Successfully investing in Nigeria

last updated on 27 May 2020 | reading time approx. 2 minutes

• How do you assess the current economic situation in Nigeria? »

• How would you describe the investment climate in Nigeria? Which sectors offer the largest potential? »

• What challenges do German companies face during their business ventures into Nigeria? »

• What distinguishes Nigeria from the other African countries from an investor's perspective? »

• In your opinion, how will Nigeria develop? »

How do you assess the current economic situation in Nigeria?

Nigeria remains the largest economy in Africa. However, the country’s economy is dominated by crude oil and is therefore very vulnerable to fluctuations in crude oil prices and production. After the recession in 2016, Nigeria implemented the “Economic Recovery and Growth Plan” (ERGP). Even though the reforms are valuable and partly effective, the economic growth is slower as projected.
 
In 2019, Nigeria recorded a growth of 2.3 per cent (IMF). The IMF report, which was released prior to the Covid-19 pandemic, predicted a similar growth for 2020. This economic growth is due to the better performance of the oil industry as well as the Nigerian non-oil sectors. The diversification of the economy is key, the implementation thereof is however slow. The non-oil key sectors of the economy are services, industry and agriculture. Another important and very fast growing sector is the telecommunication sector. 

How would you describe the investment climate in Nigeria? Which sectors offer the largest potential?

The EGRP reforms show the government's awareness that investment-friendly policies and effective administration are the key for a sustainable economic growth. As a result of these reforms the attractiveness of Nigeria for investors is improving. These improvements include the ability to incorporate a business within 24 hours and increased transparency with regards to procedures for obtaining products and services from ministries, departments and agencies.
 
One factor that continues to impair the investment climate is the insufficient electricity and transport infrastructure.  
 
The largest potential for investments are in energy (off-grid power supplies), water, entertainment (movie industry and tourism), mining, manufacturing, food processing, agriculture (storage) and technology.

What challenges do German companies face during their business ventures into Nigeria?

German companies are facing the following challenges:

• weak government institutions;
• inconsistent and frequent amendments to government policies;
• a volatile currency;
• corruption and a weak court system.

What distinguishes Nigeria from the other African countries from an investor's perspective?

Nigeria is the largest economy in Africa and its economic diversification is increasing. The government's comprehensive reform efforts are leading to visible progress and improving the investment climate. Nigeria is rich in natural resources and strategically well located to provide a gateway for an entire region.  
 
Nigeria's large and growing population offers investors with low labour costs and an enormous sales market through a rapidly growing middle class. Nigerians are very happy to spend money if they perceive value. Furthermore, Nigerians are known for their good work ethic and entrepreneurial spirit.
  

In your opinion, how will Nigeria develop?

Provided that Nigeria continues with its reform programs to strengthen the diversification of the economy and non-oil sectors, increases high-quality infrastructure and transparency at all government levels, Nigeria will perform in accordance with its enormous growth potential. A good example of the potential of the non-oil sectors can be seen in the success story of the rapidly developing telecommunication sector. The ongoing improvements in infrastructure will have a positive impact on Nigeria’s overall economic performance.