By Standard Bank
The past year has been one of economic progress for Nigeria, with Africa’s largest economy managing to crawl back into growth territory in the second quarter of 2017.
The Nigerian government has realised that they need to make the country as attractive and lucrative as possible for offshore investors to bring their capital, skills and business trade into the country. One way is to provide tax holidays to “pioneer companies,” who are engaged in the production of export goods, establishing new industries, or expanding production in vital sectors of the economy.
Pioneer companies that are eligible under the Industrial Development (Income Tax Relief) Act can enjoy an income “tax holiday” for a period of up to five years. In addition, pioneer companies enjoy other benefits such as the exemption from withholding tax on dividends paid out of pioneer profits.
Here’s a look at investment opportunities to consider:
Nigeria’s population is an estimated 186 million people. This population suggests a massive potential workforce as well as a consumer base. For a manufacturer this is an ideal scenario, not only do you have potential customers, but you also have potential employees.
The Nigerian government is eager to expand the manufacturing capability in the country, and to that end they are offering incentives for manufacturers that are able to locally source their raw materials, for example agro-allied manufacturers processing foodstuffs such as fruit juices and vegetable oils.
Any manufacturing industry that provides multiplier effect solutions for the economy is also looked upon favourably. An example of this would be machine tools, flat sheet metal, and spare parts manufacturing.
Finally, any investment in research institutes, especially those that focus on adaptive research and commercialisation of local inventions, is looked upon favourably by the Nigerian government.
Information and Communication Technology Services
Nigeria is one of the fastest growing internet users in the world. According to Statista, a global statistics company, there are approximately 76.2 million Nigerian internet users as of 2017. This is an increase of nearly 50 percent from the 2013 figure of 51.8 million. There are millions of Nigerians who are interested in involving themselves in Information Communications and Technology Services (ICTS).
This new economy does not require someone to be in a specific location to provide the service needed, rather they can be located anywhere in the world. An organization that has seen the potential in Nigeria is US-based software trainer Andela. The company offers learning programmes for young adults who want to become computer programmers.
The learning programme is a 2-year practical course where the learner interacts with companies around the world and assists them in building programmes, websites, and mobile applications. After the conclusion of the programme, the learner is able to provide remote programming support to companies that they have built a relationship with. By tapping into the underdeveloped skills of the Nigerian youth, there are countless opportunities for new economy companies to develop technology leaders of the future in Nigeria and in the rest of Africa.
Nearly one-third of all employed Nigerians find themselves working in the agricultural sector, which is the country’s main foreign exchange earner. The Nigerian government has set up incentives to help modernise and mechanise their agricultural industry. Not only will locally grown foodstuffs be promoted on behalf of the investor, business and enabling companies may receive the pioneer company status and qualify for tax incentives.
Subsidies on fertiliser and zero import duties on raw materials needed to manufacture livestock feed are some of the other incentives to attract investors to this sector. Another is the release of grants from the Raw Materials Research and Development Council for research and development that leads to the greater domestic use of Nigeria’s raw materials.
The need for skilled tradespersons, computer programmers, and agricultural workers will only increase in demand as Nigeria transforms its economy and becomes an international economic power. At present, there is an opportunity for private education to offer specific programmes that are in demand in the country. Nigeria is a country with vast underemployment and by offering distance learning or night schools, there is potential for strong investment returns in for-profit education. As an example, one can look at the success of Curro in South Africa, which began as a private for-profit primary and secondary schools but now even has a post-secondary offering.
If a Nigerian model were created that focused on skills development, the potential returns could be very lucrative.
Nigeria is in the fortunate position to offer investment opportunities to both local and international persons and companies. The need to develop the Nigerian economy offers lucrative potential returns for those looking to invest in the above sectors, including manufacturing and private education. These areas are in some ways interconnected, and by increasing the investment and development in one area, there is tremendous potential for spillover into the other sectors.
*Standard Bank, a global leading development banker, wishes both foreign and indigenous investors to key into the growing business reforms and emerging ease of doing business in Nigeria and invest in the listed sectors.