Nigeria is constantly ranked as one of Africa’s key economic nerve centres, full of economic opportunities and channels for investment. The country’s diverse economy continues to promote the growth of various sectors such as oil and gas, fintech, mining, media and entertainment. As a result, it has become Africa’s largest economy with a current GDP of USD 477 billion, a growth trajectory that continues to rise. Its young, expanding population, a wealth of natural resources, booming tech sector, and dedication to economic change is a breath of fresh air that the current government has introduced to boost economic resilience and investor confidence.
The ALN Ready Business Roadshow – Nigeria edition delved deep into some key issues for investors seeking to venture into Nigeria’s business landscape. It brought together industry experts and business leaders to discuss business opportunities in key sectors and address the impact of recent private and public sector developments on the general business environment.
Economic Reforms to Promote Stability
The change in administration in 2023 brought a unique opportunity to get back on track to a sustainable and inclusive growth path. The country has undertaken key reforms to promote macroeconomic stability and reduce fiscal pressures, such as doing away with fuel subsidies and liberalising the exchange rate.
According to the World Bank, these reforms and others, such as recovery in the agriculture and services sectors and increasing scope for government spending for development, are expected to impact the economy positively. In its growth estimates, the World Bank predicts an average growth of 3.4% between 2023 and 2025. If the positive reform momentum is maintained, concerted efforts to achieve fiscal and monetary policy consolidation, reduce insecurity, strengthen public services, and improve the business environment could boost investments and productivity, allowing Nigeria to return to a positive economic growth path.
Opportunities in AfCFTA
As one of Africa’s largest economies, Nigeria could be well-positioned as one of the major beneficiaries of the recently established African Continental Free Trade Area (AfCFTA). Other than boosting Africa’s income by USD 450 billion by 2035, AfCFTA could increase Africa’s exports by USD 560 billion, mostly in manufacturing.
For example, manufacturing could increase the production of petrochemical products, and the real estate and construction sector could further develop steel mills and cement manufacturing plants. This industry is one of the key sectors that could lead to AfCFTA’s growth and prove successful for Nigeria and other African countries, reducing dependence on imported goods from developed countries.
The biggest driver in AfCFTA is Nigeria, which, on a stand-alone basis, would be the 6th largest economy in the world by 2075, demography being a key factor in its growth. This growth would be significantly aided by the country’s diverse economy, which could allow the growing population to work across other sectors, including art and culture.
Key Sectors for Investment in Nigeria
Nigeria’s rich and diverse economy gives investors a range of viable options to choose from when seeking business opportunities. In a region with volatile political stability, a country’s stability is seen as a major factor in attracting investment and creating a pathway into the region’s economy. Sectors such as oil and gas, ICT, financial services and fintech are playing a key role in opening Nigeria’s economy.
For example, the recently enacted Petroleum Industry Act introduced significant changes to facilitate economic development by attracting and creating investment opportunities in oil and gas. Infrastructure development in Nigeria has grown exponentially due to increased public-private partnerships (PPPs) over the years. For instance, the construction industry is projected to grow at an average of 3 percent, with a market size of between USD 27 billion and USD 40 billion.
With significant investment, a growing focus on PPPs and a strong start-up culture, these key sectors could help increase economic growth for Nigeria and, more importantly, for the West African region.
Refocus on Nigeria’s Economic Priorities
In recent years, Nigeria’s manufacturing has significantly slowed and shifted more focus toward agriculture. According to Brookings, the GDP share for agriculture expanded from 23 percent in 2015 to 26 percent in 2021, while manufacturing declined from 9.5 percent to 9 percent respectively. This has contributed to the country’s weaker manufacturing base, directly impacting job creation and leading to a shortage in foreign exchange. Additionally, 80 percent of workers are employed in sectors with low productivity levels – agriculture and non-tradable services. This means that the jobs needed to generate income growth and lift many Nigerians out of poverty are not available in large numbers.
Practical strategies and solutions need to be adopted to structurally transform the economy and move labour and economic resources from low-productivity to high-productivity sectors. One of the ways to begin this reset is to identify the low-hanging fruits, especially in manufacturing, financial services, communications, technology, and entertainment, that positively impact other sub-sectors. Leveraging AfCFTA’s opportunities is also key to helping the country find a market for finished products. The trading bloc’s importance cannot be understated as it could be one of the catalysts in addressing Africa’s challenges.
