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Nigeria: Africa’s Biggest Economy With Unexploited Opportunities

Nigeria: Africa’s Biggest Economy With Unexploited Opportunities

Identifying opportunities is not an easy task. In this article, we will be highlighting potentials in the Nigerian economy.

So, if you are interested in tapping some of these opportunities in Nigeria, here is how you can identify and leverage the opportunities.

Guide at a glance

  1. What are the sectors with opportunities in the Nigerian economy?
  2. The agricultural, telecommunication, and manufacturing sectors are the thriving sectors in the Nigerian economy.
  3. What are the export products with opportunities in Nigeria?
  4. You can tap opportunities in the export of cashew nuts, cocoa, sesame, shea nuts, ginger, palm kernel, and coconut as the country is a top grower of these commodities.
  5. As a European, what do I need to export from Nigeria?
  6. There are requirements that exporters to European, American, and Asian markets must adhere to export their products from Nigeria.

  7. There must be a clear understanding of the intended export commodities and other documentations.
  8. What are the export challenges in Nigeria?
  9. There are several challenges that local and international merchants who export from Nigeria face. But with adequate information and planning, intending exporters can minimize the impact.

Overview of the Nigerian economy

With $ 480 billion gross domestic product, Nigeria stands head and shoulders taller than other African countries because of the size of its economy.

It is also Africa’s most populous nation with an estimated 200 million people. The population has helped boost consumer spending and consolidated it as a strong consumer market.

The population growth rate at 2.6 percent per year could see it become the third most populous country in the world with 300 million people by 2050.

The people must be fed with staples such as rice, beans, yam, and medicines too, among others, providing opportunities for food, pharmaceutical, and other companies.

However, Foreign Direct Investments to keep the population productive have been on the decline. On the bright side, portfolio investors are upbeat.

In 2020, when the COVID-19 pandemic hit hardest, the Nigerian Stock Exchange emerged as best in the world, among 93 equity indexes tracked by Bloomberg.

The stock market recorded 50 percent return on investment — a rare feat by a developing nation’s exchange.

The dollar is also scarce in the economy with the naira exchanging at $ 410.77 in the official foreign exchange market but above N575/$ in the parallel market.

But it is a boost for investors who can leverage the weak local currency to improve their positions when investing locally.

The upside is that investors who bring in dollars or other stronger currencies will be happy for it,

said Abuja-based Market Analyst Ike Ibeabuchi.

There is a strong opportunity to make Nigeria a base, then produce and export,

he said.

A mono-product economy

Nigeria is a mono-product frontier economy. The country’s biggest source of dollars is from crude oil sales.

But for several decades, long before it gained independence in 1960 or discovered the ‘black gold', agriculture was the major revenue and foreign exchange earner for the country, providing millions of jobs.

Initially, windfall from oil was used to support the growth of industries. In the 1960s and early-to-mid-1970s, there were industries such as Ajaokuta Steel Complex, Delta Steel, paper mills, textile firms, palm oil plantations, and cocoa mills.

But the oil boom of the 1970s led to corruption and neglect of agriculture, which was once the mainstay of the economy.

While crude oil has become Nigeria’s major economic driver and accounts for more than 80 percent of its foreign exchange earnings and over 50 percent of revenue, the paper, and textile mills are dead. The agricultural estates are also moribund.

A 2016 research by BudgIT using data from Indexmundi, the United States Department of Agriculture (USDA), and Vetiva Research found that Nigeria had a 45 percent share of the world’s palm oil market in 1960.

At present, Nigeria’s share of global palm oil output has reduced to 1.7 percent.

Even though the country is Africa’s largest oil producer, Nigeria is home to the poorest people in the world, with 51 percent of the population in extreme poverty, according to the World Poverty Clock.

Sectors with opportunities

The Nigerian government’s push for food self-sufficiency is now creating opportunities in the agricultural sector for investors to tap.

From cash crops export to value addition and market linkages, opportunities abound within the country’s agricultural sector.

Investors can tap opportunities in the export of cashew nuts, cocoa, sesame, shea nuts, ginger, palm kernel, and coconut among others as the country is a top grower of these commodities.

The country still exports about 90 percent of its agricultural commodities in raw forms and this opens other opportunities for investors in the processing value chain.

All investors need to do is get distributors in the European, Asia, and American markets to supply these products raw or semi-processed.

Another sector with huge potential is Nigeria’s manufacturing industry.

The sector has been growing consistently since the second quarter of 2020 despite the impact of the Covid-19 pandemic on household incomes.

Real GDP growth in the manufacturing sector grew 3.49 percent in the second quarter of 2021.

This is evident in the performance of top manufacturers in the country such as Nestle Nigeria made a profit of N12.4 billion, Dangote Group made a profit of N130.1 billion and Nigerian Breweries made a profit of N7.6 billion respectively in the first quarter of 2021.

Similarly, Unilever Nigeria bounced back from a loss of 519 million in the first half of 2020 to a profit of N714.7 billion in H1 2021.

Similarly, the telecommunication industry in Nigeria has huge potentials that investors can also tap.

Despite the rapid growth of the country’s telecommunication industry, broadband penetration has remained weak especially in rural communities, creating opportunities for investors.

The opportunities in the industry range from the adoption of the 5G network, the rise of the Internet of Things (IoT), the evolution of the content ecosystem, and the transformative power of artificial intelligence (AI).

Export requirements

As a potential investor, thorough research must be carried out to have a clear understanding of the commodity you intend to export, what it entails, and the targeted market.

  1. You must have adequate knowledge of processing and packaging the product if you are going into export.
  2. It begins with where to source the nuts such as cashew. Major exporters source nuts from Oyo, Kogi, and Niger states. Farmers in these areas are known to offer nuts of high quality.

  3. Countries like Indonesia, Vietnam, the Philippines, Malaysia, and Thailand import a lot of nuts extensively from Nigeria for their processed food industry.

  4. Importers expect cashew nuts meant for export to be clean, thoroughly dry, and free from matter such as sticks, and stalks.
  5. Another thing is that it must not be exposed to moisture. The raw cashew nuts must be properly sun dried and the moisture content must be analyzed. Most exporters use only jute bags to bag raw cashew nuts for aeration.
  6. Investors must be ready to procure machines such as boiler, sheller or cracker, dryer, and packaging materials to ensure that the commodities meet international standards.
  7. Necessary exports documents such as the phytosanitary certificate for commodities issued by the Nigeria Agricultural Quarantine Services (NAQS), health certificate for processed and semi-processed food items issued by the National Agency for Food, and Drug Administration and Control (NAFDAC) should be gotten before export.
  8. For shipping, most exporters take time to identify reliable shipping agents that help them deliver cashew nuts in time.

This is because the time taken by the shipping company to deliver nuts can also affect the exporter’s reputation positively or negatively.

Challenges for exporters

There are several challenges Nigeria’s exporter faces but the most challenging is the traffic congestion at Apapa and Tin Can seaports.

As a result, transaction cycles for export take longer than necessary.

Similarly, processing relevant export documentation is still done manually, and this slows the approval process.

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