Nigeria to become Africa’s largest economy

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Nigeria certainly is one of the most promising African countries in terms of development prospects and GDP growth. Nigeria is Africa’s number one country in GDP, population and crude oil exports.  Large multinational companies such as P&G and Nestle seem to be confirming this impression by entering the market, opening factory plants and expecting huge increases in sales. However, corruption is not helping the poorest among the country and therefore Nigeria remains one of the 20 poorest countries in the world.

Concerning the GDP, Nigeria bypassed South Africa as Africa’s largest economy in 2012 when it rebased the data used to calculate the GDP in order to give a more current representation of the economy. Those new figures do not mean that Nigeria is suddenly producing more; only now, more modern sectors such as telecommunications, IT, airlines and its flourishing film industry, Nollywood, are included.

According to the World Bank, South Africa’s GDP has declined since 2011; whereas Nigeria’s GDP has risen for the whole period observed. Nigeria thus seems to be reducing the gap between its biggest regional rival.

As an OPEC member, Nigeria is also a major crude oil exporter. In fact, to be more precise, it is Africa’s biggest one. Oil and gas account for 14% of Nigeria’s GDP and 90% of export revenues. In addition, 93% of the whole value of exports is from petroleum and there are still huge oil and natural gas resources that can be exploited. In August 2014, Nigeria’s crude oil production rose to 2.52 million barrels a day. Even though the government would like to increase its production to 4 million barrels a day until 2020, Energy Aspect foresees a decline to an average of 1.8 million barrels a day.

Nevertheless, the other side of the coin is that pollution is rising with these growing exports in oil. The production of oil is often careless and unmonitored. With regard to these environmental problems, firms such as Shell are said to be responsible for 70% of oil spillages. In addition, Nigeria’s whole economy relies on their oil exports and they have huge potential to become a growing economy based on their affluent natural resources. Moreover, there are concerns about the dropping oil prices and that Nigeria’s oil exports could decease due to the Ebola disease.

In addition, power shortages and a poor infrastructure are having a negative impact on the per capita growth performance. The price of doing business soars up to 40%, with these power shortages. The power supply in Nigeria is the worst in Africa in terms of efficiency and operating costs. Increasing the power supply to the standards of the neighbouring countries’ middle-class regions would boost annual growth by 4%. The problem is that most of the roads, power stations, railways, airports and other public services appeared in the 1970s when the price of oil spiked and the country flourished from its oil boom. However, succeeding parties in power did not pursue the same policy and shied away from investing further in infrastructure. As a result, Nigeria has to cope with a proceeding decay of the existing infrastructure. National development plans have been initiated, but they were not well executed.

Another sector that is becoming more and more important for Nigeria’s economy, but also its identity, is “Nollywood”, Nigeria’s film industry. In 2009, Nollywood surpassed Hollywood as the world’s second largest film industry in terms of number of movies and is now closing the gap to India’s Bollywood. Most movies are produced in their local language and are low budget – Nollywood is more about quantity than quality – but some productions are in English, necessary for the expansion to the rest of world, and are made with bigger budgets. These have received good criticism at international film festivals. However, these higher quality and higher cost productions barely generate a profit.  Nevertheless,  these movies may be what Nigeria needs to attract more international attention to its film scene.

According to Nigeria’s Finance Minister, Ngozi Okonjo-Iweala, Nollywood directly provides work for more than 200,000 people, and indirectly for more than one million. Many of these movies are financed with local support, but there have been cases where larger corporations and banks have also started to support Nollywood.

Furthermore, another drawback for the country is the political instability. The rebel group Boko Haram, which is linked to all the kidnappings in northern Nigeria, is fighting for governance under the Sharia law, which broadly means “rejection of Western education”. Of Nigeria’s 36 states, a third of them are ruled by the Sharia law and many people have died in this religious conflict.  Moreover, the North and South are divided. Whereas Christians implemented schools in the South, the Muslims in the North did not allow them to open up schools there as well. This results in critical economic and educational imbalances.

To sum up, Nigeria is clearly catching up on South Africa and is reaching out to be the largest economy in Africa. Alongside its attempts to diversify, such as Nollywood, Nigeria is also trying to find other channels of income, outside of oil production, although oil remains the main source of income. Nevertheless, the country is still facing severe difficulties, such as political instability, which have to be tackled.

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