Nigeria’s Economy
Nigeria is the most populous and the largest economy in Africa. Its Gross Domestic Product (GDP) qualified it to be listed as the 21st largest economy in the world in 2020. The population presents an immense potential for investment, trade, and business, with a variety of abundant resources to explore.
Nigeria’s economy is also primarily oil-driven, with agriculture, telecommunications, and financial services also making a significant contribution to the nation’s Gross Domestic Product. The government has been focusing on diversifying the economy while presenting various opportunities to investors and entrepreneurs.
Overview of Nigeria’s Economy
Nigeria’s economy has seen its share of ups and downs recently as the nation faces severe economic instability and uncertainty in 2020. In 2019, the nation’s economy grew by 2.44%, which was below the 3% mark that it had achieved in 2018.
The nation’s economy is primarily driven by oil and gas, which contributes a whopping 17% of Nigeria’s GDP. Agriculture, the telecommunications sector, and financial institutions all contribute to the country’s economy.
The government has been increasing its focus on diversifying the economy and making it more resilient to external shocks by working on sectors such as finance, construction, and manufacturing.
Nigeria’s Economic Challenges
Nigeria is facing many economic challenges in 2020, as the nation contends with a difficult macroeconomic environment. Some of the most pressing economic issues that the nation is grappling with include:
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Inflation: Inflation spiked in 2020, hitting a record high of 14.9% in January which is the highest level since August 2015. It has since come down to 12.78% in June 2020, but it is still higher than the central bank’s target of 8%.
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Unemployment: Nigeria’s unemployment rate has almost doubled over the last few years and stood at 23.1% in the first quarter of 2020. This is primarily driven by the lack of job opportunities and a decline in the agricultural sector due to low oil prices.
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Poverty: Poverty levels in the country remain very high, with an estimated 30.4% of Nigerians living in extreme poverty in 2020. This is due to the general decline in economic activities and a low rate of investment in the country.
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Weak Manufacturing Sector: Nigeria’s manufacturing sector is relatively underdeveloped and contributes only about 10% to the nation’s GDP, and it has seen a drop in output of about 4.4% in the last quarter of 2020.
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Foreign Currency Shortage: The foreign exchange shortage in the country has been a major bottleneck, given the fact that Nigeria relies heavily on imports, and this has resulted in the decline of the Naira against major currencies.
Opportunities in Nigeria’s Economy
Despite the economic challenges that Nigeria is currently facing, the country is still rife with economic opportunities, including:
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Agriculture and Food Security: Agriculture is a dominant sector of Nigeria’s economy and accounts for 24% of the nation’s GDP. The sector presents interesting opportunities for investors, with a focus on the production of grains, cassava, and other basic food items that are in high demand in the country.
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Technology: The Nigerian government has made a commitment to technology as a means of enabling economic growth and diversification. This presents opportunities in fields such as software development, e-commerce, computer programming, and manufacturing of technology products.
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Financial Services: Banking and insurance are two of the most profitable sectors in Nigeria. The central bank is encouraging players in the industry to adopt novel strategies, such as usage of digital technologies, to improve their efficiency and effectiveness.
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Transportation: There is a great need for investment in the country’s transportation infrastructure, and this presents a great opportunity for investors, who can benefit from the industrialization that will become apparent as a result.
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Oil and Gas: The oil and gas sector accounts for almost all of the government’s revenue and remains a key component of the economy. There are opportunities for investors in oil exploration, production, and refining.
Nigeria possesses immense potential for growth and development, given its population and the abundance of natural resources. The government recognizes this and is taking steps to diversify the economy and make it more resilient to external shocks. Despite the economic challenges posed by the COVID-19 crisis, Nigeria still presents many opportunities for savvy investors.
