The Nigerian Economy: Outlook And Opportunities For Private Investors Dr Jumoke Oduwole
1. Nigeria’s Economic Outlook
Current facts about the Nigerian economy Africa’s largest economy over the last seven years - At $392.26bn in 2018, Nigerian economy larger than South Africa’s by $29bn Largest Market - a projected 20 years of uninterrupted democracy market size of 402m people and spanning peaceful handover of 5 the world’s 3rd largest population Presidents by 2050 Nigeria named one of the 10 most improved Size of France and Italy combined. Well economies in the World Bank Doing placed geographically and blessed with Business report released on October 24, diverse natural resources 2019 Nigeria’s per capital income of Competitive labour cost – current monthly $2028.2 is 84% higher than the minimum wage at $83 compared $233 for continent’s average of $1,720 South Africa or $124 for Egypt 03
Current facts about the Nigerian economy (Cont’d) In 2018, the Nigerian economy grew by 21.1bn – larger than the combined GDP of Comoros, Djibouti, Eritrea and Mozambique and The Gambia. In 2018 alone, more than USD25bn in Nigeria’s total trade more than diaspora remittances in 2018, 7 times quadrupled from $22bn in 1999 to larger than total official development $99bn in 2015 assistance Nigeria accounts for approximately Signatory to the AfCFTA and 60% of the trade among ECOWAS bullish on the promise of greater countries access to African markets Curtailed Boko Haram terrorists. Regained control of 17 Local Government Areas previously under their control 04
Nigeria set great economic aspirations in the Economic Recovery and Growth Plan (ERGP 2017-2020) which has three broad pillars: Broad Policy Objectives • Double manufacturing’s share of GDP • Maintain a competitive exchange rate • Reduce inflation from 18.6% to 9.9% Pillar 1: Pillar 3: Pillar 2: • Increase tax/GDP ratio from 6% to 15% Restoring Building a Investing in • Improve budget preparation and execution growth our people competitive process economy • FDI target of $10bn • Creation of 15 million new jobs • Average annual GDP growth of 4.62% • Top 100 on the ease of doing business ranking by Enablers: Improving governance and security 2020 Delivery: Implementation and financing • Rebalance domestic/foreign debt from 84:16 to 60:40 05
2. Known Investor Challenges
Africa’s Investment Attractiveness Biggest draws: natural resources, high 53.2% 23.5% 14.4% 7.7% 1.2% growth rates and large domestic 30.5% 36.6% 24.0% 8.2% 0.6% markets… 24.6% 36.2% 26.8% 9.9% 2.5% 27.5% 32.1% 28.0% 10.7% 1.8% 22.1% 35.1% 27.0% 12.5% 3.3% 8.9% 18.5% 37.1% 34.3% 1.2% …yet concerns about business Nigeria has 4 of the 5 key factors investors environment persist look for in its favour 07 Source: Nigerian Investment Promotion Commission (NIPC) November 2019
Africa’s Perceived Barriers To Investment… Business environment is most important barrier… … incentives are least important barrier 08 Source: Nigerian Investment Promotion Commission (NIPC) November 2019
3. Investment Opportunities
Nigeria offers investment opportunities in both high growth & underpenetrated markets across major sectors. Key examples: • 82% of the land size is arable; 1. • 40% of arable land is cultivated • Population is expected to reach 400 million by 2050; Agriculture • Current Daily Production of 1.8 Million Per Barrel; 2. • Local refining capacity represent 24% of crude oil production (1.85 million barrel/day); Oil/Gas • Installed Daily Capacity of 12,522 Megawatt; 3. • Current Operating Capacity 3,879 Megawatt; • Over 40% have limited to no access to Power. Power Generation • Over 20 Million Housing Deficit vis-à-vis a Growing 4. Population of over 195 Million People; 10 Real Estate
Nigeria offers investment opportunities in both high growth & underpenetrated markets across major sectors. Key examples: • Children under age of 15 years make up about 40.9% of the current population of 195 Million; 5. • Over 10.5 Million children under the age of 15 years are undereducated; • Approximately 20.1% in education accessibility rate; Education • Health insurance penetration rate is estimated 6. at 5.1% of the current population; HealthCare • 7. Internet Penetration rate estimated at 47.4%; • Mobile penetration rate estimated at >80%; Telecommunication & ICT 11
