Business Day: Potentials of five major sectors of the Nigerian Economy
By: Josephine Okojie
Agriculture contributed 41.84 percent to Nigeria’s GDP in 2009, and employs about 70percent of its workforce. Investing in profitable, high growth and sustainable agribusiness in Nigeria is seen as a way to drive youth employment.
Nigeria is blessed with an agriculture friendly climate, coastal and marine resources of over 960 kilometres of shoreline, expansive rivers and lakes covering 120,000 square kilometres and a large consumer market.
“The potential for growth is quite remarkable and agriculture, in itself, is a major contributor to the national Gross Domestic Product. Research shows that Nigeria has over 80 million hectares of arable land. This accounts for about 23 percent of arable land across all of West Africa. Thus, in terms of production, the potential for West Africa to leap forward is immense as the region possesses not only land, but the lowest levels of irrigation in the world,” said Kola Masha, Managing director, Doreo Partners.
He also noted that having some of the fastest growing yields in the world is also a plus for the region. Nigeria’s soya bean yield grows five times more rapidly than the world average.
This also makes for a significant boost in production.
The key to unlocking the growth potential of Agriculture in Africa is to empower small holders of farmers who have access to millions of hectares which would ensure that they have access to appropriate inputs, sufficient financing amongst others that will significantly boost productivity, he adds.
“Capturing this potential would require a four-pronged approach: boosting yields, shifting more production into high value crops, reducing post-harvest and distribution losses, and increasing scale production. The biggest opportunity in agriculture is improving crop yields, which accounts for 39 per cent of the upside potential. Rice yield in Nigeria today are only 71 per cent of South African levels and 36 per cent of Brazil’s. Cassava yields are half Indian levels. We believe yields could reach approximately half their ecological potentials (based on soil and climate types, as determined by the UN Food and Agriculture Organisation), rising by around 40 per cent on average and creating overall value of $45 billion per year by 2030,” according to the McKinsey Global Institute (MGI) report.
Trade accounts for 17 percent of Nigeria’s GDP and 25 percent of employment and has been the largest driver of growth in Nigeria over the past decade, according to the National Bureau of Statistic (NBS). This sector includes both retail trade and wholesale trade.
According to the MGI global report on Nigeria renewal: delivering inclusive growth, consumption was projected to triple more than before, rising to almost $1.4 trillion in 2030, which shows an annual increase of 8 percent. This would make trade the largest sector of the economy.
The Trade sector will also provide opportunities for makers of packaged foods and fast moving consumer goods (FMGC), which could grow by more than 10 percent yearly.
Infrastructure is a major enabler of growth in developed and emerging economies. The value of a nation’s core infrastructure such as roads, railways, ports, airports, telecommunications and the electrical system represents about 68 percent of their GDP, but in Nigeria it is only about 39 percent, according to the MGI report.
The Nigerian Government is, however keenly aware that rebuilding and maintaining infrastructure is necessary for the country to attract foreign investment and have implemented various improvement measures in order to reach its goal of being one of the world’s 20 largest economies by 2020.
The MGI report also stated that total infrastructure investment in Nigeria could reach $1.5 trillion from 2014 to 2030 which will make building infrastructure not only a major contributor to GDP but also an enabler of growth across the economy.
Oil and gas
Oil and gas exports account for more than 95 percent of Nigeria’s export earnings. The country’s proven oil reserves are estimated at between 16 and 22 billion barrels while some sources claim there could be as much as 35.3 billion barrels. Most of Nigeria’s oil is found in the Niger Delta region.
Nigeria is the world’s tenth most petroleum rich nation. Nigeria is also rich in natural gas reserves. The industry is dominated by the Nigerian Liquefied Natural Gas Company (NLNG), a joint venture between several companies and the state.
The area has lately witnessed many kidnappings and acts of violence, but the federal government has taken steps to resolve the security situation.
The Nigerian National Petroleum Corporation (NNPC) has said that in addition to Nigeria’s proven natural gas reserves of 182 trillion cubic feet (TCF), about 600 thousand cubic feet of undiscovered gas potential is still available for her to tap from.
NNPC said that with such gas potential available in Nigeria, the country’s hydrocarbon industry would remain competitive despite new hydrocarbon discoveries in Sub-Saharan African countries like Mozambique.
The Manufacturing sector enables large scale industrialisation and moves agricultural workers into more productive activities. It helps economies diversify and allows resource rich economies to become less resource dependent and create more relatively high paying jobs.
Poor infrastructure and epileptic power supply are the key impediments to the manufacturing industry in Nigeria.
Though growing rapidly, Manufacturing in Nigeria contributed just $35 billion to the economy in 2013, or about 7 percent of GDP. If Nigeria could match the performance of nations such as Malaysia and Thailand when their manufacturing sectors were expanding rapidly, output could reach $144 billion a year in 2030.