A new report by the McKinsey Global Institute (MGI) on Nigeria, has indicated that the nation could potentially become a major global economic super power in less than two decades from now. Frederick Mordi has the details.
In July, the McKinsey Global Institute (MGI), a global management consulting firm, released a report on Nigeria entitled Nigeria’s renewal: Delivering inclusive growth in Africa’s largest economy.
In the report, MGI notes that despite the internal security challenges that Nigeria is currently grappling with, the nation is making progress on the economic front. The gloomy stories that have been making the headlines in the country seem to have eclipsed this positive development.
According to the report, foreign investors are increasingly shifting their focus to Nigeria due to the investment opportunities that abound. The economy, the report adds, appears more diverse than previously thought. It predicts that with the right reforms and investments, Nigeria could, in fact, emerge as one of the 20 leading economies in the world by 2030. The report says: “We believe that Nigeria can build on the momentum of the past decade and, if all goes well, achieve 7.1% annual GDP growth through 2030. The country is well positioned to benefit from trends such as rising demand from emerging economies, growing global demand for resources, and the spread of the digital economy.
“Should Nigeria reach its full potential, annual GDP could exceed $1.6trn in 2030 and the country could be a top-20 economy.”
Nigeria’s youthful and rapidly growing population and access to markets within and outside the continent are other factors working in the country’s favour, the report found out.
The MGI report identifies five major sectors of Nigeria’s economy that hold the ace for further growth. They include trade, agriculture, infrastructure, manufacturing and oil and gas, which is the mainstay of the economy.
Critical sectors for investment
It projects that due to the rapid expansion of the increasingly sophisticated consumer class in Nigeria, annual consumption could increase from the current $388bn to almost $1.4 trillion a year, in 2030, representing an annual increase of about 8%.
The report adds: “This would make trade the largest sector of the economy and provide a particularly good opportunity for makers of packaged foods and fast-moving consumer items such as paper goods, categories that could grow by more than 10% a year.”
The swift expansion of South African retailer, Shoprite, across several Nigerian cities, for instance, lends credence to the growth in the trade sector. Shoprite, which opened its first branch in Nigeria in Lekki, Lagos, in 2005, currently has nine outlets in the country. The company is looking to open three more outlets before the end of the year, taking advantage of the growing middle class and rising demand. It aims to eventually open 44 branches in Nigeria within the next few years.
The report also predicts that given the current reforms in agriculture, the sector, which accounts for 22% of the GDP, making it the largest in the economy, could rise to $263bn a year by 2030, up from $112bn in 2013, in terms of economic value. This could make investments in agriculture a gold mine for discerning investors.
Similarly, the report projects that total infrastructure investments in Nigeria could reach $1.5 trillion from 2014 to 2030, and would make building infrastructure not only a major contributor to GDP but also an enabler of growth across the economy.
For the rapidly growing manufacturing sector that contributed $35bn to the economy in 2013, or about 7% of GDP, the report said there is potential for further growth.
It said: “If Nigeria could match the performance of nations such as Malaysia and Thailand when their manufacturing sectors were expanding rapidly, output could reach $144bn a year in 2030.”