In this post, we will be taking a look at Nigeria as a viable investment destination. Before we delve into the main topic, let’s take a critical look at the Nigerian demographics, population, and cultural history.
Nigeria which is an African country on the Gulf of Guinea has many natural landmarks and wildlife reserves. Protected areas such as Cross River National Park and Yankari National Park have waterfalls, dense rainforest, savanna, and rare primate habitats.
One of the most recognizable sites is Zuma Rock, a 725 meters tall monolith outside the capital of Abuja that’s pictured on the national currency.
The country which is officially recognized as the Federal Republic of Nigeria is a country in West Africa. It is the most populous country in Africa geographically situated between the Sahel to the north, and the Gulf of Guinea to the south in the Atlantic Ocean covering an area of 923,769 square kilometers, with a population of over 211 million.
It borders Niger in the north, Chad in the northeast, Cameroon in the east, and Benin in the west. Nigeria is a federal republic comprising 36 states and the Federal Capital Territory, where the capital, Abuja, is located.
The largest city in Nigeria is Lagos, one of the largest metropolitan areas in the world and second largest in Africa.
According to Wikipedia, Nigeria has been home to several indigenous pre-colonial states and kingdoms since the second millennium BC, with the Nok civilization in the 15th century BC marking the first internal unification in the country.
The modern state originated with British colonialization in the 19th century, taking its present territorial shape with the merging of the Southern Nigeria Protectorate and Northern Nigeria Protectorate in 1914 by Lord Lugard.
The British set up administrative and legal structures while practicing indirect rule through traditional chiefdoms. Nigeria became a formally independent federation on October 1, 1960. It experienced a civil war from 1967 to 1970, followed by a succession of democratically elected civilian governments and military dictatorships, until achieving a stable democracy in the 1999 presidential election. The 2015 election was the first time an incumbent president had lost re-election. Nigeria is a multinational state inhabited by more than 250 ethnic groups speaking 500 distinct languages, all identifying with a wide variety of cultures.
The three largest ethnic groups are the Hausa Fulani in the north, Yoruba in the west, and Igbo in the east, together comprising over 60 percent of the total population.
The official language is English, chosen to facilitate linguistic unity at the national level.
Nigeria’s constitution ensures freedom of religion and is home to some of the world’s largest Muslim and Christian populations, simultaneously.
Nigeria is divided roughly in half between Muslims, who live mostly in the north, and Christians, who live mostly in the south.
indigenous religions, such as those native to the Igbo and Yoruba ethnicities, are in the minority.
A Look at Nigeria’s Economy
Nigeria’s economy is the largest in Africa, the 27th largest in the world by nominal GDP, and 25th largest by PPP.
Nigeria is often referred to as the Giant of Africa owing to its large population and economy and is considered to be an emerging market by the World Bank.
It is a regional power in Africa, a middle power in international affairs, and is an emerging global power. However, the country ranks very low in the Human Development Index and remains one of the most corrupt nations in the world.
Nigeria is a founding member of the African Union and a member of many international organizations, including the United Nations, the Commonwealth of Nations, the Economic Community of West African States, and OPEC.
It is also a member of the informal MINT group of countries and is one of the Next Eleven economies. Nigeria has enormous resources, most of which are yet to be fully exploited.
A tremendous investment opportunity exists in the solid minerals sector. Mineral resources include coal, tin, iron ore, and others.
Nigeria’s agricultural products include, among others, groundnuts, palm oil, cocoa, and coconut. Nigeria also has a booming leather and textile industry and is one of the largest oil producers on the continent creating huge inflows of foreign investment.
Despite periodic crises, Nigeria offers a stable political environment. In April 2011, the Independent National Electoral Commission organized legislative, gubernatorial, and presidential elections. While imperfect, the elections were considered Nigeria’s most successful since its return to multiparty democracy in 1999 and reversed a downward trajectory of successively flawed election processes.
The international business community increasingly sees Nigeria as the central driver of a vast African market.
The Nigerian government has put in place a comprehensive package of investment incentives to stimulate private sector investment from within and outside the country. Among them is the Companies Income Tax Act which has been amended to encourage potential and existing investors and entrepreneurs.
Pioneer status gives industries a five year tax holiday, and tax relief is provided for research and development.
