicted that the country's GDP will rise to 8.2 per cent in 2013.

The report predicted that the non-oil sector will be the major driver of the Nigerian economy in the current year, due to a robust private consumption and a significant recovery in oil production following the Niger-Delta amnesty programme.

To achieve this, however, the report said, 'The government must pursue its reform agenda if double-digit growth is to be achieved, and it has made a start with the deregulation of the petrol price. Its challenge with all its reforms will be to hold its nerve against opposition from vested interests but some additional palliative measures may be required to fully win the argument.

Minister of Trade & Investment, Olusegun Aganga
'If it holds firm on one reform, it becomes emboldened to implement the next, which could be the new electricity tariff, the petroleum industry bill or the sovereign wealth fund.'

'The direction of the economy in 2012 will be determined above all by the success of the reform programme. If the government stands firm over the deregulation of the petrol price, the first major step within the programme, it will be emboldened to move on other core elements of the agenda. If it backs down, which is not our central view, then the vested interests which are opposed to deregulation will themselves feel emboldened and resist other reforms with renewed vigour.

FBN Capital also expressed confidence in the Nigerian capital market, predicting a 14 per cent increase in the All-share index from its December 31, 2011 position, to 23,500 points by the end of 2012.

'We are Positive on equities for 2012 but Neutral on fixed income as a broad asset class. Our end-2012 target for the All Share Index is 23,500, 14 per cent over December 31, 2011 levels.

'Our view is underpinned by attractive valuation for banks in particular. Within the fixed income space, the long end of the curve appeals to us.'

'Though yields are attractive on fixed income instruments, we do not expect this broad asset class to become more attractive given our view that monetary policy rates have peaked and that global economic trends may potentially lead to a loosening stance by the CBN.