As Nigeria’s economy recovers, here’s how to take advantage
Investors and pundits can finally breathe a sigh of relief, as Nigeria’s economy finally begins to recover from one of the most painful contractions in a generation. The IMF cheerily announced last month that the Nigerian economy is in full recovery mode, with GDP growth expected to hit around 1.9% in 2019.
While this is a far cry from the double-digit annual growth seen in the previous decade, it is a sign that the country’s finances are once again on solid ground and that high growth rates are once again attainable.
Nigeria was and still remains one of the primary economic powerhouses of the continent and the structural reforms taken since the 2017 recession have put the right conditions in place for a potential economic boom in the near future.
If you’re considering how best to adapt and exploit Nigeria’s return to growth, here are the key areas you need to be paying attention to.
Growth Will Be Constrained to Lagos
It was recently revealed that over 70% of Nigeria’s GDP growth last year was generated by Lagos alone. This is a phenomenon that will continue to be seen well into the future, as the countryside and smaller cities empty out and economic power continues to concentrate in our largest city.
The city is expected to become the third largest on the planet over the next two decades, with the population predicted to increase from its current 21 million people to 45 million people by 2040.
The economic power of the rest of the country is predicted to steadily decline, with only the capital, Abuja, promising to generate jobs and wage growth in the near future. The one thing investors need to know for the future is that all roads lead to Lagos.
Oil is Still King
In what will likely come as disheartening news for many, Nigeria’s reliance on oil exports is showing zero signs of waning in the future. The government and the Central Bank have made a lot of noise about reducing the size of Nigeria’s bloated energy export sector and focusing more on services and manufacturing, but this has largely failed to materialize.
Telecommunications and construction are also major growth industries within Nigeria, but the 2017 crisis only served to increase the country’s reliance on oil. This shouldn’t be a problem in the short-term as long as oil prices remain high, but there are growing signs that crude values will experience a sharp drop later in the year, which could easily snuff out any nascent growth.
Currency Speculators Will Benefit
Anyone looking to make a profit out of the wild fluctuations of the naira on the foreign exchange market is in for a good year. The currency is expected to make a strong recovery against the US Dollar and British Pound in the next few months, pushed up in part by an increasingly stable political outlook.
More and more Nigerians are getting involved in the country’s robust forex market, trading trillions of dollars worth of currency every single day. The influx of first-time traders is likely to result in a surge in the popularity of demo accounts which allow people to practice forex trading for free and get a grasp on what is still a complex market.
There are no safe bets when it comes to the naira, but it will certainly be an interesting next few months.
Nollywood is Still a Safe Bet
One industry that seems to be completely recession-proof is Nollywood. The Nigerian film industry recently surpassed India’s Bollywood to become the second-largest film industry on the planet, after Hollywood.
Nollywood makes up a whopping 5% of Nigeria’s total GDP, a figure that has been growing steadily since 2014 and may well constitute as much as a tenth of the economy within the next decade.
Investors have long considered the film industry to be a safe port in a storm, which means that in times of even modest recovery, Nollywood is a stellar bet. The US film streaming giant Netflix recently invested a record $8 billion into the Nigerian film industry, aiming to produce content locally for a global audience. That’s a ringing endorsement.
Pay Close Attention to the NSE
The Nigerian Stock Exchange has had a tough time recently, to say the least. Equities fell 13% last year alone, partly due to wider concerns which have affected emerging economies worldwide.
However, the 12 months ahead look promising, as post-election reform and a strong trade outlook begin to have an impact.
Nobody is expected anything like a bull run, but the general consensus among the financial hawks is that the NSE looks set to enjoy buoyant growth in numerous areas. Of course, much of this depends on how the ongoing political situation plays out, but signs are promising.
For the first time in a few years, things are looking up for the Nigerian economy. Follow these tips to ensure that you get the most out of it.
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