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Nigeria’s Economic Potential and Development Report


GDP

Propelled by the economic reform package implemented in the last decade, Nigeria is managing its economy well and heading towards realizing its full economic potential. Through collaboration with the World Bank, Nigeria’s GDP at PPP has grown steadily before, during, and after the recent global financial crisis. The country’s GDP as of 2000 was $170 billion whereas as of 2012 the figure had risen to $451 billion (CIA, n.d.). This is an almost 300% increment. If the value of the country’s informal sector is factored in, the 2012 GDP figure ascends to about $630 billion.

In 2000, Nigeria’s GDP per capita per person was $1400. In 2012, this figure rose to $2800, which is 200% increment. Again, if the contribution of the country’s informal sector is included, the latter figure ascends to $3900 per person. Nigeria’s economy rebasing project is to finalize towards the end of this year (2013). It is, thus, the expectation that these GDP figures may rise by as much as 40%. Through a fiscal stimulus package from the World Bank, Nigeria that had been negatively affected by the global financial crisis managed to exhibit a GDP growth of over 6.0% from 2008 to 2012. The country’s GDP growth as of 2012 was 7.1%. Nigeria’s household income per share is 1.8% for the poorest and 38.2% for the richest (CIA, n.d.).

Agriculture sector

Agriculture is one of Nigeria’s core sectors (National Bureau of Statistics, 2013, para 1). Nigeria’s agricultural output is ranked sixth in the world. Though the industry still faces mismanagement, it contributes a significant portion of Nigeria’s GDP. The country’s agricultural exports consist of tapioca, cocoa, yams, peanuts, sorghum, yams, and rubber. Its livestock agricultural products include pork, veal, poultry, beef, eggs, and poultry. Fishing is another of Nigeria’s main agricultural sub-sectors. Nigeria’s overall agricultural productivity is low as evidenced by its food imports. The main reason for this is that the agriculture industry in Nigeria suffers from the use of antiquated agricultural methods. This is one area where iPad can play an important role since they have the potential of becoming a useful instrument in conveying much-needed agricultural information on new technology to farmers. Furthermore, since the information can be in writing and the graphical form it can be easily understood. Nigeria’s agriculture industry accounted for 30.9% of the country’s GDP and employed 70% of its labor force (CIA, n.d.).

Nigeria’s oil industry became the focus of its economy in the 1970s. Due to this, the agricultural sector that had been previously doing well began its decline, which lasted for about two decades. The country’s unhealthy dependence on oil also triggered a massive rural-to-urban migration. Besides, due to this, explosive informal sector growth has taken place, which is currently estimated to account for 75% of Nigeria’s economy. Nigeria’s known oil reserves are in approximately 35 billion barrels or 5.6×109 m3. Its natural gas reserves are approximately 2800 km3. The United States is Nigeria’s biggest consumer of its crude oil consuming about 40% of the product. In 2012, Nigeria’s oil industry accounted for 12% of the country’s GDP (National Bureau of Statistics, 2013). The oil industry together with other manufacturing industries accounted for 15% of Nigeria’s GDP (CIA, n.d.).

Services sector

In terms of services output, Nigeria is ranked 63 in the world and 5th in Africa. Inadequate energy and power supply are some of the major challenges facing Nigeria’s services industry. Despite this challenge, the country’s banking sector has exhibited financial growth characterized by new sector entrants. Growth in the private services sector has remained stagnated over time due to the high cost of doing business in the country, a lack of essential infrastructure, and insecurity. The Nigerian Stock exchange has exhibited strong execution from the last decade; however, stock market equity utilization is heavily enjoyed by the private sector. Nigeria’s services industry accounted for 30% of the country’s GDP and market capitalization of the companies listed in NSE is valued at $97.5 billion (CIA, n.d.).

Transportation

The current state of Nigeria’s transportation infrastructure is a hindrance to positive economic performance and growth. About a fifth of the country’s roads are paved though some of these are in bad shape and need of repair. The government through county authorities has started a road infrastructure project that includes repairing existing roads and creating new ones. The country has the largest road network in West Africa and the 2nd largest in the southern Sahara region. The country also hosts 4 international highways of the THN. Inland waterways are another major form of transportation in Nigeria. In total, they span about 8600km. The longest waterway is a combination of the Niger River and the Benue River. Though this is the longest, it is not the most commonly used for commerce. The most commonly used inland waterways are found in the Niger Delta.

Nigeria’s rail network spans about 3557 km. The government of Nigeria is seeking to privatize the NRC to restore the infrastructural and financial condition of the country’s railway system. With the privatization, the railway services are to cover the western, eastern, and central regions of the country (CIA, n.d.). In total, Nigeria has 22 airports. Only 4 of these manage international flights. In 2002, the Nigerian Airways that was government-owned seized its operations. It was replaced by Air Nigeria that is partly owned by Virgin Atlantic.

Communication

The Nigerian communication sub-sector that consists of NIPOST, NITEL, and media services accounts for less than 1% of the country’s GDP at a constant factor cost (National Bureau of Statistics, 2013, para1). Nigeria considers its communication infrastructure vital to its political and socio-economic development. This is because communication facilitates cohesion among the different communities in the country as well as facilitates the creation of stronger trade relationships with foreign countries. Nigeria has several privately-owned communication providers offering courier, telephone, and GSM services. Nigeria’s media is regulated by the country’s Ministry of Communication. The internet has added further dynamism to Nigeria’s communication sector. Largely consumed internet products include E-mail, social-networking, and web-searches. Nigeria’s print media is mostly private-owned due to the government’s loss of interest indirect ownership and management of print media such as newspapers and magazines.

