Nigeria recently rebased its economy for the first time since 1990. The change nearly doubled its GDP, according to the country’s National Bureau of Statistics, catapulting Nigeria into the top spot among African economies and beating out South Africa.
The country, which is also the continent’s largest oil producer and most populated state, may now occupy a higher-profile position among world economies, but on the ground little has changed. Some investors already know that. While the economy is growing—indeed, according to an Ernst & Young report, “for many of us already doing business on the [African] continent [Nigeria] is an exciting, dynamic, high octane growth market”—the fact remains that “for some others, often on the outside looking in, it seems chaotic, unstable, and uncertain.”
No one is richer for the rebasing, nor has the new calculation done anything to alleviate high poverty or unemployment rates. And the same hazards await potential investors. But numerous sectors present plenty of opportunities that create, “one of the most attractive developing market investment destinations in the world in coming years” in a country that has already become one of “the 10 countries with the highest growth rates in Africa,” according to E&Y.
Some of those sectors are the very ones that were not included in Nigeria’s economic calculations under the previous GDP, meaning that the rebasing reflects a more accurate picture of the current state of the Nigerian economy. Telecommunications, e-commerce and entertainment have reduced the country’s reliance on oil and gas as a source of revenue, though the latter sector still brings in the most income to the government, and the most foreign direct investment. While the old GDP calculated that oil and gas made up 32% of Nigerian government revenue, the new has cut that back to only 14%—still substantial, but indicating a much-needed move away from so much dependency on a single sector.
Nollywood, the country’s movie industry, now accounts for 1.4% of GDP all by itself. In fact, nobody’s bigger globally than Nollywood except Bollywood—not just movies, but TV and music production have helped this sector to mushroom—and Hollywood has been left far behind. According to the most recent data from Unesco, which is from 2006, Bollywood’s major film releases totaled 1,091; Nollywood came in second at 872, and Hollywood lagged the pack at 485.
The country’s position on the world economic stage would itself be a worthy thriller topic, albeit a thriller that still needs a happy ending. Nigeria, which was playing host to the World Economic Forum the first week in May, has also gotten headlines for bombings at its capital city Abuja; the kidnaping of more than 200 schoolgirls by the radical group Boko Haram; warnings by the U.S. State Department of planned terror attacks against two Sheraton hotels in Lagos; and the kidnaping of three Dutch nationals in the oil-rich Niger Delta.
Some scheduled attendees of the WEF canceled plans to attend over safety concerns, and there is increasing social unrest—both from Boko Haram, whose goal is to revive a medieval Islamist caliphate in the north of the country, and from citizens demonstrating against a government that has thus far proved ineffective at protecting its citizenry.
Into this mix stir the fallout stemming from the suspension of Lamido Sanusi, governor of Nigeria’s central bank. Sanusi, who had won respect globally for his efforts to weed out corruption, had released a report earlier in the year that said he had uncovered a $20 billion shortfall in the income reported by the Nigeria National Petroleum Corporation (NNPC) that stemmed from graft and corruption. The response of President Goodluck Jonathan was to suspend Sanusi, accuse him of “acts of financial recklessness” and revoke his travel rights—not a move designed to instill confidence in the Nigerian government among business leaders. Sanusi is fighting the charges.
Still, there is no doubt that there’s plenty of opportunity for growth in the country. According to the IMF, Nigeria’s GDP growth is expected to hit 7.1% this year, up from 6.3% in 2013.
The services sector, which 20 years ago amounted to less than 30% of GDP, has grown to around 50%. In Nigeria’s power sector alone, which woefully underserves the population—presenting an opportunity as well as a drawback—14 power companies were sold to new owners that included Siemens AG and Korea Electric Power Corp. Eight new Hilton hotels are planned, despite concerns over traveler security. Proctor & Gamble has opened its second manufacturing plant in the country, and businesses from fast food—Johnny Rockets International, Cold Stone Creamery, Domino’s and KFC, among others—to clothing are expanding.
E&Y’s Africa by numbers: a focus on Nigeria report, issued for the May World Economic Forum on Africa, points out that while the U.S. is one of the top investors in the country, the bias does remain toward oil and gas, with 52% of foreign direct investment going to the resources sector over the last five years. South African, Indian and British investors, on the other hand, are moving more heavily into sectors ranging from telecommunications to consumer goods and automotive.
“There has been particularly strong growth in investment into telecommunications, with the sector attracting 23.9% of FDI projects between 2007 and 2013. Growth in investment into other service sectors like financial services, consumer products, tourism and business services, further highlights the growing opportunities emerging in these sectors,” according to the report. Real estate and construction have drawn outside money as well, along with chemicals and e-commerce, indicating that investors could find opportunity in a multitude of avenues.