An Inside Look at Nigeria at 60
Nigeria at 60 is experiencing difficult macroeconomic conditions in an environment of 'lower for longer' oil prices. Government finances, the exchange rate, and the inflation rate are all under significant adverse pressure. In these conditions, local and foreign businesses are less likely to take risks. Nevertheless, the fundamentals of the Nigerian economy look quite favourable for foreign exporters and investors in the medium term due to three key factors:
The scale of Nigeria's economy: Nigeria is the largest economy in Africa by size and population. Between 2015 and 2030, it is expected that Nigeria's economy will grow at a rate of around 5 to 7% per year, and the population may increase by up to 50%.
Nigeria's resource wealth: In addition to its oil reserves, Nigeria has fertile land and significant deposits of minerals (such as tin, iron, coal, limestone, niobium, lead, and zinc).
Nigeria's strategic location: Nigeria is well-located to serve as a gateway for trade across the rest of Africa. It is also a natural hub between the Americas and Asia.
China is the largest exporter to Nigeria, accounting for more than a third of all non-oil goods imported. India has risen to the third position, since 2000. According to the High Commission of India in Abuja, Indian-owned companies now employ the largest number of people in Nigeria, after the Federal Government. These facts reflect China and India’s growth in importance in global trade, and an increase in their focus on Africa and Nigeria specifically. While the United Kingdom (UK) has fallen to the fifth position, the United States (US) has maintained its position as the second-largest exporter of goods to Nigeria. Meanwhile, Germany has dropped proportionally less than the UK.
There could be a number of reasons behind the UK's decline in exports to Nigeria—ranging from UK goods becoming less competitive, to UK businesses having less of an appetite to trade with their Nigerian counterparts. Nevertheless, the UK remains well-placed to succeed in Nigeria.
Nigeria is part of the Commonwealth, which means it shares close ties with the UK and its fellow members through a shared language and history. In the context of doing business in Nigeria, UK and Commonwealth-based firms benefit from:
A familiar legal system: The Nigerian judiciary is based on the UK's. This simplifies incorporation and administrative procedures, as well as the mediation of potential disputes.
Trade and investment support infrastructure: Currently, 32 of the 54 Commonwealth countries have bilateral investment treaties (which encompass promotion and protection protocols) with Nigeria. The UK also benefited from trade deals between Nigeria and the European Union (EU)—although not any more due to Brexit. Private trade associations, such as the Nigerian-British Chamber of Commerce, also facilitate greater commercial relations between the two countries.
Sizable diaspora communities throughout the Commonwealth: In 2013, the UK was home to 184,000 of the 1.1 million officially-registered first-generation members of the Nigerian diaspora—second only to the US. This number has likely grown since then. Nigerians also represent 10% (or 18,000) of all foreign students in the UK, just behind India and China. Nigeria's diaspora is an asset that can be leveraged on behalf of the UK's export and investment activities, seeing as the diaspora has a keen interest in transferring business ideas and practices from the UK to Nigeria.
Findings from a variety of companies operating in Nigeria reveal that Nigerian customers highly regard foreign brands. More established brands, such as Guinness and Procter & Gamble, enjoy strong recognition across generations of customers, and are seen as synonymous with quality.
Based on recent assessments, several goods and services have been identified as the largest and most promising growth areas for foreign firms in Nigeria, given their existing strengths and the needs of the Nigerian economy going forward. These goods and services include:
Manufactured goods: For example, other countries' expertise in producing fittings (i.e. heating/cooling, lighting), high-end apparel, and fashion accessories will cater to rising demands of the Nigerian construction and retail sectors for these particular products.
Machinery and transport equipment: This is the largest category of imports, accounting for 56% of Nigeria's total. Power-generation machines and motor vehicles are in high demand for both commercial and individual use.
Transportation and travel: Facilitating the movement of people and goods will be even more important as Nigeria’s economy continues to grow and diversify. Foreign passenger-transport and cargo/freight companies are well-placed to take advantage of this trend, due to Nigeria’s strategic location (as mentioned earlier).
Information and communications technology (ICT) services: With rising incomes and greater global connectivity, internet/satellite provision, along with media content creation and distribution, will become even more in demand in Nigeria.
Licensing and franchising: As discussed earlier, foreign brands are quite popular in Nigeria. Accordingly, licensing and franchising is becoming more frequent, as the country’s intellectual property (IP) protections continue to grow stronger. In fact, licensing and franchising could become Nigeria’s third-largest service import by 2030.
Nigeria at 60 is a rapidly-developing country, with lots of potential, as evidenced by the successes of Chinese, US, Indian, and British enterprises. It’s only a matter of time before businesses and entrepreneurs in other countries catch on, and decide to give the Nigerian market a go.
Ahmad Tanko Aliyu is an intern at M74 from Nigeria. He is a graduate of the Federal University of Technology Minna, where he earned a bachelor’s degree in Quantity Surveying. Ahmad is a cost estimator, digital marketer, and research enthusiast.
The views expressed above are those of the author and do not reflect the official position of the M74 Group, which remains neutral on all matters. Publishers assume no liability for content.