Business in Nigeria: 6 Industries Worth Investing In
Are you looking for profitable investment opportunities in Nigeria that are not related to the oil sector? With the oil sector being such a fundamental part of the economy and accounting for up to 6.33% of the country’s GDP in the third quarter of 2022; it can be difficult to think of other thriving local industries. But they are very much present, thanks to the Nigerian government’s efforts to diversify the economy and put the country’s considerable labour force to good use.
Discover some of Nigeria’s fastest-growing industries and what opportunities they hold for those wanting to go off the beaten track.
1. Transport
In the third quarter of 2022, the transport and storage industry in Nigeria grew by a staggering 41.59%. Overall, the road, railway, airway, waterway, and pipeline subsectors of the Nigerian transport industry account for about 3% of the country’s GDP. While impressive, this growth can quite easily be explained. Any country’s transport sector is, effectively, a cornerstone of progress, supporting the supply chain, trade within and outside the country as well as economic progress. Not to mention public transport – a key ingredient to a dynamic economy, whether it is by car, train, ship, or even airplane. In the past and even now, some investors have shied away from investment in non-oil industries in Nigeria, with poor infrastructure to blame – something the Nigerian government is aware of and focused on rectifying.
Indeed, while past development in the transport sector has proved tricky, Nigeria is determined to grow its public transport infrastructure, viewing it as essential to the country’s continued growth. This includes roads, railways, as well as port and airport infrastructures. Cooperation between the public sector and private foreign actors will be of utmost necessity for the success of this project.
With Nigeria being an African powerhouse, as well as the most populous African country, opportunities for investment in the transport and storage sector are numerous and can prove to be particularly lucrative.
Cold chain logistics
One particular area of investment in the transport industry would concern cold chain logistics. Indeed, in recent years, Nigeria has been losing its competitive edge both locally and internationally because of its inability to transport and store temperature-controlled goods (such as meat and dairy) in the right conditions. This represents an opportunity for any investor.
2. Finance & Insurance
In Q3 of 2022, the Nigerian Finance & Insurance industry experienced a growth of 12.7% — a particularly surprising development for a country that has historically seen low levels of insurance penetration, often owing to religious and cultural barriers. Despite this, the sector remains tenacious, earning more than N50 billion ($160 million) in overall investment income. The Central Bank of Nigeria is expected to maintain its strict monetary policy and the enactment of the Pension Reform Act 2014 will likely help the insurance sector maintain its projected 10% yearly average growth rate.
In Nigeria, the 2 main types of insurance are life insurance and general insurance (housing, motor insurance, health…). Life insurance has partly picked up thanks to the National Health Insurance Authority Bill 2022, a new law that would provide health insurance coverage to some 83 million vulnerable Nigerians.
3. Information & Communication Technology
The ICT sector grew by 10.53% year-on-year in Q3 2022.
Viewed as Africa’s most prominent ICT market, Nigeria houses a whopping 82% of the African continent’s telecom subscribers as well as 29% of internet usage. With a compound annual growth rate (CAGR) of 4.6% and an expected increase of over 167 million subscribers in the five years to come, Sub-Saharan Africa is also anticipated to experience the fastest development in the ICT industry.
As a result, the Nigerian government is promoting collabourations between regional ICT businesses and international investors to move the economy away from oil and gas. Local authorities have backed the establishment of government- or private-sector-led incubator hubs, youth innovation initiatives, and science technology zones in order to foster these collabourations and grow a community of entrepreneurs in the technology sector. In fact, the government of Nigeria has even given Abuja Technology Village and other hubs special economic zone status, thereby allowing duty-free shipments and eliminating labour problems – all as an economic incentive to investors and business owners.
4. Art & Entertainment
The Art & Entertainment industry in Nigeria recorded a growth of 7.79% in Q3 of 2022. While the pandemic impacted the sector in 2020, it has since picked up, striking lucrative deals with international streaming giants and production houses. A report by PWC predicts that the industry will be the fastest-growing one globally in the coming 5 years.
5. Construction
Nigeria’s construction industry is expected to expand by 3.2% yearly between 2022 and 2025 as a result of the real estate industry’s consistent expansion and government support for the infrastructure and energy industries. Supportive government programs, like the $2.7 billion Infra-Co fund, which is backed by the Central Bank of Nigeria (CBN), the Nigerian Sovereign Investment Authority (NSIA), and the Africa Finance Corporation Companies (AFCC), have drawn financiers to the sector and increased the trust of the businesses already established – making construction a safe industry to invest in.
6. Food Processing
With a population of over 213 million people, it is safe to say that the food industry offers great opportunities to investors. Over the past five years, the sector has expanded at an average rate of 3%, contributing an average of 4% annually to the GDP. Even though the industry is primarily made up of small and medium-sized businesses, new entries from international food corporations and existing operations are expanded to satisfy the needs of the local market. The increasing urban population also means that consumers are now paying more attention to their diets, a change that has triggered an interest in low-fat, low-sugar, and low-carbohydrate foods and beverages.
Investors can seize the opportunity to be among the first ones to introduce foods and beverages that meet the demands of people with special dietary needs.
How Africa HR Solutions can facilitate your entry into Nigeria
Expanding to new markets is never an easy task, and sometimes, you may just want to wait before going through the costly and time-consuming process of establishing your own local entity. What if you could legally operate in Nigeria almost right away, without the initial entity investment?
Africa HR Solutions’ Employer of Record (EOR) solution allows you to do just that. We onboard your employees, and manage payroll and taxation as well as HR and compliance, while you are free to focus on your core mission: expansion.
Contact us now to find out more about how our EOR solution can help you achieve your expansion goals.