Nigeria became Africa’s largest economy in 2014 after it “rebased” its gross domestic product data, updating the components that make up its GDP to include previously uncounted industries such as telecoms, information technology, online sales, airlines and film production. It also has the highest production of oil and gas in the continent. More than 62 per cent of the country’s population is under 25 and its growing middle class makes up 23 per cent of the population.
Over the last five years, Nigeria’s Gross Domestic Product (GDP) growth averaged 6.8 per cent. In the fourth quarter of 2013 the GDP in Nigeria increased to 7.6 per cent. Oil has been a dominant source of government revenues since the 1970s. Regulatory constraints and security risks have limited new investment in oil and natural gas and Nigeria's oil production contracted in 2012 and 2013.
Nevertheless, the Nigerian economy has continued to grow at a rapid six-eight per cent per annum, driven by growth in agriculture, telecommunications and services, and the medium-term outlook for Nigeria is good, assuming oil output stabilises and oil prices remain strong.
A large number of well-known companies operate in Nigeria, including Shell, Diageo, Virgin Atlantic, British Gas, HSBC, Barclays, PZ Cussons, Cadbury and Unilever. There are also many small and medium-sized British companies.
Strengths of the Nigerian market:
- average GDP growth of 6.9 per cent over the past 10 years
- large consumer base with a growing middle class
- young and educated population
- biggest beneficiary of Foreign Direct Investment (FDI) in Africa
- abundant natural resources
- many Public and Private Partnerships (PPPs) in the developing infrastructure
Challenges of the Nigerian market:
- poor power supply nationwide
- weak infrastructure across many sectors
- some security challenges
- government bureaucracy when awarding and paying for contracts
- high level of corruption
- high unemployment and poverty
Nigeria’s infrastructure spending has increased recently. The Nigerian government is developing the infrastructure using both public and private partnership mechanisms. Nigeria needs approximately $500 billion for critical infrastructure development and so has created the Nigeria Infrastructural Fund to help address this; other real estate funds have also been established.
The country has the ninth-largest gas reserves in the world and the largest in Africa, but domestic and industrial consumption of gas in Nigeria is below 20 per cent. Because of this, there is a lot of excess gas that needs to be burnt off for safety reasons (gas flaring). The government has set aside $8 billion for improvements in the sector. There are opportunities for gas gathering, operating and securing processing facilities and pipelines.
Nigeria has more than 80 million hectares of arable land and agriculture contributes in excess of 42 per cent to Nigeria’s GDP. The growth potential of this sector is enormous. Recently, the agriculture sector has received attention from investors who have realised the potential of the market. Many state governments have entered into partnerships with private sector companies.
Education and the power sector are other areas that may potentially be of interest to overseas exporters.