Nigeria is fast becoming an attractive destination for foreign investors, even in view of challenging economic and political transformations. Within the past 5 years, the country’s foreign direct investments has seen an dramatic increase and investors continue to report profits, partly due to the fact that the number of a fast increasing middle class with an increasing purchasing power and consumer spending power of the average Nigerians, as well as consumer demand for new products, better infrastructure, better public services and healthcare.
Don’t be blinded by the myths of doing business in Nigeria , instead be driven by the returns amassed by companies like General Electric whose CEO Jeff Immelt who revealed his experience, saying that doing business in Nigeria is a “good risk” and had the potentials for GE to make $10 billion from investments in the nation.
If you’re a foreign investor still on the fence about entering the Nigerian market, the market is very ripe for plucking – it’s not too late, now is the best time to get on board.
Top 5 Promising Investment Opportunities in Nigeria
Here are five opportunity areas for investment, based on insights from experts, businesses and stakeholders involved in the construction industry.
#1. Retail/ Fast Moving Consumer Goods (FMCGs)
With a boom in the e-commerce sector and more consumers now shipping global brands right from their computers, we are seeing more top international stores opening up to accept payments from Nigeria. The result is a demand for improved order fulfilment and service delivery by the Nigerian customer base, hence a ripe opportunity for Savvy multinational brands to cut off the middleman (ecommerce platforms) and invest in setting up stores closer to their Nigerian customers.
Trend Report: Nigeria’s middle class is rapidly increasing and looking for new retail products like food, beverages, home and personal care products. According to a McKinsey report, annual spending in consumer goods is expected to significantly be on the increase, and so existing multi-national companies that are already in the country are expanding operations to capture this increasing market.
Case Study: In the first week of Paypal’s launching in the country, it was reported that consumers purchased tons of items from USA, UK and China through its online platform.
Due to the falling oil price, Nigeria is now ready for income diversification, and ready to go back to its first money-maker, agriculture. Nigeria has a huge mass of uncultivated, green land and a shortage of food production – even with a fast increasing population, most food are imported and majority prefer chasing white collar jobs to farming, and so this sector is big opportunity that is ripe for foreign investors to dive in. Opportunities in this market also includes food processing, manufacturing of pesticides and fertilizers, improved seedlings
#3. Residential Housing/ Real Estate
With a population of over 180 million people and a rising middle class, the demand for quality housing is on the increase. Although lots of residential real estate projects can be seen in Abuja and Lagos, there’s still up to 99% unmet demand open for investors. The real gap is in availability of low cost housing, and this translates to a big opportunity for investors and multinational construction companies.
#4. Mining of Solid Minerals
Although Nigeria has a huge mineral resources deposit, its mining industry is under-developed. Its minerals are yet to be tapped due to lack of technical expertise in high-scale mining and financial capability, and partly due to the fact that the country is sidetracked with reaping from the oil industry. This is a big opportunity for savvy investors in the mining sector, as the country has assorted mineral resources that include gold, iron ore, tin, lead, coal, bauxite and zinc.
#5. Infrastructure and Construction
Although infrastructure spending is a huge part of every annual budget in the country, Nigeria is still seriously underserved with infrastructure – both in both public and private infrastructure.
Road construction projects and real estate projects are numerous and always ongoing in Nigeria, especially in major cities such as Lagos and Abuja. Construction companies make use of numerous equipment which are currently imported, and they would readily patronize a local construction equipment assembly plant, if there was one. This gap creates an opportunity for foreign investors who can set up a local assembly plants for road construction equipment such as welding machines, bulldozers and cranes, as well as for real estate construction equipment such as for manufacturing of standard iron rods used for reinforcement of high-rise buildings.
Other areas ripe for investment in this sector include the power sector – Nigeria’s power production is way underperforming, and a huge concern for home and commercial users. With most people turning to inverters and solar systems to generate their own power, and even the privatization of the Nation’s power company not serving the required power capacity, here’s a big opportunity for private investors to do a similar thing that the telecoms investors did in Nigeria – for a huge ROI.
Nigeria’s transportations system is another area with a huge gap, and the railway system is almost non-existent. There’s a gap to provide standard railways and system for the public, and this opportunity can be done by partnering with the state governments.
- Nigeria has the biggest economy in Africa, with a high GDP (higher than that of South Africa);
- Nigeria’s GDP growth is forecasted to be one of the highest in the world, over the next five years
- Nigeria’s debt/GDP ratio at under 11 percent, is lower than that of most developed countries.
- The main investing countries in Nigeria are the United States, China, and the Netherlands.
- According to the UNCTAD, Nigeria has the third largest FDI stock in Africa (12% of the total African stock), following South Africa and Egypt.
- Nigeria is Africa’s largest markets, having one-sixth of the entire African population, a cheap workforce and by location is very accessible to many West African countries.
- Here are some, giant foreign brands who entered the Nigerian market within the last 5 years: Paypal, Ermenegildo Zegna, Porsche, Domino’s Pizza, KFC, Intercontinental Hotels. Many have since joined and more are entering every month.
- Rate of return on foreign investment in Nigeria and other African countries is higher than in any other developing region in the World, according to a McKinsey report.
- Nigeria is one of the World’s biggest consumer markets, with an increasing demand and higher purchasing power and a huge population (180 million)
Introducing the Nigeria House High Level Investment Summit in Rio 2016
Now that you know the top 5 opportunities that are ripe for foreign investors who are considering investing in Africa or Nigeria, here’s a big news – the country’s official Investment team will be at Rio 2016 at the Nigeria Olympic Hospitality House, and has planned a high level business and investment summit to hold during the 2016 Olympics in Rio, Brazil. You can be there to find out more and meet the team.
Would You Join Other Savvy Investors?
While there is a huge and ever-growing opportunity to invest in the above 5 sectors, speed is critical. Investors who can quickly step in and get a grip on the market will be the dominant players in the years to come.