Nigeria: Current and Upcoming Opportunities (Pt 2)
A number of Buhari’s promises directly tackle the worst of the points made in the part 1 of this article: focus on the energy sector, safety, anti-corruption and on governance measures being the main ones. Predictions have been made that if Buhari is able to tackle the energy supply and the natural gas required for it (for which he has already developed the plans) the result will be double-digit economic growth in the upcoming years.
Furthermore, given Nigeria’s size, the country is also seen as one of the important first ports of entry to the ECOWAS (Economic Community of West African States) as a whole. To a certain degree, the same goes for Kenya when it comes to COMESA (Common Market for Eastern and Southern Africa). Both economic zones have the same goal, but they are in different stages of integration and economic characteristics, including population and growth. Given these differences it is important to consider both Nigeria (ECOWAS) and Kenya (COMESA) when formulating the company’s Africa strategy and to assess which pros and cons of the two countries and economic zone fit best with the objectives of the Africa strategy.
Sectors with potential
The Nigerian sectors with the highest potential are directly linked to the expected plans of the new government and the country’s biggest challenges and potential. These comprise the following:
- Energy– as stated this is a top priority sector given the enormous positive impact on the economic growth if operating effectively. Anything, which contributes to raising the energy production and ensure more stable distribution is welcome.
- Infrastructure – not always a sector without specific risks, but hopefully Buhari’s plans regarding improvement of safety and corruption will help to open up the significant opportunities for foreign investors and businesses.
- Agriculture – following the necessity to diversify the economy, Buhari has promised to continue and further strengthen his predecessor’s successful policy and to make it into one of his absolute spearheads of the economy.
- Consumer products – a growing middle class in a large and strongly developing country is the right combination for a larger demand for consumer products.
- Transport – a growing economy with investments in infrastructure and more production from agriculture, among other things, also leads to a demand for more and improved transport.
- Healthcare – there are significant and continuous developments in the healthcare sector in Nigeria with the aim to have healthcare insurance coverage for all and also to have the necessary infrastructure in place.
In addition to this list, noteworthy as well are financial services and off-shore, which are relatively mature markets. Financial services will grow strongly along with the general economy and sectors, both in credit facilities and in consumer products including insurance. Over the past year there have been several insurance companies entering the Nigerian market through acquisition. Off-shore could be given an impetus if the oil price goes up again.
At the time of writing this article Buhari’s has just assumed power, and the cabinet and its plans are not yet fully known. Currently, Buhari still has the status of superhero with the majority of the population. And although Buhari has adjured that he does not possess a magic wand and that people should be patient, there may be a grey cloud forming if Buhari is unable to deliver on the high expectations. The continued war with Boko Haram and a possible new drop in oil prices due to the overproduction may put pressure on the process on the realisation of the imminent changes.
This risk factor of not meeting the necessary changes is still visible in the share prices on the Nigerian Stock Exchange. These have risen up to the election and shortly after, but have stagnated and even waned due to the fact that the final plans of the Buhari administration are yet unknown.
There is confidence that the election of Buhari and the Nigerians’ commitment to change will certainly lead to lasting positive changes in Nigeria; although it may not be without temporary setbacks. These positive changes, together with the proud entrepreneurial Nigerian spirit – as experienced here on a daily basis and in every part of society – make a solid combination for significant new trade and business opportunities. In conclusion, it is recommended to closely monitor further developments in Nigeria and to act on current and upcoming opportunities.
Written by Laurens Kreuze, a partner with KPMG in Africa, stationed in Lagos, Nigeria. At KPMG, he is the contact for European companies and organizations that are interested in doing business in Africa (and vice versa).
This article was written in a personal capacity. A Dutch version of this article will be available in August.
About David Okwara
Africa, Africa brief, Africa challenges, Africa opportunities, African countries, agriculture, challenges, development, East Africa, economic growth, economy, FDI, financial services, Foreign Direct Investment, foreign investment, GDP, government, growth, healthcare, infrastructure, investment, KPMG, KPMG Africa, Nigeria, oil, Oil and gas, opportunities, private equity, private sector, sub-Saharan Africa