Doha: Nigeria’s economy presents major opportunities for foreign investors, said the weekly report by the QNB Group yesterday.
A July 2014 McKinsey report projected that GDP could triple to $1.6trn by 2030, supported by rapid infrastructure expansion through investment of up to $1.5trn. As the largest and most populous economy in Sub-Saharan Africa (SSA), it has grown rapidly since 2010 on a continued expansion of its manufacturing and services sector. Real GDP growth accelerated to 6.54 percent in Q2, 2014, compared with 6.21 percent the previous quarter. Looking ahead, the Group expects the economy to continue in the 6 percent-7 percent range, making it one of the fastest economies in the region.
Nigerian GDP was rebased in April 2014, doubling it overnight from $273bn to $523bn and thus making it the largest economy in Africa, surpassing Egypt and South Africa (22nd largest in the world). The economic fundamentals suggest that the potential for growth is high. The population is large (169 million) and expanding quickly (2.7 percent per year).
McKinsey expects 70 million people to move out of poverty by 2030. Real GDP growth is rapid at 6.2 percent from 2010-13 (CAGR), which has helped lift GDP per capita from $2,347 to $3,087 over the same period.
Although the primary sector (mainly agriculture as well as the petroleum sector), services sectors have driven growth in 2010-13, all expanding by over 7 percent with the exception of government services. The rebasing of GDP increased the value of the service sectors by 3.4 times and it now accounts for 45.7 percent of GDP. Private consumption now accounts for 71.7 percent of GDP. The fast-growing population and rising wealth underpins this growth in services sectors. Of particular note is the financial services sector, which grew at a CAGR of 18.6 percent in 2010-13 as it recovered rapidly from the global financial crisis when non-performing loans rose sharply.
Nigeria has achieved this remarkable growth rate despite considerable handicaps. The country’s infrastructure is dilapidated. Power infrastructure is most in need of investment — the electricity output of the entire grid in Nigeria is equivalent to the output in Qatar, notwithstanding the large difference in population.
Furthermore, the business environment is challenging. Nigeria ranks 147 out of 189 countries in the World Bank’s Doing Business report (185th for “Getting Electricity”) and 127th out of 144 countries in the WEF’s Global Competitiveness Index (134th for infrastructure).
Nigeria is expected to involve $3.1tn of investments over the 30-year period backed by sovereign wealth and revenue from the oil and gas sector.
The energy sector offers the largest opportunity for international investors. The government is now selling majority stakes in 10 government-owned gas-fired power stations, which could double power generation. This will increase domestic demand for gas in Nigeria and is likely to lead to more investment in gas exploration and production, which has been relatively neglected until now.
Even at its current high rate of growth, Nigeria presents a considerable opportunity for foreign investors. The Peninsula
