Nigeria: Market Profile
03 September 2014
Major Economic Indicators
- Nigeria grew by 6.2% in Q1 2014 following a 5.5% growth in 2013. With the rebased GDP calculations in April 2014, Nigeria is now the largest economy in Africa.
- The non-oil sector, which contributes over 80% of Nigeria’s GDP, continued to be the key growth driver in Q1 2014, posting a robust year-on-year (YoY) growth of 8.2%.
- Nigeria’s exports dropped 11.6% to US$102.6 billion in 2013, while imports grew 9.6% to US$55.9 billion.
- Nigeria is Hong Kong’s second largest export market in Africa. In the first five months of 2014, Hong Kong's total exports to Nigeria expanded by 69.2% to US$200 million.
Current Economic Situation
After the Nigerian government’s rebasing of its GDP calculations in April 2014, Nigeria surpassed South Africa to be the biggest economy in Africa. However, its per capita income is roughly 40% the level of South Africa even after rebasing. Under the new methodology, the economy grew 6.2% in 2013, after expanding 5.5% in 2013. With over 170 million people, Nigeria is the most populous country in Africa and the world’s seventh most populous country. Thanks to continued diversification of the economy, Nigeria is one of the world’s fastest growing countries.
Implementation of the reforms initiated by the government in 2013, including agriculture modernisation, improvement in transportation network and reforms in financial, power and petroleum sectors bodes well for the growth prospect in 2014. Nonetheless, with the 2015 general elections looming on the horizon, there is fear that pre-election spending may fuel inflation, which has just edged down to around 8%.
Nigeria is the Africa’s largest oil producer, with around 2.2 million barrels produced per day. Oil plays an important role in the Nigerian economy, accounting for over 90% of exports earnings and about 75% of government revenue. However, oil production in Nigeria has suffered from serious oil thefts, particularly in the Niger Delta region. The US has stopped importing crude oil from Nigeria, while the US oil production surges amid more active exploitation of oil shales. Continued supply disruptions and softer oil demand from the developed countries led to the sector’s negative growth of 6.6% in Q1 2014. Besides, the Nigerian government is struggling to contain an insurgency by Islamist militant group Boko Haram, which has caused disturbances mostly in northern Nigeria. Nigeria will hold general elections in February 2015, when President Goodluck Jonathan’s ruling People’s Democratic Party will see a tough challenge from the opposition All Progressives Congress (APC), the strongest one since 1999, with the APC putting particular emphasis on creating jobs and fighting corruption.
Nigeria’s non-oil sector, contributing over 80% of GDP, continues to be the key driver of economic growth, posting a robust YoY growth of 8.2% in Q1 2014 over the year, In particular, trade, telecom and agriculture comprise over 50% of the country’s economy, accounting for the majority of GDP growth in recent years.
The service sector, which accounts for over 50% of Nigeria’s GDP, is a major growth driver, with the telecom sector being a major powerhouse. Nigeria liberalised its telecom sector in the late 1990s, with the sector’s GDP contribution rising to 8.3% of GDP in Q1 2014. The entry of foreign telecom operators has sped up the process of modernisation, particularly mobile penetration.
Manufacturing in Nigeria only accounts for about 9% of GDP, yet it is regarded as a key driver of Nigeria for economic diversification. A large oil producer notwithstanding, blackouts are still a daily occurrence in many parts of Nigeria, where the expected peak demand is almost triple to the current energy generation of only about 3,500 megawatts (down from the peak generation of over 4,500 megawatts in December 2012), posing challenges to manufacturers.
Nigeria’s exports dropped 11.6% to US$102.6 billion in 2013, with major markets including the EU, India and Brazil. On the other hand, imports picked up 9.6% to US$55.9 billion in the same period, with the EU, China and the US being the major import sources.
According to the UNCTAD, inward FDI to Nigeria dropped 22% to US$5.6 billion in 2013 from US$7.1 billion in 2012. FDI came mostly from multinational oil companies from the US, the UK, China and South Africa.
Nigeria became a WTO member in 1995. It adopts the Harmonised System (HS) of Customs Tariff and all duties are levied on an ad valorem basis, with rates for most product lines ranging from 0% to 35%.
Nigeria is a member of Economic Community of West African States (ECOWAS), a customs union of 15 member states including Benin, Burkina Faso, Cape Verde, Cote d’Ivoire, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Senegal, Sierra Leone and Togo. ECOWAS adopts a five-band tariff regime, with the first four bands ranging from 0% to 20%, and the fifth band targeting certain sensitive items that are subject to a 35% tariff.
Of the 14 Free Trade Zones (FTZs) operating in Nigeria, five are located in the Lagos, the country’s business capital and most populous city. Another 11 FTZs are under construction. Industries permitted in FTZ include chemicals, petroleum, textiles, garments, rubber, plastics, electrical and electronics (E&E), telecom equipment, metal, wood, leather, education materials and cosmetics.
The Standards Organisation of Nigeria (SON) is responsible for inspecting the quality of imported goods. If customs documents are submitted on time, the concerned goods should generally be cleared within 48 hours.
The National Agency for Food and Drug Administration and Control (NAFDAC) regulates the importation of food, drugs, cosmetics, medical devices, bottled water and chemicals. Importers of such goods should register with NAFDAC.
The Nigerian Communications Commission (NCC) regulates the import of telecom equipment for use into the country by licensed private telecom service providers. This is to ensure the quality of telecom equipments is up to standard.
Hong Kong's Trade with Nigeria^
Nigeria is Hong Kong’s second largest export market in Africa. In the first five months of 2014, Hong Kong's total exports to Nigeria expanded by 69.2% to US$200 million over the period, following a 4.8% contraction in 2013. Major export items included telecom equipment & parts (88.7% share), computers (1.1%) and watches and clocks (1%).
On the other hand, Hong Kong's imports from Nigeria dropped by 16.9% to US$32 million in the first five months of 2014, after a drastic growth of 103.1% in 2013. Major imports items included telecom equipment & parts (53.4% share), leather (29%), non-ferrous base metal waste & scrap (11.1%) and pearls, precious & semi- precious stones (1.7%).