Nigeria is an expanding economy, and currently the second largest in Africa. It has been marked by many as one of the world’s rising stars, and is on track to become one of the 20 largest economies by 2020. It faces a number of challenges on the way, however, such as its large and growing population of which 45% live in poverty and which its subsistence agricultural sector is unable to support.
Much has been made of Nigeria’s oil and natural gas sectors. With over 35 billion barrels of oil reserves and over 100 trillion cubic feet of natural gas located beneath the country, foreign energy companies have been rushing to invest in the country and exploit its natural resources. Nigeria has benefited greatly from increased investment and revenue from energy exports, but over reliance on this sector has led to the neglect of other, more stable, sources of income.
Due to Nigeria’s high reliance on the natural gas sector, Nigeria has developed a smaller entrepreneurial community. Over the past few years, the dependency on oil has repelled entrepreneurs and investors in other sectors such as finance, high tech electronic industries and telecommunications.
Another struggle Nigeria faces is widespread corruption. This is a large hurdle for sustainable growth, as Nigeria doesn’t have reliable government officials to tackle the issue. As a result of this the institutions that are in place are insufficient to successfully deal with the problems. This factor greatly impacts foreign investment as foreign entities feel insecure investing large amounts of capital and resources into the country; thus slowing economic growth.
On a whole, Nigeria has great potential to transform into Africa’s leading economy. As to how long it will take to successfully become a world leading market, only time will tell. But that developing entrepreneurial community has high rewards for foreign investors keen on doing business in Africa.
Our firm sees Nigeria, along with other African nations such as Kenya, as being popular jurisdictions for startups and small business in the near future. Apart from industries associated with natural resources what other industries do you think have great potential in Africa?