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Nigeria is the largest economy in Africa, with a GDP exceeding USD 500 billion. From 2005 to 2014, the economy experienced robust growth, averaging over 7% per annum. However, this growth slowed in 2015. The expansion was primarily driven by non-oil sectors such as financial services, telecommunications, and entertainment. Foreign direct investment (FDI) has been strong, averaging USD 2 billion per quarter since 2013, with over 70% of this investment flowing into the non-oil sectors. Contrary to common perception, Nigeria’s economy is more diversified than it appears; the oil sector contributes only about 14% to GDP. Nevertheless, there is a pressing need to further diversify the economy, leveraging Nigeria’s abundant natural and human resources. Although oil has substantially contributed to Nigeria’s revenue since its discovery in 1956, especially after the 1970s price surge, the management of oil revenues has posed significant governance challenges. Deeper economic diversification is essential for structural transformation, shielding the domestic economy from external shocks and driving growth alongside job creation.
Efforts to diversify Nigeria’s economy are extensive and cover three key sectors where the government has made significant progress:
Telecommunications Sector: The deregulation policy initiated by the government has led to an increase in the number of telephone lines from about 400,000 in 2001 to over 140 million today. This growth has created over one million jobs, both directly and indirectly, and attracted more than USD 25 billion in investment. The success of the telecommunications sector, particularly mobile telephony, has spurred growth in related industries like e-commerce and entertainment (Nollywood). The World Trade Organization has recognized the standards being set by Nigeria’s entertainment industry.
Financial Services Sector: The financial services sector has seen substantial growth since the liberalization efforts that began in 1990 and continued through 2005 under the Central Bank of Nigeria’s (CBN) guidance. Market-led mergers and acquisitions reduced the number of banks from 89 to 24, resulting in larger and better-governed financial institutions that have expanded operations across Africa and financed larger transactions. This consolidation served as a catalyst for the growth of the Nigerian Stock Exchange, which now boasts a market capitalization of over USD 50 billion.
Cement Sector: Despite an abundant supply of limestone, Nigeria was historically a net importer of cement. However, the government’s backward integration policy transformed the country into a net exporter of cement. This success in the cement sector is attributed to an enabling environment, appropriate regulation, policy consistency, and competition among industry operators.
The progress made in these three sectors demonstrates the importance of creating a conducive environment for business through proper regulation, consistent policies, and fostering competition. The government aims to build on these elements to develop other sectors where Nigeria holds a comparative advantage, further driving economic diversification.
The Nigerian government’s plans to promote economic diversification rest on three foundational elements: implementing an industrialization plan, improving the ease of doing business, and developing both hard and soft infrastructure.
Nigeria Industrial Revolution Plan (NIRP): Launched in 2012 under the Ministry of Industry, Trade, and Investment, the NIRP provides a comprehensive roadmap for industrialization across three sectors: agro-allied, solid minerals, and oil and gas-related industries, where Nigeria holds a clear comparative and competitive advantage. The plan is dynamic, with periodic reviews and updates based on current realities, ensuring pragmatic implementation and necessary adaptations.
Ease of Doing Business: Improving the operating environment for businesses of all sizes is a high priority for the Nigerian government. This requires inter-ministerial coordination to eliminate bottlenecks that hinder business operations. The government is reviewing trade and investment policies, laws, and incentives to align them with global best practices. Leveraging technology to enhance the efficiency and transparency of business procedures is also a key strategy.
Infrastructure Development: Efficient and modern infrastructure is crucial for economic diversification and growth. Reliable electricity supply is vital for industries, while effective transportation networks are essential for moving agricultural and mining products to markets. The government is establishing a national infrastructure fund to supplement the existing infrastructure component of the Sovereign Wealth Fund, in line with the national infrastructure master plan aimed at stimulating economic activity.
Diversification remains a top priority for Nigeria under President Buhari’s administration. Sustainable economic growth requires developing and expanding the productive base, particularly focusing on the non-oil economy. The government is committed to creating a favorable environment for domestic and foreign trade and investment, enhancing the ease of doing business, and fostering partnerships with other countries and international organizations like the WTO to achieve inclusive economic growth and improve the welfare of Nigerians.