In 2009, Nigeria took significant steps to strengthen the banking sector. These reforms came on top of a major banking overhaul in 2006 that reduced the number of banks and increased a bank’s minimal capital requirement. Retail, corporate, and internet banking are seen as intensively competitive, and the home loan market is considered moderately competitive.
Since 1999, the Nigerian Stock Exchange has enjoyed strong performance.
Nigeria is also home to the most lucrative telecoms market in Africa, which is growing at twice the African average. The explosion of industries such as the mobile telecommunications market and the unparalleled success of foreign companies such as South Africa’s MTN have demonstrated that potential can be turned into reality.
With a population of more than 200 million, Nigeria is the most populous country in Africa. One in every six Africans is a Nigerian and is the eighth most populous country in the world.
The structure of its population with 75 percent of the populace under age 30 and an excellent regional distribution of eight anchor cities each with populations exceeding 1 million suggests a healthy growth picture going forward.
Is Nigeria A Good Place To Invest?
The Nigerian government has created a favorable climate for business and industrial ventures. Administrative and bureaucratic procedures have been greatly streamlined. The government has put in place policies and programs that guarantee a free market economy. In recent years, it privatized the only government owned petrochemical company and sold its interest in eight oil service companies.
It overturned a number of suspect contracts awarded by previous governments. Nigeria’s gross domestic product remains strong and steady, growing at a rate of 6.9 percent in 2011 compared to 8.1 percent in 2010.
It grew by over 6.7 percent in 2012. A series of recent policy initiatives to transform its agricultural sector put Nigeria’s growth into a double digit territory between 2012–2015.
This would put the country’s growth rate ahead of two other emerging markets, Brazil and Russia, and slightly behind India and China.
Nigeria is rapidly developing its physical and industrial infrastructure, in terms of transportation, communications, electricity and water supply.
Extensive road repairs and new construction activities are regularly being implemented as state governments, in particular, spend their portions of enhanced government revenue allocations on infrastructure.
Four of Nigeria’s airports namely: Lagos, Kano, Port Harcourt and Abuja airports currently receive international flights and there are several domestic private Nigerian carriers.
Citigroup recently listed Nigeria as one of 11 Global Growth Generators economies which have been identified as sources of growth potential and of profitable investment opportunities.
Similarly, Goldman Sachs identified Nigeria as one of its 11 countries, states with a high potential of becoming, along with the BRICS, the world’s largest economies in the 21st century.
Nigeria As An Investment Destination
Nigeria which is Africa’s largest economy with a GDP of over 475 billion dollars is still a preferred investment destination for US companies, particularly for the West Africa operations, despite the battering of its economy by Covid-19 pandemic, survey by the American Business CouncilanalyzedUS embassy in Nigeria, Veraki, KPMG, and PWC, have revealed that over 65.12 percent of US companies identified Nigeria as a regional hub for their operations in West Africa.
According to the survey, 64.58 percent of the US companies have a local content target, this is reflected in areas such as people, supply chain and input.
The survey findings contained in a report titled: “Nigeria economic impact survey 2020,” analysed the economic effect of US companies operating in Nigeria on the Nigerian economy.
It also measured changes in their business revenue, foreign investment, job creation, gross value added and plans for expansion.
Nigeria’s Biggest Investors
The United States remains Nigeria’s biggest investing country, followed by China, United Kingdom, the Netherlands and France.
China, though a later entrant, has swept all of African countries including Nigeria from the West through its Belt and Road policy of trade with aid.
The benefit Of Foreign Direct Investment In Nigeria
Nigeria is the third host economy for FDI in Africa, behind Egypt and Ethiopia. The country is among the most promising poles of growth in Africa and attracts numerous investors in the sector of hydrocarbon, energy, construction etc.
According to the United Nations Center For Trade And Development 2021 World Investment Report, Foreign Direct Investment flows to Nigeria totaled 2.4 billion dollars in 2020, showing a slight 3.5 percent increase from the previous year which was 2.3 billion dollars in 2019.
Despite the global economic crisis triggered by the Covid-19 pandemic. The total stock of Nigeria’s Foreign Direct Investment was estimated at 102 billion dollars in 2020.
Some of the main investing countries in Nigeria include the USA, China, United Kingdom, the Netherlands, and France. Nigeria intends to diversify its economy away from oil by building a competitive manufacturing sector, which should facilitate integration into global value chains and boost productivity.
