There is no doubt that Nigeria is Africa’s leading economy, with the Rainbow Nation keeping pace, etching close to Naija’s numbers year-on-year. With a population of just over 200 million, going by GDP volume, Nigeria is the world’s 30th largest economy, one that’s highly dependent on oil and at the mercy of its fluctuating prices.
While it may be a fancy boast to lay claim to the number one spot in terms of nominal GDP on the continent, according to figures from the International Monetary Fund (IMF), per capita, Nigeria ranks 18th in Africa, with the largest population of people living below the poverty line. Furthermore, before the 2016 recession, the country’s economy was expanding at a rate of 6.3% per year, and the inflation percentage was in the single digits. However, in 2020, IMF estimates put it at 12.9%, and the National Bureau of Statistics reported that Nigeria’s GDP should contract by 4.3%.
Thus, despite the country’s dynamism, for the Nigerian economy to get back on its feet and continue growing at the previous pace, it needs to reorient from agriculture and oil and focus more on rising industries and untapped sectors. The main obstacles for development remain widespread corruption, deficient transport infrastructures, a fragile banking system, and an unappropriated energy supply. Despite these negatives, emphasizing investments in some of the industries listed below may provide a jolt to the country’s financial state.
Animal Food Manufacturing
Going by a May 2020 report posted on ResearchAndMarkets.com, the global animal food market grew by 3.5% in 2020, hitting a market size of almost $240 billion. The Asia Pacific region is the largest player in this sphere, holding 38% of the market, while Africa is the smallest one. The US alone has 4,000 animal food production businesses, and its industry employs about 55,000 Americans.
Agribusiness research and consulting firm, WATT Global Media, claims that Africa’s ten largest animal food manufacturers produce close to 8 million metric tons of compound feed per year. Yet, none of them are Nigerian companies. Seven have headquarters in South Africa, two in Egypt, and one has a base in Morocco.
Nigeria has well-developed poultry and livestock production industries, and formulated feeds may account for 80% of such businesses’ total operational costs. Almost all animal protein supplements get imported, as is a substantial percentage of all feed. Add to this that Nigeria’s pet food market should grow at an annual rate of 3.5% due to rising purchasing power in urban households, and this industry’s potential becomes evident. Since labor costs are low in Africa, Nigeria companies can also focus on exporting products to economically more powerful regions, as demand for animal food is surging globally.
Many Nigerians may not be aware that the automotive industry in the country dates back to the 1950s. Federated Motors Industries, a subsidiary of the United Africa Company, had an assembly line that produced Bedford TJ trucks. SCOA also made Peugeot 404 pickups. However, it wasn’t until the oil boom of the 1970s that significant developments in this sector happened, when the federal government signed partnership agreements with foreign manufacturers for these companies to assist with vertical integration within the local industry. The move caused international brands such as Volkswagen and Peugeot to take over the sector until the economic downturn of the 1980s. By the start of the 2000s, foreign cars dominated the market, with more and more people gravitating toward purchasing affordable used cars, which set the industry back. According to 2012 research, about only 20% of Nigerians buy new vehicles.
With automotive production remaining stagnant for decades, in 2013, the federal government approved a New Automotive Industry Development Plan (NAIDP), which aimed to attract investments and transform the Nigerian automotive industry. Lagos Business School claimed that the market size could reach a mark of one million annual units sold. Factoring that there’s an affordable credit purchasing scheme in place. According to the National Automotive Design and Development Council (NADDC), 31 licensed vehicle manufacturers operate in the country, and they have a combined capacity to produce 205,000 vehicles per year. Yet, industry analysts estimate that, since the launch of NAIDP, not more than 10,000 cars have been made locally per year.
Currently, Nigeria is one of the fastest-growing automobile markets, supported by demand for low-price passenger vehicles. While local production is dropping, import numbers rise. Japanese cars control one-third of the used and new car market. Despite these disappointing figures, a PWC report indicates that the growth of services and product companies that support the auto assembly industry will help Nigeria’s chances of becoming an automotive hub. Building capacities for things such as tires, belts, batteries, and lights are essential for expanding the Nigerian automobile sector.
Online gambling is a booming sector whose global market size swells at about $8 billion per year, set to almost double in size by 2027. Factors contributing to this industry’s rise include increased internet and smartphone penetration and new technologies such as blockchain. In Nigeria, as of late, sports betting has become a national pastime, as over 60 million residents are actively involved in it.
While the rest of the world is shifting from offline to online, gambling regulation forbids Nigerians from operating gambling sites from most regions within the country, Lagos excluded. Online slots is a game Nigerians could enjoy playing, but the reel-spinners available at local operators such as Bet9ja and NairaBet are crude compared to those on foreign sites. Most residents opt against playing at Nigerian online casinos and open accounts with international slot casinos.
If the country had federal online gambling regulation, that would lead to foreign investors and Nigerian entrepreneurs pouring money into this local industry. In turn, the government would benefit from a new massive tax influx that it is currently losing out on due to residents playing at offshore platforms. Legalization would inadvertently lead to better local sites. These would entice Nigerian players to partake in this hobby at platforms run by Nigerian-based companies. Most European countries with such regulation mandate that taxes incurred from gambling activities go to school and cultural programs. Some even specifically designate in their laws the purposes for which all accumulated gambling funds must get spent, and these often include youth development centers and outreach programs.
As mentioned, Nigeria is an oil-depended economy. Oil accounts for 83% of the country’s export earnings, 10% of its GDP, and 70% of all government revenues. That said, the technology industry has played a pivotal role as the country transitions into the mainstream of the global economy. The second-fastest-growing sector in Nigeria is telecommunication, a subcategory of the Information and Communication field. Research shows there’s a growing trend of entrepreneurs investing in innovation centers and technology ventures.
In 2018, Nigeria was the fourth fastest-growing community on the Microsoft-owned open-source software development platform, GitHub. GitHub reported that between 2017 and 2018, software contributions by Nigerian developers grew by 160%. In 2019, Free Code Camp, an online coding educational website, stated that Nigeria is their third-most-accessed location point. Due to its growing startup ecosystem and potential employment opportunities, the desire to learn how to code amongst Nigerian youths is massive. What is disappointing to see is that Nigerian developers get paid 20% less than those in South Africa.
While Lagos may be the second-worst place to live in, if we go by the Global Liveability Index, it remains a haven for tech jobs in the country, as many expect to see it soon rank among the world’s top 30 startup ecosystems. Tech oversaturation in the state has caused companies to branch off into other areas of the country.
Africa has a ton of IT potential. Thus, it is not surprising that it has attracted investments from IT giants such as Microsoft and Google. Nigeria seems to be at the forefront, with the second-highest tech startup density on the continent. As this sector flourishes, it should directly lower the country’s large unemployment rate, as tech-savvy youth will have more job opportunities.
The largest industries in Nigeria are petroleum, agriculture, tourism, and mining. These have been at the top of the list for years. However, in recent times, the telecommunication and financial sectors have become very dynamic, and so has the retail sphere. Nigerian entrepreneurs have to abandon established beliefs and investment patterns. They must shift to observing global trends by financing booming and neglected sectors. Education and labor availability are currently at an all-time high. Therefore, this is the ideal time for the country’s economy to benefit from new approaches.