When we added our member firm in Nigeria, SIAO Partners to our network in September 2013, I heard about the Nobel Prize-winning Nigerian playwright and poet, Wole Soyinka, who once said: “…there are prospects for a new Nigeria, but I don’t think we have a new Nigeria yet.” Thinking about Nigeria again for this blog I considered this quote.
In the first half of 2014, Nigeria became the largest economy in Africa following its re-evaluation by the National Bureau of Statistics (NBS), increasing its GDP by 89% to over $510 billion. Much of this has been attributed to growth in new sectors such as telecoms, banking and the film industry, which has been welcomed by foreign investors, eager to diversify their portfolios. Investors have also been attracted to Nigeria’s burgeoning consumer market of 170 million people, many of whom are opening bank accounts for the first time and becoming owners of mobile phones and new technologies.
The fact that Nigeria has managed to remain one of the top three destinations in Africa for foreign direct investment is more remarkable given that it is viewed as being a high-risk market for investment. Factors such as poor governance, unstable macro-economic policies and increasingly alarming terrorist activity in the north of the country, all contribute to Nigeria’s consistent low rating in the World Bank’s ‘ease of doing business’ report. Indeed, Nigeria slipped 9 places to 147 in 2014.
This is compounded by some disconcerting facts - it is currently valued that Nigeria needs $50 billion a year for the next decade just in order to develop the right infrastructure for power, roads and water. Furthermore, there is a growing disenchantment among Nigerians, as evidenced by a recent personal well-being index which showed the average well-being of the population has declined, particularly in terms of satisfaction with personal finances; the country is one of the poorest in terms of revenue per capita with 46% of the population living below the poverty line (World Bank).
Yet there are future prospects which indicate things could be improving. The economic re-evaluation has improved Nigeria’s national debt to (nominal) GDP ratio of 11% (down from 19%), and the expected slowing of the country’s growth rate does not appear to have happened with forecasts set at 7.4% for 2014. Lastly, Nigeria is close to raising its first infrastructure fund – ARM infrastructure – that will see $250 million of investment going into transport, energy and utility sectors across West Africa.
We may not have a new Nigeria yet, but with a population twice the size of any other African country, Nigeria has the opportunity to expand and enrich its consumer markets and increase the wealth and outlook of its people.