Nigeria, commonly known as the giant of Africa with more than 150 million people is the most populous country in Africa. With one of the biggest democracies in the world and a presidential system of government, it has a dual economy, based on its rich natural resources, traditional agriculture and the trade sector. It not only shows high potential in human resources but also is endowed with rich natural resources such as oil, gas and minerals. The country aims to develop other productive sectors, boosted by the size of its population and economy, it is a regional powerhouse.
The country has a rich land of diverse cultural heritage, with more than 250 ethnic groups, a wide array of religions and sophisticated visual arts. The talent, creativity found in its festivals, music, sculptures, literature and films are well known all over the world.
PHYSICAL FEATURES AND NATURAL SETTING
Nigeria is located at the extreme inner corner of the Gulf of Guinea on the west coast of Africa and lies between latitudes 3°15’ to 13°30’ N and longitudes 2°59’ to 15°00’ E. On the south, it is bordered by Gulf of Guinea, on the west and north, it is bordered by the Republics of Benin and Niger respectively, and on the east, it adjoins the Cameroon Republic. Nigeria has a land area of 923, 768 km2 in which land comprises 910, 768 km2 and water accounts for 13, 000 km2. Its greatest length from North to South is 1, 046 km, and its maximum breadth from East to West is 1,127 km with a total boundary length of 4,900 km, of which 853 km is coastline. Comparatively, the area occupied by Nigeria is slightly more than twice the size of the state of California in the United States of America and almost twice that of France.
Background of the Nigerian Economy
Nigeria is the largest economy in Africa, with a GDP greater than USD 500 billion and steadily grew to over 7 percent per annum between 2005 and 2014, but this growth has being slower in 2015. This growth was driven primarily by the non-oil sectors, such as financial services, telecommunications, entertainment, etc. Foreign direct investment (FDI) inflows have been strong, averaging USD2 billion per quarter since 2013, with over 70percent of this in the non-oil sectors. Nigeria’s economy is actually more diversified than it seems, with the Oil sector contributing only about 14percent to GDP. Nevertheless, we ought to be doing more to diversify with the significant natural and human resources with which Nigeria is blessed. There is no doubt that Oil has contributed substantially to Nigeria’s revenue since its discovery in 1956 and more especially, since 1970 when its price was on the upward trend. Yet, oil receipts and their management have challenged governance to the core over time in Nigeria. Deeper economic diversification is an urgent necessity to undertake structural transformation, buffer the domestic economy from externally transmitted shocks and accelerate growth accompanied by job creation.
Current Diversification Efforts
The task ahead of further diversification of the economy is enormous, which is not taken for granted. There are three categories or sectors that the present administration has put in effort in diversifying the economy:
- First, the Telecommunications sector: we have seen an increase in the number of telephone lines available in the country from about four hundred thousand (400,000) lines in 2001 to over one hundred and forty million (140,000,000) lines currently, because of the deregulation policy of the government. According to the Nigerian Communication Commission, the operators in the sector have created over one million – direct and indirect jobs and helped to attract over $USD twenty five billion ($USD25 BN). The success of the telecommunication sector, especially mobile telephony, has helped develop other ancillary sectors like e-commerce, entertainment (what we call Nollywood), among others. The World Trade Organization has recognized the standards being set by the Nigerian entertainment industry Nollywood and has reflected it on the Programme Cover for this Round Table.
- Second, the financial services sector: We have seen the strong growth of the financial services sector since the liberalization exercise that started in 1990. The exercise continued in 2005, with the guidance of the financial regulatory body Central Bank of Nigeria (CBN) and there were market-led mergers and acquisitions that reduced the number of banks from eighty-nine (89) to twenty-four. The banks came out of the exercise bigger, with better corporate governance and have now started to operate across Africa, financing larger transactions. The market-led business combinations served as a catalyst for the stock exchange’s growth, which has grown to a market capitalization of over fifty billion dollars (USD$50 BN).
- Third, the cement sector. In spite of the abundant supply of limestone, the major constituent for making cement, Nigeria primarily imported the product for our building needs. The government however implemented a backward integration agenda that has now translated the country from being a net importer to a net exporter of the product.
The success that has been recorded in growing these three sectors, which is used as an examples have some basic underlying elements in common – the right enabling environment including appropriate regulation; policy consistency; and fostering competition among the industry operators. The administration will build on these elements to develop sectors where Nigeria has comparative advantage to foster more diversification of the economy. Although the task of further diversification of the economy is herculean, but Nigeria’s short and medium term prospects remain favorable (driven by strong fundamental advantages). Four of the strongest advantages are – Strong demographics, with a large domestic market and labor force; abundant natural resources and favorable climate; a developing financial sector with strong management teams (and ability to partner with international banks to fund businesses); and growing democratic institutions with the political will to build the foundation for the future.
