Foreign Investments in Nigeria

There is no way the economy of Nigeria could have been as buoyant as it is without the investment of foreign companies and countries.

From the oil and gas sector to telecommunications, agriculture and even to the tech sector, etc, foreign investors have poured billions into this country.

Their investments account for a major part of the economy of Nigeria and have changed a lot of lives while doing so.

But what sectors do these global investors play in, in Nigeria? What obstacles stand in their way? What government incentives attract them? We will see all of that in this article.

Key Sectors That Are Attracting Foreign Investments In Nigeria

The sectors where foreign investment plays a huge role includes;

• Oil and Gas
• Telecommunications
• Agriculture
• Manufacturing
• Transportation and Logistics
• Fintech and Technology 
• Power and Energy
• Real Estate and Construction

1. Oil and Gas 

For many decades, the economy of Nigeria has largely relied on the oil and gas sector. It is the primary source of foreign exchange for the country and one of the highest employers of labour; directly and indirectly.

This sector has received the highest amounts of foreign investments than all other sectors in the country.

Since it is one of the leading producers of oil in Africa, Nigeria has attracted foreign direct investment (FDI) from many foreign companies like Shell, ExxonMobil, Chevron and Total.

These guys have extensive investments in the exploration and production of oil as well as infrastructure, especially in the Niger Delta Region.

1.  Telecommunications:

With the largest population in Africa, telecommunication companies have been attracted to the Nigerian market.

Over the last twenty years, there has been substantial growth in the telecom sector of Nigeria. This is mainly because of the rising demand for phones and Internet services.

Because of this, global telecom companies like MTN (owned by MTN Group in South Africa), Airtel (owned by Bharti Enterprises in India), and 9mobile (formerly known as Etisalat and largely owned by LH Telecommunication Limited based in the UK), have heavily invested in the country.

The focus of foreign investments in this sector has mainly been on expanding their network coverage and improving service delivery. Also, the speed with which e-commerce, and online businesses have grown, has also made the telecom sector develop digital financial services like mobile banking and online payments.

Even though the major players of telecommunications in Nigeria are MTN, Airtel and Globacom, MTN alone boasts of over 60 million subscribers.

1. Agriculture

I dare say that the agricultural sector in Nigeria is underserved.

There are so many mouths to feed and only a few percent of the Nigerian population is involved in large scale agriculture.

Plus the age long outdated pattern of crop cultivation and livestock farming, this sector is ready for a disruption.

Thankfully, while the general population is still trying to scale, the Federal government has encouraged foreign investments in agriculture as a strategy to diversify the economy.

With Nigeria’s large population, there are so many investment opportunities in crop cultivation, food processing, agro-allied industries and value chain development in crops like cocoa, cassava and rice.

One major foreign investor I would like to point your attention to is Olam International (from Singapore) who have invested in large scale farming and food processing, especially rice milling, cocoa processing, and sesame farming.

Because of the large fertile land and agriculture-friendly climate that most parts of the country have been blessed with, there are still opportunities to produce crops like maize, cassava, cocoa, oil palm, groundnuts, etc.

• Manufacturing

The large population in Nigeria has also attracted many manufacturing companies because of the availability of cheap labor. Also, there is the assurance of a ready consumer market for goods that are (or will be) produced by these manufacturing companies.

A worthy example is Proctor and Gamble (from U.S.A), with manufacturing facilities in Nigeria that produce things like diapers and detergents for the domestic market as well as surrounding countries.

Recently, some government initiatives have  aimed at encouraging local production and this has stirred up growth in the manufacturing sector.

Nestlé (from Switzerland) is another foreign company that have invested in the manufacturing sector of Nigeria.

These foreign investments have contributed to creating jobs for the population and encouraging the growth of small and medium-sized enterprises (SMEs).

• Transportation and Logistics

For the economy of the country to grow well, we must pay attention to transportation and logistics.

This is because, it is this sector that connects different parts of the country together. It is this sector that supports the movement of goods and services within and outside the country.