Labor force

According to 2012 estimates, Nigeria’s labor force is 53.83 million persons. The services, agriculture, and manufacturing industry account for 70%, 20%, and 10% respectively of this labor force (CIA, n.d.). Unemployment in the country stands at 24%. Labor unions in the country are independent of the government. The unions have formed an umbrella body called the NLC, which is responsible for 6 major strikes in the country. More notably, the NLC has been pushing for a minimum wage increment for workers, which currently stands at $42.80 per month. Nigeria’s HDI is 0.459, as such, the country’s human capital development among the lowest comparing it with a world average of 0.694 and a regional average of 0.471. High socioeconomic inequalities in the country are also hindering human capital development. The income distribution among the countries poorest is 1.8% whereas that of the richest is 40.8%. Nigeria aims at improving its human capital development through instituting education and labor reforms in education. It aspires to be among the best producers of skilled human labor. It considers it to be a vital and bold step towards economic growth and development.

Investment

Despite its infrastructural and policy challenges, Nigeria has many investment opportunities, which have the potential to position the country as a regional leader and as a major player in the international market. The telecommunication sector is one area with such opportunities. The sector has shown handsome growth so far and is yearning for more thanks to attractive government reforms. The growing consensus in Nigeria is that foreign investments are critical elements in aiding the country to achieve its full economic potential. European investment in Nigeria is increasing. Joint ventures and long-term investment opportunities are also available in the larger national market especially those dealing with the country’s raw materials. Companies wishing to seize these opportunities and to improve the prospects of success have to adequately enlighten themselves on-ground business conditions, create brands that establish themselves among the locals, and choose their investment partners with care. To encourage companies to seize these opportunities, the Nigerian government is creating a favorable political environment and additionally, embarking on rebuilding and maintaining the infrastructure that supports foreign investment.

Foreign investment

As of 2012, direct foreign investment in Nigeria was $85.73 billion (CIA, n.d.). Much of this investment is from Nigerians living in the Diaspora and it was directed towards the banking and energy sectors. With an increasing need for FDI the 1972 and 1977 NEP decree, which aimed at reducing foreign investment, became obsolete and was abrogated. This is because FDI is a way to create employment and reduce the country’s unemployment figure. The decree was promulgated mainly because it promoted indigenous entrepreneurship in the country. With the abrogation of the decree, FDI in Nigeria is expected to increase. Another factor that has slowed down FDI in Nigeria is recurring political instability. The various coups and riots in the country have created an environment that does not attract foreign investment. To remedy this, the government is working towards political stability, the naira has been made convertible, and the 1962 ECA and the 1989 NEPD abrogated.

Conclusion of economic analysis and relevance to iPad business

The general theme that emerges from studying the above economic analysis is that Nigeria is moving from economic mismanagement towards realizing its full economic potential. With the growth, it is expected that there will be an outstanding need for real-time information especially in the services industry which includes the finance sector. To grow or increase in tandem with Nigeria’s economic growth is the purchasing power of its citizens. As such, the demand for gadgets such as iPad will increase and they will also be affordable depending on the pricing strategy adopted. In the discussion on FDI, it was noted that to improve the prospects of success, foreign investors have to adequately enlighten themselves on-ground business conditions, create brands that establish themselves among the locals, and choose their investment partners with care. The pricing strategy adopted should, therefore, be informed by the prevailing economic and market conditions.

Taking into account the relevant factors, e.g. duty and freight costs, a combination of the penetration pricing strategy and the premium pricing strategy would be appropriate. With the penetration pricing strategy, the price of the iPad will be relatively lower to facilitate entry into the market. This will be a strategic move to build customer loyalty. The penetration pricing strategy is apt only for the short-term as it enables the company to deal with competition from other gadgets and to ensure that the iPad steadily gains market share. The strength of the penetration pricing strategy is that it has the potential to increase a customer’s lifetime value. This is because customers tend to have a bond with the initial product offering so much that if there is the maintenance of high quality there is an incremental willingness in them to buy additional products from the company.

In the long-term after penetrating the Nigerian market and gaining market share, the company should switch to the premium pricing strategy. The reason for this is that iPad imported will be premium commodities. By switching to the premium pricing strategy, the price of the iPad will be slightly higher or lower than that of its competitors. There will be a gradual transition between these pricing strategies. This is because an abrupt and unexpected rise in price can create a negative impression on customers and consequentially cause plummeting sales and poor financial performance. The transition should be spread over a period that is sufficient to make price increases unnoticeable to the customers.

References

CIA. (n.d.). Web.

National Bureau of Statistics. (2013).Agriculture. Web.

National Bureau of Statistics. (2013). Communications. Web.

National Bureau of Statistics. (2013). Petroleum. Web.

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IvyPanda. (2020, October 1). Nigeria's Economic Potential and Development. Retrieved from https://ivypanda.com/essays/nigerias-economic-potential-and-development/

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1. IvyPanda. "Nigeria's Economic Potential and Development." October 1, 2020. https://ivypanda.com/essays/nigerias-economic-potential-and-development/.


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IvyPanda. "Nigeria's Economic Potential and Development." October 1, 2020. https://ivypanda.com/essays/nigerias-economic-potential-and-development/.

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IvyPanda. 2020. "Nigeria's Economic Potential and Development." October 1, 2020. https://ivypanda.com/essays/nigerias-economic-potential-and-development/.

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IvyPanda. (2020) 'Nigeria's Economic Potential and Development'. 1 October.

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