Africa’s sleeping giant has finally awoken to the potential of becoming a highly favoured emerging market, with the ambition of becoming one of the world’s top twenty economies.
Nigeria is acquiring the look of an economy in rapid transformation. Having grown at an average annual rate of 8.4 percent since 2000, according to IMF data, the economy is currently forecast by Nigeria’s National Bureau of Statistics to grow by 6.75 percent in 2013 and 7.27 percent in 2014, which should place it among the world’s better performing economies.
With such enviable growth prospects, as well as a rapidly expanding middle class and consumer markets, it is little wonder that Africa’s most populous nation has become an emerging market attracting the interest of local and international investors alike.
Officials in Abuja have lately been busy playing host to executives of international corporations that have visited the Nigerian capital to size up the nation’s market with a view to entering into investment deals with government and local business partners. In January this year alone, firms from the USA, Canada, the Netherlands and Turkey signed accords that held promises of investment in Nigeria totalling NGN800 billion (US$5.2 billion), according to reports in Lagos-based BusinessDay.
Most remarkably, the attraction is now more towards the non-oil sector, rather than the country’s lucrative hydrocarbon industry – the main magnet for foreign investors in the past. In January, the USA’s General Electric signed a memorandum of understanding with the Federal Government to invest $1 billion in the next five years, with an initial commitment of $250 million to build a factory in the free trade zone in Calabar in the south east. Last year, Swissbased Glencore International signed an MOU to invest $1 billion in mining, energy and infrastructure.
Although not all investment pledges materialise, some significant progress has been recorded in the past decade in the scale and scope of private investment in agriculture, telecommunications and retail business.
According to the UN Conference on Trade and Development, foreign direct investment (FDI) flows into Nigeria rose from $6.1 billion in 2010 to $8.9 billion in 2011, making it Africa’s biggest FDI recipient and accounting for a fifth of all flows into the continent. Local businesses and multinationals already established in the country are leading the new push. An obvious example of the former is the expansion of the industrial empire of the Dangote conglomerate, owned by Aliko Dangote, Africa’s wealthiest man. In June 2012 the industrialist opened an extension of his company’s Obajana plant in Kogi State, raising its capacity to 10.25 million tonnes, making it one of the world’s biggest cement factories. The Dangote group, which has cement plants in other parts of Nigeria and in other African states, has invested some $6.5 billion in its cement business in recent years in a drive to become one of the world’s top eight cement companies by 2015.
Dangote has also taken steps to expand sugar production in Nigeria, including recently acquiring a 95 percent stake in Savannah Sugar Company.
Companies are expanding to take advantage of the growing purchasing power of Nigeria’s fast expanding middle class. Guinness Nigeria hopes to complete a US$372 million investment to expand its beer production by 50 percent, by November 2013. Nestle Nigeria, part of the Swiss food processing multinational, plans to invest
$635 million over the next ten years, with a view to tripling its sales in Nigeria over the period.
Government officials say there is growing investor confidence in the administration’s economic reforms, especially in its policies geared to achieving macroeconomic stability and providing incentives to support private enterprise. In his budget speech in October 2012, President Goodluck Jonathan boasted that his administration’s reforms to involve the private sector in agribusiness had so far succeeded in attracting
$7.8 billion in commitments to the agricultural sector, with the prospect of creating 3.5 million new jobs by 2015. He said the latest fiscal measures had resulted in the establishment of 13 new private rice mills, with total capacity of about 240,000 tonnes.
The growth in private investment could yet help Nigeria realise its ambition to become one of the world’s 20 largest economies by the year 2020. Officials point to evidence of a more friendly business environment in a country where economic nationalism used to be prevalent. “There has been a change of attitude to investors among officials and ordinary people in Nigeria. They now know that investors are coming to add value to the economy, not to cheat the nation,” said Amos Y. Sakaba, chief operating officer of the One Stop Investment Centre at the Nigerian Investment Promotion Commission. “Now local communities are willing to defend foreign and domestic investments in their areas because they see it as helping to improve their lives.”
But some observers worry that the rise in economic growth and investment in Nigeria may not herald the fundamental transformation of the economy needed to lift the majority of the country’s population out of poverty. “It is hard to say if more investment in Nigeria is a reflection of growing confidence in the country’s economy or if it is just a reaffirmation of the fact that no matter what, there are some sectors in Nigeria where the profit yield is just too tempting to be ignored,” said Soji Akinrinade, a journalist and director of Mayfive Media in Lagos. “The problem is that the increase in the level of investment hasn’t brought down poverty rates or tackled the biggest problem of Nigeria today: unemployment.”
