Economy

Make a Mint

Despite structural issues relating to infrastructure and bureaucracy, Nigeria has made strides in improving ease of doing business.

It is not a stretch to say that no other country in the world holds quite as much potential as Nigeria. Explosive population growth has made it the largest country in Africa, and the UN has projected it to be the world’s third most-populous country by 2050. The economy has grown in tandem; in 2014, Nigeria became Africa’s largest economy, passing longtime titans South Africa and Egypt. Along the way, Nigeria has rapidly added both soft and hard power. The Nigerian government has also implemented new policies to encourage foreign investment, simplify regulations that have in the past proved cumbersome, and generate the flows of capital and knowledge needed for the country to continue developing.

Since the Fourth Republic was inaugurated in 1999, Nigeria has had one of the more liberal approaches to foreign investment on the African continent. The government’s free trade practices led to strong growth in the first decade of the 2000s, with GDP growth above 5% from 2004-2012. Nigeria’s total levels of investment were slightly below other emerging economies pegged as up-and-coming powers but above Sub-Saharan Africa as a whole; at 16% of GDP in 2015, it stood just behind Brazil and South Africa, which recorded figures of 17.6% and 20.7%, respectively. Nigeria’s oil and gas industry is the country’s single largest source of revenue and as such has been its primary conduit for international investment. Recent years, however, have seen a shift. As the price of oil has dropped, foreign inflows have fallen accordingly; from 2015 to 2016 Nigeria saw FDI decrease from USD9.64 billion to USD5.12 billion. Today, as Nigeria looks to move past the economic recession brought about by falling oil revenues and build a new economy, the government’s focus is on building stronger structural measures and restoring investor confidence.
Corruption and inefficiency are by no means unique to Nigeria, but Africa’s largest country has made a name for itself as a particularly difficult market to navigate at times. Nigeria ranked 136th out of 176 countries on Transparency International’s Global Corruption Perceptions Index, and an estimated 85% of Nigerians surveyed believed corruption has increased from 2011 to 2013. A lack of transparency and failure to enforce anti-corruption legislation have eroded national and international trust in the government’s ability to manage projects smoothly. Navigating this landscape is one of the most difficult tasks for foreign firms looking to conduct business. Foreign investors must obtain the approval of the Federal Ministry of Internal Affairs in order to conduct business in the country; however, once that hurdle is cleared, registering property, obtaining consistent electricity, dealing with permits, and paying taxes are all significantly more challenging than the global norm, according to the World Bank’s Doing Business 2018 report. Nigeria ranked 145th out of 190 countries in the report, with bureaucratic delays and high costs the most frequently cited reason for low rankings in various categories.
Yet despite these structural issues, improvements have been and are currently being made. The 2018 Doing Business Report named Nigeria as one of the top-10 improved countries worldwide thanks to reforms that significantly increased the ease of getting credit and protecting investor rights. New technological systems have streamlined some registration forms, and new visa-on-arrival processes have been widely praised as a first step toward an e-visa regime on par with other developed countries. Nigeria’s membership in global organizations such as the WTO and the Economic Community of West African States reflects its commitment to forming stable international agreements, and recent years have seen it join onto pacts like the WTO’s Trade Facilitation Agreement. The Nigerian government has made a public promise to honor foreign commitments and create a new and more stable environment, and a spate of new PPPs has given private industry new hope that it can play a key role in the development of one of the world’s most promising markets.

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