Exporting to Nigeria – Market Overview
Nigeria has the largest market in Africa with a population of more than 200 million people. In March 2016, PwC published a report, “Nigeria: Looking beyond Oil,” that raises the Nigerian economy to the top 10 in the world in 2050 with a projected GDP of $6.4 trillion. Examples of such extrapolations are numerous and wide-ranging. A 2018 World Bank report on Business Reforms in Nigeria noted improvements in starting a business, dealing with construction permits, registering property, getting credit, and paying taxes.
Consequently, Nigeria’s Ease of Doing Business has started to show signs of improvement. Nigeria’s potential has remained largely untapped as the country’s previous growth was fueled by consumption and high oil prices. Because Nigeria is heavily dependent on oil which accounts for about 90% of export earnings and over 70% of total government revenues, Nigeria’s commercial activities were adversely affected by declining oil prices with its economy contracting by 0.67% and 2.06% in the first and second quarters of 2016 respectively. Successive quarterly contractions in 2016 and an annual growth rate of 1.5%, the first full year contraction since 1991, meant Nigeria officially entered a recession in 2016 which lasted till Q2 of 2017.
As of Q3 of 2017, Nigeria officially exited the recession and commenced implementation of the government’s Economic Recovery and Growth Plan (ERGP) which focuses on diversifying the country’s economy.
Nigeria can be a lucrative market for companies that can learn to navigate a complex and evolving business environment. Established multinationals that have mastered operating in this chaotic regulatory environment make substantial profits despite the country’s low-income levels and logistical difficulties. The Nigerian Government continues to promote Nigeria as a rewarding target for Foreign Direct Investment (FDI). Foreign capital flows into all major sectors of the economy with the United Kingdom, the United States, Canada, France, and China being the main sources.
China has re-emerged as a major development, trade, and investment partner of the Nigerian government especially considering Western skittishness in investing in Nigeria due to the recession and restrictive government controls in foreign exchange and international trade. China is Nigeria’s largest contractor and partner in infrastructure projects with a total volume of projects estimated at US$77 billion. These projects cut across infrastructure sectors – road, rail, power, construction – and are largely implemented by Chinese state-owned enterprises and financed by the Export-Import Bank of China.
Nigeria is an increasingly important market and manufacturing center for the African consumer product sector. Nigeria is currently home to a growing middle class now estimated to be about 50 million, and it is a clear leader in the regional economic grouping ECOWAS and regionalization efforts. There is a wide range of foreign products in the Nigerian market from both large and small companies.