Exploring Investment Opportunities In Nigeria Amidst Economic Challenges – By Oluwanifesi Adefila
As Nigeria undergoes significant economic reforms, investors are paying close attention to the country’s immense potential. The changing landscape, marked by policy adjustments and technological innovations, has become a canvas of opportunity for discerning investors seeking to unlock value in various sectors.
As of September 2022, a report by Gumroad finds that at least 481 tech startups were in operation across Nigeria, employing over 19,000 people between them. Fintech is the most populated sector, with more than one-third of the country’s tech startups active in that vertical. In 2023, the top five startups for the year raised a total of $207 million in funding. Nigeria’s tech startups have not only attracted investors but have also raised substantial funds. According to Disrupt Africa, at least 383 Nigerian tech startups raised a combined total of $2,068,709,445 in funding between January 2015 and August 2022, surpassing other African nations.
Notably, in recent years, Nigeria has witnessed a surge in Foreign Direct Investment (FDI). In a report by Statista, between April and June 2023, the flow of foreign direct investment (FDI) into Nigeria amounted to some $86.03 million. Compared to the previous quarter, this value experienced an increase. For instance, as of Q1 2023, FDI in the country stood at around $47.6 million. In another report by the Nigerian Bureau of Statistics, the total capital importation of the Nigerian investment landscape stood at $1.03 billion as of Q2 2023, with Portfolio investment capturing 10.37% ($106.85 million), which was closely followed by Foreign Direct investment at 8.35% ($86.03 million).
Capital inflows predominantly originated from the United States, contributing US$271.92 million or 26.39%. Singapore and South Africa followed suit with US$177.44 million (17.22%) and US$136.95 million (13.29%) respectively, demonstrating a continued global interest in investing within Nigeria’s economic ecosystem. On the domestic front, Lagos state retained its position as the leading investment destination in Q2 2023, commanding US$778.06 million, a substantial 75.52% of total capital. Abuja (FCT) followed suit, securing US$194.28 million (18.86%). These statistics reinforce the significance of Nigeria’s commercial and political hubs as preferred investment destinations.
Despite all of these opportunities, the Nigerian investment landscape faces numerous challenges. Recently, PSG, GlaxoSmithKline and Unilever have exited the country, leaving Nigeria-based businesses like Dangote, Honeywell, BUA Group and others. The removal of fuel subsidies is a significant reform that has sparked discussions about reallocating funds to areas that can yield higher returns, such as infrastructure and human capital development. As investors analyse the situation, the focus shifts from short-term gains to long-term impacts on creating employment opportunities for the youth, the formation of capital, and shaping the ecosystem.
The African Continental Free Trade Agreement (AfCFTA) is a significant development that cannot be ignored. Nigerian businesses stand to gain from increased cross-border trade within the continent, resulting in a more extensive market for expansion. The potential for synergies and collaboration across African nations is an invitation for investors to explore opportunities beyond Nigeria’s borders.
An often overlooked sector, when it comes to investment is tourism, but it has a lot of investment potential. During the COVID-19 pandemic, many people opted for staycations, which showed that local tourism is quite resilient. Nigeria’s tourist destinations are diverse and promising, especially as infrastructure development continues. This makes it an attractive prospect for investors who are looking beyond traditional sectors.
Another area where strategic investments could drive significant impact is real estate, with its staggering housing deficit. While the numbers may seem daunting, the focus on key regions like Lagos and Abuja allows investors to channel efforts where they can make a tangible difference. However, the real estate sector is not without its challenges, highlighting the need for sustainable development and thoughtful interventions.
The power sector in Nigeria is currently facing some challenges, especially concerning the implementation of cost-reflective tariffs. However, this is a positive sign of the country’s commitment to fostering growth. Investors who are aware of the transitional phases are looking for ways to work with the government to ensure a smooth and sustainable trajectory.
There are many opportunities available to strategic investors who are committed to keeping up with the latest technological advancements. These investors work quietly behind the scenes to orchestrate their moves, demonstrating the resilience, adaptability, and determination necessary for successful investment in Nigeria.
As the nation aims to achieve clarity, stability, and comprehensive infrastructure development, companies like Honeywell Group with their strategic approach and diverse portfolio spanning five decades across the real estate, tourism and oil and gas industries, exemplify the adaptability required to thrive in the ever-evolving Nigerian investment terrain. Likewise, investors who see these challenges as opportunities are contributing to Nigeria’s economic transformation.
