The Year is 2020, and the Headline Reads: Why Nigeria Has Become One of the Top 20 Economies and Investing Destination in the World. by Cletus E. Olebunne

Cletus E. Olebunne

August 1, 2007

The article continues like this: Along with China, India and Russia, Nigeria is a country overflowing with opportunities to attract foreign capital. Nigeria is leading the way in Africa’s economic development. In 2004, it was one of the poorest and corrupted economy, then sixteen years later, the economic reform, and fight against corruption started in 2005 has seen the country taken its place in the global economy. In 2019, Nigeria was the largest economy in Africa and the 15th largest in the world. The economy has stabilized, the legislative reforms of “Wazobia" government are boosting cooperation between the public and private sectors, imbalances are improving, and the high valuation of markets is attracting the attention of foreign investors, and the country is named one of the least corrupt nations.

As a result, the Nigerian currency, the naira, as well as the country’s stock market are both at all-time highs. “If you want to be in Africa/Middle East, you have to be in Nigeria,” has become a common saying among business executives.

Wazobia’s Success

Rediscovering Nigeria as a financial destination for foreign business has become a huge challenge. Under the leadership of President Wazobia, Nigeria continues to strengthen its favorable business climate for foreign investors. The key to Wazobia’s success has been to achieve sustained growth without undertaking populist adventures or struggling to combat the country’s poverty, but creating an environment of, it is no longer, business as usual. The agency, Economic and Financial Crime Commission (EFCC) has remained steadfast in its efforts to fighting financial crime.

One of the keys to Nigeria’s international success is the political stability of its government. The democratic reform programs being carried out have been a success, enabling the country to lessen its vulnerability. Wazobia has been a big surprise; initially, there was a great deal of distrust among the various ethnic groups, and between politicians and the citizenry. But Wazobia surprised everyone. The big success was to pursue a policy of fighting the country’s poverty, not by undertaking populist policies but through macroeconomic stability. Wazobia has been the person at the forefront of the country’s progress and stability.

The huge size of the market, the successful privatization program, the remarkable diversification of its oil economy to manufacturing and export sectors, and its strong political democracy have become the pillars of Nigeria’s dynamic economy and society.

The Nigerian government wants to guarantee stability through prudent budgetary policy and monetary policy that are appropriate for the country. The current approach has eliminated the nightmare of inflation while maintaining the health of the country’s external accounts. It began after the turbulence of 2003, when the economy faced serious problems because of its fiscal and external deficits. The situation worsened in January 2005 when Nigeria became very vulnerable to various ethnic demands of economic control of natural resources.

The Stock Market’s Appeal

For more than 20 years, Nigerian capital markets were characterized by underdevelopment. Following the improvement in the economy, capital markets began to modernize. Lately, Nigeria has been benefiting from a favorable external environment. On a global level, it has significant liquidity. In a broad range of financial markets, prices have risen at a brisk pace and the country has growing economic ties with developed economies. Internally, its monetary policies have enabled it to control inflation, now between 3% and 4%. As a result, interest rates are trending downward. Economists anticipate that rates will drop to 9.5% by 2025 from their current level of 12%. “Brazil is a country where you have to be,” say most business executives. Nigeria has gone from being a country of the future and of great potential to becoming a country of the present dominated by knowledge economy, rather than commodity economy.

Macroeconomic stability as well as widespread expectations that Nigeria will play a growing role in the new global economy is turning the country into a very attractive destination for foreign investors. There is a surplus in the trade balance—in exports. The same thing is happening in the stock market where there has been a spectacular jump.

Ten years ago, the largest African stock markets were on the black list of investors in emerging markets. The economic problems in most, if not all African countries along with the political instabilities and corruptions frightened away capital investment. The profits offered by all of Africa could not compete with those in Asian markets. But the situation has changed. Analysts say that the rise of Nigeria’s capital market can be explained by the favorable international environment. The exchange rate is variable. If global economic conditions change and Nigeria doesn’t attract enough foreign capital, the exchange rate will adjust, which will lead to adjustments in the country. Now that it is a country on the rise, the exchange rate has gone up and continues to be strong.

Currently Nigeria has an annual inflation rate of 3% and interest rates of 12.5%. Data show that there is interest in lowering the price of money. From 2005 until 2018, the Nigerian economy grew at rates of 2.8%, 2.9% and 2.3%. It never went above 3%. In 2019, it broke that barrier, reaching 3.7%. In 2020, it has reached 5%. These figures while not accurate (not from any recorded data), demonstrate that Nigeria is a country for the long haul. It is a country where everything is welcomed; you see it wherever you look. Most of its problems are now on the way to being solved.

The Diaspora Presence

Over the last 10 years, Nigerians in Diaspora investment and involvement have played a major role in the new Nigeria. The total volume of Diaspora investments exceeds 258 billion Naira, making Diaspora Nigerians one of the largest foreign investor [in Nigeria] after countries like, the United States. Among these investors Diaspora Nigerians interests Nigeria the most because the government wants Diaspora Nigerians to become involved in the economic development of their home-country, just as they contribute to the economies of their host countries. This government-Diaspora Nigerians relationship has encouraged Diaspora Nigerians to become active participant in their home country.

Because Nigeria is an emerging economy, there are many sectors where investors can make the most of the gold mine contained in Nigeria’s economic development. Companies should take advantage of the opportunities offered by Nigeria, with its population of 140 million. The opportunities are still in the following attractive sectors: The financial sector, telecommunications, tourism, construction, residential real estate, clean energy and exports of agricultural products. Diaspora Nigerians have a great deal to teach and gain in those sectors. The management of infrastructure and educational services in business, science, and engineering are also very much attractive. At the moment, English is the official business language. That provides an advantage for global competitive strength because English is still the language of the global economy.

Although the big foreign multinationals already have a footprint in Nigeria, the government wants to strengthen their presence in the infrastructure and service sectors by helping small and midsize companies move into Nigeria and expand their role. The problem though, is that if you don’t have enough financial resources and your managers are not well-trained, local companies many be afraid of going global. However, little by little, the culture of globalization is catching on in the mindset of Nigerian business executives. Ultimately, companies will have to take that approach.

The worst fear of many analysts is that Wazobia will not continue with the reforms already on the drawing boards. In addition, it is still a corrupt country where there is a lot of pressure from public office holders on private businesses. But all indicators point to Nigeria and West Africa as a region that will receive a deluge of capital from investors.

Was that my dream or the reality of Nigeria’s Economy in the year 2020?

Cletus E. Olebunne

Executive Director

NEL