Nigeria: Economic Recovery Will Open New Business Opportunities
New economic measures adopted by the recently re-elected government of Muhammadu Buhari will try to expand Nigeria's economy away from oil income dependence and focus on consolidating Nigeria's manufacturing base – thereby opening new business opportunities for overseas suppliers and investors.
Nigeria's population and gross domestic product is projected to reach 399 million people and cross $3.3 trillion by 2050. However, much needs to be done to bridge the gap between the reality of Africa’s largest economy and its undisputed potential.
While Nigeria’s economy has performed much better in recent years than it did during previous boom-bust oil-price cycles, such as in the late 1970s or mid-1980s, oil prices continue to dominate the country’s growth pattern.
Nigeria emerged from recession in 2017, with a growth rate of 0.8%, driven mainly by the oil sector. Growth was higher in 2018 (at 1.9%) and more broad-based; however, it still fell below the population growth rate, government projections and pre-recession levels.
As Africa’s top oil producer, Nigeria is heavily reliant on crude, with the fuel accounting for 90 percent of foreign-currency earnings and two-thirds of government income. Without reforms to reduce its dependence on oil income, Nigeria risks “a lost decade” of flat economic growth.
The country has recently held national elections in 2019, for the sixth consecutive time since its return to democracy in 1999. The incumbent president, Muhammadu Buhari won the elections and would be sworn in for a second term on May 29, 2019.
Robust Economic Growth
Nigeria’s economy grew in 2018 at its fastest pace since a recession two years earlier. Nigeria’s central bank expects the economy to pick up in 2019, forecasting a gross domestic product growth of 3 percent, up from 1.9 percent recorded last year.
On the other hand, Nigeria continues to face massive developmental challenges, which include the need to reduce the dependency on oil and diversify the economy, address insufficient infrastructure, and build strong and effective institutions, as well as governance issues and public financial management systems.
Nigeria accounts for nearly 20% of continental GDP and about 75% of the West Africa economy. Despite this dominance, its exports to rest of Africa are estimated at 12.7%, and only 3.7% of total trade is within the Economic Community of West African States. Nigeria has yet to ratify the Continental Free Trade Agreement, pending the outcome of broad consultations with captains of industry and other stakeholders.
Large pockets of Nigeria’s population still live in poverty, without adequate access to basic services, and could benefit from more inclusive development policies. The lack of job opportunities is at the core of the high poverty levels, of regional inequality, and of social and political unrest in the country.
Economic growth has been recovering since the third quarter of 2016, when the recession bottomed out. Higher oil prices helped Nigeria exit that contraction.
Low oil prices will slow down growth in 2019, but the longer-term outlook depends heavily on how the government tackles the expansion of country's economy away from oil income.
The World Bank had expected growth to be slightly less than 2 percent in 2019 as the elections kept foreign investors away.
New Beginnings
To its credit, the Nigerian government has secured the territorial integrity of the nation by reclaiming territory in the Northeast and has tackled big-ticket corruption, introducing and improving transparency and accountability in the management of public funds.
Nigeria also committed to unprecedented investments to start and finish critical infrastructure projects in power, roads, and rail across the country, as well as direct investments in people to lift them up—the largest social investment program in Africa.
Nigeria accounts for about 47% of West Africa’s population, and has one of the largest populations of youth in the world.
