Key Drivers of the Nigeria Economy

According to the IMF, West Africa's collective GDP increased from $105 billion in 2000 to more than $659 billion in 2020, with an average annual growth rate of 5.6%. The largest economies in West Africa are Nigeria, Ghana, and Côte d'Ivoire, which accounted for one-fourth of Africa's GDP in 2020. Nigeria alone represents 75% of West Africa's GDP and is the largest oil producer in Africa. The African Development Bank projects that West Africa's GDP will grow by 4.1% in 2023, down from 4.4% in 2022.

Nigeria's main immediate economic drivers are activities in the agricultural, oil and gas, energy, manufacturing, technology, and services sectors. However, activities in these potential economic powerhouses remain largely untapped and underinvested. Nigeria's key advantages in pushing its key economic drivers are a large young population, abundant natural resources, and a lower labor cost. These factors are exceptional compared to other countries in the continent. Nigeria's Vision for diversification of its economy and the ongoing reforms initiative to improve the business environment will lead the country into a future of digital transformation and technological progress, especially in the service sector.

Agriculture

The agriculture sector contributes around 23% to Nigeria's GDP and employs about 40% of the labor force. It is dominated by crops such as cassava, yam, maize, rice, sorghum, millet, and cocoa. Nigeria is also a major livestock, poultry, and fishery producer. Nigeria also has considerable unexploited resources, fertile land, and a favorable climate for agriculture.

Oil and Gas

The oil and gas sector accounts for about 31% of Nigeria's GDP and provides about 90% of its foreign exchange earnings. Nigeria has the largest proven oil reserves in Africa and the 10th largest in the world. It also has abundant natural gas resources, which can support the transition to a low-carbon economy.

Manufacturing

The manufacturing sector contributes about 10 % to Nigeria's GDP and consists of sub-sectors such as food and beverages, textiles, cement, chemicals, pharmaceuticals, plastics, and metal products. Nigeria has a large domestic market and a strategic location for regional trade. It also has the potential to develop its solid and critical minerals for industrial use.

Services

The services sector accounts for about 43% of Nigeria's GDP and includes activities such as trade, transportation, telecommunications, finance, education, health, and entertainment. Nigeria has a large and young population, which can drive the demand for services. It also has opportunities to leverage digital technologies to improve service delivery and access.

Digital Technology

In recent years, Nigeria has undergone a digital revolution, witnessing substantial growth in its Information and Communication Technologies (ICT) sector. This transformation has been marked by an increase in internet users, mobile phone subscribers, and e-commerce activities. According to the Nigerian Communications Commission (NCC), the number of registered new SIM cards rose from 316.64 million in December 2022 to 323.62 million in February 2023, highlighting the popularity of mobile services. Additionally, the Nigerian e-commerce market is flourishing, with predictions that it will reach a value of US$13 billion by 2025, as per a report by PWC Nigeria.

From 2019 through 2023, Nigeria witnessed a consistent upswing in investments flowing into startups, reflecting a strengthening belief in the local entrepreneurial landscape. The cumulative funding secured by Nigerian startups surged from $178 million in 2019 to an impressive $565 million by 2023, showcasing an astounding growth rate of 216%. This remarkable ascent was propelled by a convergence of factors, including a surge in venture capital enthusiasm, heightened involvement of angel investors, and the maturation of a burgeoning cohort of startups. Notably, there was an expansion in the variety of funding sources, with an increase in participation from international investors, underscoring the escalating global interest in Nigerian startups.

Nigeria-Thailand Economic Opportunities

In 2021, Nigeria exported $1.09 billion worth of goods to Thailand, while Thailand exported $311 million worth of goods to Nigeria. Both countries have agreed to enhance further cooperation in other fields, such as energy and renewable energy, mining, and agriculture. Nonetheless, Nigerian service sectors remain largely untouched, which presents room for the development and transfer of technology and knowledge for daring but well-equip and well-connected businesses.

By Mr. Sarawut Thiramanit, Dr. Prachaya Suwanhirunkul

Enterprise Thailand