Investment opportunities in the Agricultural industry Overview ▪ Abundant and reliable rainfall in over two thirds of the territory ▪ The agricultural sector plays a key role as Nigeria’s key growth driver ▪ The sector is the second largest contributor to GDP (21% in 2015) and provides employment for over 70% of the population ▪ Nigeria has some of the richest natural resources for agriculture production in the world Opportunities ▪ Nigeria is the most populous country in Africa and a fast-growing population will increase domestic consumption ▪ A young and growing population provides a large pool of labour ▪ Favourable climate, fertile land and water resources ideal for export- oriented production ▪ 84 million hectares of arable land, of which only 40% has been cultivated Incentives ▪ New US$9 million equity fund from the African Development Bank for small and medium sizes agribusinesses ▪ Machines and equipment enjoy a 0% duty ▪ Capital allowance of up to 50% for plants and equipment 12
Example - Isa Gerawa's Soybean Processing Factory in Kano is processing Nigerian raw soybeans into finished vegetable oil. Isa Gerawa's Soybean Processing Factory In Kano • 1,200-tonnes-per day solvent extraction plant in Kano • $50m investment – N18bn • Created no fewer than 5000 jobs for the citizens 13
Nigerian manufacturing industry offers several attractive investment opportunities Agro-allied And Agro Oil & Gas Related Processing Industries ▪ Food Processing (Beverages, ▪ Petrochemical Packaged Foods, etc) ▪ Fertilizer ▪ Sugar Production ▪ Methanol ▪ Palm Oil Processing ▪ Refineries ▪ Leather and Leather Products ▪ Plastics ▪ Rubber Products (Tyre) ▪ Cocoa Processing Metals and Solid Minerals Construction and Light Product Manufacturing ▪ Cement Production ▪ Housing ▪ Automobile Assembly ▪ Cotton, Textile and ▪ Basic Metal/Steel Garment ▪ Aluminum ▪ Electronics ▪ Chemicals ▪ ICT Equipment 14
Example - The Turkish diaper maker Hayat’s Factory in Agbara, Ogun State The Turkish Diaper Maker Hayat’s Factory In Agbara, Ogun State • $100m investment in diaper production • Annual production capacity - 1.3bn units of diaper and 13,000 tons of tissue • Employs 3000 Nigerians 15
Nigerian ICT sector offers attractive investment opportunities Nigeria ICT sector – strong fundamentals ✓ ✓ 58% of the adult ✓ ✓ ICT sector accounts for population have access to 13.8% of Nigeria’s GDP in 2018 financial institutions and 13.8 % 58 % have mobile phones ✓ The sector has more ✓ than doubled in size over the past 7 years. 5 ✓ ✓ There are about 23 activetechnology ✓ ✓ There are over 163 hubs across the country. millionmobile phone 60 % 8 % subscribers ✓ ✓ 26 million Nigerians ✓ ✓ 60% are active mobile are on Facebook internet subscribers Nigeria’s Services sector contributes 53% to the country’s GDP and has been the highest contributor to economy, withan annual growth rate of 5.8% between 2010-2015. Competitive labour compared to other regions. The digital economy is projected to generate $88 billion and create three million new jobs over the next tenyears. 16
Nigeria ICT sector examples FinTech E-commerce CleanTech HealthTech Media & AdTech EdTech AgriTech Logistics 17
Fintech impact examples • One of the most valuable African FinTech businesses with operations in 20 African countries • One of Nigeria’s unicorns – valued at over $1bn, Visa International recently announced a $200m investment • Processing over 500 million transactions per month as at May 2019 • Drives financial inclusion across Nigeria with over 270,000 access points as of 2018 • Nigeria’s largest distribution network for financial services in Nigeria • 23000 merchants • Over 14m unique users and 530 direct employees. • Over 10,000 indirect employment through 23,000 agents • Nigeria’s first open living lab and pre -incubation space where work to catalyze creative social tech ventures take place • Founded 5 years ago • Acquired Kenya’s iHub for an undisclosed amount in September 2019 • Invested over USD500,000 in social tech ventures. Operations in Kigali, Rwanda 18
4. Business Climate Reforms
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