By Ambassador Adebowale Adefuye and Stephen Hayes
It is often argued that the economy of Nigeria, the world's 8th largest petroleum exporter, is dominated by oil. With petroleum comprising 97% of total exports and 90% of revenues, this appears a legitimate argument. But the reality is somewhat different. Nigeria is changing, and evolving beyond its status as a mono-economy. A youthful population, robust economic potential and an ambitious pro-growth government agenda are transforming Nigeria's economy, positioning the country as a premier destination for emerging market investment. The country is fertile ground for companies seeking high-growth opportunities.
A Demographic Advantage
Home to more than 170 million people, Nigeria is Africa's most populous country. Urbanization is contributing to projections that the country's population will double by 2050, making demographics central to defining the Nigerian opportunity. With over two-thirds of its populace under 30 and a median age of 18, Nigeria's labor force — 52 million strong — is one of the world's largest and youngest. This youthful population's demographic dividend will increase productivity across a number of sectors in the coming decades while serving as one of the continent's most attractive consumer markets. At 30 million households, Nigeria's vast consumer class is already brand-conscious and becoming more affluent, with nearly a quarter of its population firmly rooted in the middle class.
An example of this economic transformation is found in telecommunications. Nigeria currently boasts 79 million mobile phone subscribers and a telecommunications market that grew by 34% in 2010 — with a further rise in value to over $25 billion this year. Eyeing the successes of this sector, banking and retail firms are now entering the Nigerian market in droves. These trends are underpinned by a thriving English and local-language advertising market that has come to define globalized Nigerian consumerism.
Growing Faster Than You Think
Nigeria is West Africa's economic engine. Its 2011 GDP growth rate of 7.2% is predicted to maintain at 7% in 2012 — considerably higher than Brazil, Russia or South Africa. This growth is driven primarily by the non-oil sector. Moreover, per capita income has continued to rise in Nigeria over the last decade.
Nigeria is the United States' largest trading partner in sub-Saharan Africa. Commerce between the two nations reached more than $38 billion in 2011. America is also the largest foreign investor in Nigeria, directly investing $5.2 billion in 2010. Coca Cola, Proctor & Gamble, GE, GM and Citibank have all been highly successful setting up shop in Nigeria. As Nigeria's economic development takes off, rising demand for electricity, housing and retail goods continues to attract new investment. It is no surprise that Nigeria is Africa's largest destination for Foreign Direct Investment (FDI).
The Country Is Changing
Nigeria's indicators were not always so promising. President Goodluck Jonathan has pursued policies conducive to foreign investment and growth, including the privatization of many state-owned entities and the appointed of internationally respected technocrats to diversify economic growth and improve fiscal management. The government is also working toward developing stronger public-private partnerships for roads, agriculture and power.
In fact, this year the Jonathan Administration finally abolished the Power Holding Company of Nigeria, which had governed the use of electricity, often the bane of many companies due to its ineffectiveness and inefficiency. The privatization of the power sector occurred through an open process with international observers, and this week the winning bids were announced for five power generation plants. The winners comprise companies from 13 countries for a sale that could top $1 billion.
President Jonathan's economic blueprint for the future aims to place Nigeria among the top 20 economies in the world by the year 2020, with a GDP of $900 billion. His transformation agenda offers investment incentives like tax holidays, full foreign ownership of businesses in most sectors, full repatriation of profits and expedited visas and company registration. With an eye toward a better future for all Nigerians, the government recently created a Nigerian sovereign wealth fund to collect and invest its oil revenues. This mechanism will focus on enhancing physical infrastructure and human capital. Nigeria's optimism for the future is underscored by their partnership with the Corporate Council for Africa in hosting an infrastructure conference in Washington, DC this week.
Despite Nigeria's traditional reliance on the petroleum sector, the country's economy offers new promise like few others in Africa or the world. Though the government confronts challenges typical of many emerging nations, smart reforms and prudent investments are empowering Nigeria to move beyond oil toward a more diverse and sustainable economic base. Favorable demographics, a rapidly evolving marketplace and prudent government policies are making Nigeria's aspiration to become Africa's largest economy is not only achievable, but likely.
Prof. Adebowale Adefuye is the Federal Republic of Nigeria's Ambassador to the United States. Stephen Hayes is the president and CEO of The Corporate Council on Africa.