NIGERIA’S FOREIGN TRADE FRAMEWORK
Nigeria was declared Africa’s largest economy in 2014 largely as a result of a tremendous economic growth in the last decades fuelled by foreign trade. Nigeria’s Gross Domestic Product stood at over $510 billion in 2013. Nigeria also topped African countries in the last three years in Foreign Direct Investment which stood at an average of over $7 billion per year between, 2011-2013 amounting to a total of over $20 billion USD in this period. Economic growth has consistently exceeded 6% per year in recent years. With over 177 million people, the Nigerian market has continued to attract foreign investors. Foreign trade continues to play a significant role in Nigeria’s development. In the pre-independence era, foreign trade in mineral resources (tin and columbite, coal, etc.) and raw and processed agricultural products (timber, rubber, groundnuts, cotton, cocoa, palm produce, hides and skins, etc.) was the main engine of growth of the economy and this was achieved through exports. Indeed, the agricultural sector’s contribution to export revenue was then about 65% of total government revenue.
This benefited over 80% of the population who were engaged in the sector. The oil and gas industry has displaced the agricultural sector as the prime mover of the economy, rising from less than 30% total export receipts in the 1960s to over 96.8% in 2012 (Central Bank of Nigeria, 2012). The importance of oil in the Nigerian economy became more visible during the oil boom of the early 1970s when the international price of oil rose gradually from $10 to about $40 before peaking at over $100 per barrel in some periods in the last decade. The dominance of oil resulted in the gradual shrinking of agriculture and consequently made the country more dependent on food imports, costing the nation over $11 billion per year as of 2012 (National Bureau of Statistics, 2012).
INVEST IN NIGERIA
Nigeria was proclaimed Africa’s largest economy in 2014, following the rebased calculation of its Gross Domestic Products – GDP to capture hitherto undervalued or neglected sectors such as its flourishing entertainment industry (Nollywood and Nigerian Music) and Information and Communications Technology – ICT. Nigeria’s GDP then totaled over 510 billion dollars. The GDP has also been registering an impressive growth rate in recent years, exceeding 6% annually. Nigeria is one of Africa’s most attractive destinations for investors. Besides the diverse natural resources it is endowed with, Nigeria disposes of a huge human capital, with trained and qualified professionals readily available at competitive costs in the employment market. Investors would also be impressed by the array of investment incentives they can take advantage of in various sectors. Nigeria, investors would quickly discover, is a market characterised by the high return on investment it offers. Nigeria’s investment environment is supported by strong and reliable financial institutions and government agencies.
NIGERIAN INVESTMENT PROMOTION COMMISSION
The Nigerian Investment Promotion Commission (NIPC) is a Federal Agency charged, among others, with coordinating, monitoring and providing necessary assistance and guidance for the establishment and operation of enterprises in Nigeria. It is not only the gateway to investment in Nigeria for foreign investors and Nigerian investors seeking to engage in value-added activities in their country, but also Nigeria’s window to the international investment world. It is a Federal Agency with a perpetual succession and a common seal. NIPC collects, collates, analyze and disseminates information and data on investment opportunities and sources of capital. It advises on business partnership and identifies specific projects in which potential investors can be solicited to participate.
The NIPC registers and keeps records of all companies to which the NIPC Act applies. It maintains the interaction between investors and ministries, government departments and agencies, financial institutions and other authorities concerned with investments. It anchors the One-Stop Investment Centre (OSIC) which interfaces with companies on incorporation and registration matters. www.nipc.gov.ng
ONE STOP INVESTMENT CENTRE-OSIC
Established in 2006 within the framework of the Nigerian Investment Promotion Commission (NIPC), One-Stop Investment Centre (OSIC), as its name indicates, is an organ set up to facilitate investment in all sectors of Nigeria’s economy. It provides a single portal or contact point for sourcing information and carrying out the necessary formalities with a view to obtaining all the required approvals before the operation of a business. OSIC brings together the divers services normally provided separately by various government agencies involved in company registration and operations formalities. It is a point of convergence for coordinated and streamlined action. The centre also assists existing and prospective investors with statistical data and information on the Nigerian economy, investment climate, legal and regulatory framework, as well as sector and industry- specific information, to facilitate the making of informed business decisions.
Services offered by OSIC include:
• Providing general information and data on Nigeria’s economy, as well as advisory services on investment opportunities;
•Granting of business entry approvals, permits and authorizations;
•Assisting with company incorporation and registration;
•Facilitating post-entry approvals, licences and other sector-specific permits with statutory government agencies with extant mandate;
• Assisting with tax registration and clearance;
• Assisting with work permit, expatriate quota and other immigration formalities;
• Facilitating Customs clearance for investment projects. OSIC brings together, for speedy service delivery, several agencies and ministries, among others.