The recent merging of trade, industry, and investment under the ambit of the Federal Ministry of Industry, Trade, and Investment reflects Nigeria’s intention to effectively coordinate between these three key areas to improve its trading and investment environment.
Some of Nigeria’s main advantages for receiving Foreign Direct Investment are :
A partially privatized economy, an advantageous taxation system, significant natural resources, and a low cost of labor.
On the other hand, widespread corruption, political instability, lack of transparency, and poor quality of infrastructure are limiting the country’s Foreign Direct Investment potential.
Intense bureaucracy also curbs foreign investment. In the World Bank’s 2020 edition of Doing Business Report, Nigeria ranked 131st worldwide, for the ease of doing business.
This represents a leap from the 2019 edition when the country was ranked 146th. The country has improved in many subcategories of the rankings which includes :
Starting a business
Dealing with construction permits
Trading across borders
Nigeria has been attracting strong inflows from American companies, including giants like Uber, and Facebook, as well as Emergent Payments, and Meltwater Group.
China has also been investing considerably in the country, mainly in the textile, automotive, and aerospace industries.
What To Consider If You Want To Invest In Nigeria :
Nigeria’s strong points in terms of attracting Foreign direct investment include :
important size of its domestic market. Nigeria is Africa’s most populous country
Africa’s highest GDP
Important hydrocarbon resources
High agricultural potentials
Relatively low public and external debt
The Nigerian Government’s policy of economic liberalization, promoting public-private partnerships and strategic alliances with foreign companies.
Obstacles To Foreign Direct Investment In Nigeria :
Poorly developed transport and energy infrastructure majorly lack of electricity which results in high operating costs
An inefficient judicial system and unreliable dispute settlement mechanisms
A high tax burden
With oil and gas accounting for over 90 percent of export revenues, the economy is vulnerable to volatility on global markets and to large swings in energy prices
The federal government is hampered by the strength of state and tribal authorities. Deep ethnic, religious, and regional divisions provide risks to political stability
An increasing lack of security, especially in connection with the extremist group Boko Haram operating in the north east of the country.
How Can I Invest In Nigeria?
In Nigeria, every company must be registered with the Corporate Affairs Commission and stamp duty must be paid to the Federal Inland Revenue Service.
Every company with foreign participation must also be registered with the Nigerian Investment Promotion Commission and a business license and an expatriate quota must be obtained from the Ministry of Interior.
The financial statements must be prepared annually and submitted to the Corporate Affairs Commission.
Investment Opportunities in Nigeria with The Highest Returns
Bank Investments: It is almost impossible to discuss investment opportunities in Nigeria without referring to bank wavings. Potentially, each bank has a savings or investment platform open to its customers to encourage reliability. If you are looking to grow wealth, you might consider bank investments. Some of these banks offer between 10 and 15 percent annual interest.
Cryptocurrency and Blockchain Investments: Cryptocurrency is acknowledged as one of the biggest and riskiest investment opportunities in Nigeria. Beyond Nigeria, cryptocurrency is driving the financial technology and digital transaction space. trading cryptocurrencies such as Bitcoin, Litecoin, and the rest is a rewarding investment opportunity to consider in Nigeria as the country has seen emerging high-performing crypto startups springing up and growing very fast. However, the Nigerian government is trying to regulated cryptocurrency and blockchain investments
Real Estate Investments: Investing in Real Estate in Nigeria has proven to be one of the best investment opportunities in Nigeria over time. To successfully sail through this, however, you must possess high capital. Several Nigerians face accommodation issues. Tapping into this pain point provides an array of options available in real estate. You could consider leasing out for commercial purposes like conferences, seminars, and public functions. Investing in real estate, especially in commercial parts of the country, attracts high returns.
Agriculture and Livestock Investments: The agriculture industry is integral to the growth and development of the Nigerian economy. In fact, you wouldn’t be very far from being right if you considered this the best investment in Nigeria. In a bid to diversify, the government is making conscious efforts at resuscitating the industry hence, the attraction for investors. If you are not interested in direct farming, you can invest in a company that makes its profit on livestock farming.
Bonds and Stocks Investments Investment in bonds provides a different perspective from private and commercial operations. The Federal Government is responsible for introducing investment opportunities to Nigerians. For FGN Bonds, the interest rate is usually as juicy as 13 percent which makes it a relatively better option against private investments.
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