Whenever Nigeria is talked about in economic terms, it is mostly around the statistic that 69% of its residents live below the poverty line i.e. live on less than $2/day. This is despite the fact that Nigeria is a resource-rich country with Africa’s largest oil deposits, and has a lot of potential in agriculture (only about 10% of its arable land is under cultivation). Not even the rebasing of our Gross Domestic Product (GDP) which made us displace South Africa as Africa’s largest economy could hide the fact that a lot of Nigerians were left outside the economic boom that has happened in Nigeria over the past 20 years.
However, what this focus on the negative makes everyone to miss, is how much of a highly sought-after market Nigeria is, especially judging by the influx of Foreign Direct Investment into the country. In the last decade, FDI has grown from $1.14billion in 2001 to $2.1billion in 2004 and reached $11billion in 2009, making the country the 19th highest recipient of FDI globally. Over the last three years, $20bn of FDI has come into Nigeria, making it the highest destination of FDI in Sub-Saharan Africa.
Even better, this FDI is not in the dominant sector of oil, but in the non-oil sector which has been quietly and steadily growing at 8 percent a year and is a large driver of the economy’s overall growth of 6 percent annually. Many top brands are making inroads into Nigeria; for example, South African retail giant, Shoprite has set the target of as many as 800 stores in Nigeria.
What this means is that despite the grim numbers of poverty rate and what-not, there exists massive potential in the country for the growth of businesses. Admittedly, there is still a lot of work that needs to be done to remove red-tape bureaucracy, lower the cost of doing the business and resolve infrastructural challenges. But the fact remains that there is massive demand for products and services, especially basics which revolve around food and housing.
Any investor thinking of growing, especially in Africa, and does not have Nigeria included in its plan runs the risk of missing out on Africa’s largest market. Just ask Vodacom – their decision to not bid for a GSM license in 2001 because they said Nigeria was not a big enough market for mobile telephony allowed their closest competitor, MTN surge ahead, leaving them in the dust.
While one might argue that the companies I have been using as examples here, and other companies making a killing in Nigeria are large companies with the financial muscle, it cannot be denied that opportunities for small and medium enterprises are increasing. Over the past three years, access to financing for SMEs both from the private sector and the government have increased, through schemes such as the YouWin programme of the Federal Government and the FG-backed MSME Fund.
Again, a lot still needs to be done in making it easier for businesses to grow and prosper in Nigeria. But before then, do not underestimate in your potential to execute your ideas and reap profit in the country.