When countries invest in infrastructure projects like ports, railways, roads, and airports, there is also better connectivity and even better efficiency of the supply chain.

An example of a foreign company that has invested in the transportation and logistics sector of Nigeria is AP Moller-Maersk ( from Denmark) which is a global shipping and logistics company. They operate container terminals and logistics services in major Nigerian ports especially in Apapa Port, Lagos.

There is still a huge potential for growth in this sector because a lot of roads, railways and airports still need to be created in the country at large. When done well, this will even further improve connection within Nigeria as well as between Nigeria and its regional neighbors.

• Fintech and Technology

There have been great technological advancements in Nigeria. One of the areas where this can be seen is in the increased popularity of mobile payments, digital banking, and cryptocurrency.

The financial technology (fintech) and other areas of technology (like agritech, edtech, healthtech, etc) are really booming right now.

Because of this boom, some Nigerian startups have impressively attracted global investment e.g. Paystack and Flutterwave.

When Stripe acquired Paystack in 2020 for $200 million, a major milestone was reached in the fintech industry. Many Nigerian youths began learning tech skills like web development, UI/UX design, data science and analytics, etc to enable them to feature in the global tech market.

Since then, a lot of investments have been poured into the sector by both local and global venture capital firms and fintech companies, who are tapping into the country’s youthful and tech-smart population.

• Power and Energy

One of the most severe problems of Nigeria is its unreliable power supply. This has greatly limited economic development in the country.

In recent years, the power and energy sector has been seeking to address energy shortage in the country. Their focus has been on investing in renewable energy and power generation.

A typical example of foreign investments in this sector is the American company called General Electric (GE) which provides gas turbines and other infrastructure for electricity generation.

Also as investors keep looking for a lasting solution to the electricity problem, their attention is turned to renewable energy sources like solar and wind power. 

I believe that Nigeria has the potential to improve its power supply with the right support from the government and the availability of foreign capital. Once this power issue has been well handled, new economic and financial opportunities will emerge.

8. Real Estate and Construction

There is a high demand for the real estate market in Nigeria, mainly because the population is steadily increasing and the fast-paced urbanization in major cities.

Many people are looking for good quality but affordable accommodation options to take care of their residential, commercial or industrial needs.

This need has attracted many foreign investors like Actis (from the UK) which is a private equity firm. They have invested billions into real estate projects like shopping malls, residential estates, and office buildings. Their impact can also be felt in retail as they’ve created retail malls like The Palms Mall in Lagos.

Other foreign investors are also attracted to the construction of infrastructure like roads, bridges, and airports going on in many cities of the country.

There is still room for more local and foreign investors to get involved in this sector because Nigeria is beginning to modernize its cities and address the shortage in housing across the country.

Challenges of Foreign Investments in Nigeria

Some of the challenges faced by foreign investments include;

In oil and gas

• Political instability
• Crude oil theft and illegal refining
• Environmental pollution

In agriculture

• Insecurity
• Old and outdated farming practices

In manufacturing 

• Inadequate power supply
• High production costs
• Competition with cheaper imports

In Real Estate 

• Land ownership disputes
• High cost of construction
• Unnecessary delays

In Transportation

• Poor infrastructure quality
• Financing of projects

In Fintech and Technology

• Uncertain regulations
• Cyber attacks

Government Incentives for Foreign Investors

Some of the incentives given by the Nigerian government to attract and keep foreign investments include;

• Tax holidays
• Duty exemptions
• Access to special economic zones, etc

Conclusion

At this point, it is obvious that almost everywhere we look, there are foreign investments at work. These investments have contributed greatly to helping  diversify the economy of Nigeria, creating jobs and even improving infrastructure.

However, they have faced different challenges in the different sectors they play in. From security concerns to political instability, poor infrastructure, cyber threats etc.

Despite these challenges, there are still opportunities from the oil and gas, agriculture, fintech, real estate, even to  transportation sector. The future is bright for Nigeria. For investors who want to play the long term game, Nigeria remains one of the best destinations for foreign investments in Africa.