Africa, as a continent, has been on the up for some time now. Economically speaking, the surge in foreign investment has been a result of more factors than can be contained in this article. However, the situation in Nigeria is one of the most intriguing and promising. The most populous country in Africa with over 200 million citizens, was once seen as a jewel in the continent’s crown, laden with natural resources and well-defined legal, logistical and financial sectors – it’s no surprise that Nigeria has since been labeled an emerging market by the World Bank.
Oil is synonymous with Nigeria’s successes, but also its failures. With oil production never quite large enough to rival the ‘economic miracles’ seen in the middle-east, the oil industry has drawn in more issues than solutions, for example, pushing up the value of Nigerian currency, naira, to a level that stopped other industries from being able to compete. Links to corruption and a lack of inefficient production mechanisms did no favors either.
However, there is hope on the horizon for the verdant nation. Nigeria is finally making major moves away from its reliance on crude oil, and the results are beginning to show. That’s not reflected just in its booming stock valuations, but also in a flourishing energy sector – a sector that could be the foundation that Nigeria builds its future on.
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Cleaner Investing
The Financial Derivatives Company (FDC) made headlines when they placed Nigerian equities as the “best investment asset” class to hedge against inflation between August 2020 and 2021. This was notable, as Bloomberg also ranked the NSE as the best-performing stock market among the 93 other global equity indexes.
Nigeria has benefited from being one of the few African nations to pay off its debt to the ‘Paris Club’ – a group of officials from major creditor countries – a feat few other African nations can rival. It’s one of a few reasons Nigeria has relatively low public and external debt, along with a high GDP, economically liberal government policies, and a notable shift towards renewable and agricultural industries over its oil-rich roots.
For these reasons, investment has flooded in, and CFD stock shares in Nigerian companies have been highly attractive to investors as online services have allowed people to trade on markets from around the world. CFD traders look for potential, and renewables are at the forefront of that. There are governmental targets to expand secure access to energy to 90% of the Nigerian population by 2030 and a third is to be derived from renewable sources. For the investors, this is the perfect blend of emergence to maturity, combined with a relatively affordable cost to invest in the Nigerian industry.
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Bigger and Better
Nigeria is on a mission to reinvent its industrial infrastructure too. There is an opportunity for a country blessed with a warm, sunny and tropical climate to shift its inefficient reliance on diesel-powered generators (a product of its oil supplies) and begin to increase the industrial share of jobs in the country. It’s a jarring statistic, but 1 in 8 of those joining the working-age population over the next 30 years will be Nigerian.
The potential for Nigeria to experience a China-esque explosion of the industry is not out of the question, especially in light of its business-friendly policies and need to cut ties with the oil barrels which have stifled growth in the country for so long. The influx of investment is tied implicitly to bright potential or expectation of growth in the future. The continued commitment to greener and more efficient forms of energy production is likely to keep those foreign investors happy. The hope will be, given more time and external monetary resources, that Nigeria can reassert itself as a jewel in Africa’s crown and a spearhead of renewables in the region.
