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Nigeria to become a major economic force

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Staff writer ▼ | July 29, 2014
A new report from the McKinsey Global Institute (MGI) finds that Nigeris can become one of the world's leading economies by 2030.
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"What people overlook is Nigeria's extraordinary advantages for future growth, including a large consumer market, a strategic geographic location, and a young and highly entrepreneurial population," says Reinaldo Fiorini, director and location manager of McKinsey's Lagos office.

Trade. Based on an expanding consumer class in Nigeria, MGI projects that consumption could more than triple, rising from $388 billion a year today to $1.4 trillion a year in 2030, an annual increase of about 8 percent. This would make trade the largest sector of the economy and provides a particularly good opportunity for makers of packaged foods and fast-moving consumer items such as juices, which could grow by more than 10 percent per year.

Agriculture. Improvements on several fronts can help raise both the volume and value of Nigerian agricultural production in the next 15 years. The sector, which is now the largest at 22 percent of GDP, could more than double from $112 billion per year in 2013 to $263 billion by 2030. This would require raising yields through greater use of fertiliser, seeds, and mechanized implements; shifting the crop mix to more valuable crops; increasing the amount of land under cultivation; reducing post-harvest losses; and raising more livestock and increasing the output of forestry and fisheries.

Infrastructure. On average, the value of a nation's core infrastructure—roads, railways, ports, airports, the electrical system—is about 70 percent of GDP; in Nigeria, core infrastructure is estimated to be about 35 - 40 percent of GDP. It has one-seventh the roads per kilometer as India. On a per capita basis, Nigeria has one-third the residential buildings of Indonesia and one-sixth of the commercial space.

Between core infrastructure and real estate, total infrastructure investments in Nigeria could reach $1.5 trillion between 2014 and 2030. This would not only make infrastructure building a major contributor to GDP, but also an enabler of growth across the economy.

Manufacturing. Manufacturing in Nigeria remains at a relatively early stage of development, contributing $35 billion, or about 7 percent of GDP, in 2013. It has, however, achieved strong growth recently, with output rising by 13 percent per year from 2010 to 2013. Based on current trends, this could yield a four-fold increase in manufacturing output by 2030, to $144 billion per year (an annual growth rate of 8.7 percent). Local processing (packaged foods, for example) and commodities would continue to be the largest manufacturing industries in Nigeria.

Oil and gas. While the oil and gas sector is expected to grow by 2.3 percent per year at best, its success is still vital to the Nigerian economy. With the right reforms, liquids production could increase from 2.35 million barrels a day on average to a new high of 3.13 million barrels a day by 2030, contributing $22 billion to GDP by 2030.

Natural gas output could grow by as much as 6 percent per year, adding $13 billion to GDP by 2030. In total, the oil and gas sector has the potential to contribute $108 billion per year by 2030, up from $73 billion in 2013. However, this assumes that the sector is successful in dealing with current obstacles such as security and can attract fresh investment.

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