Country Profile: Nigeria

Background Information

Nigeria

Nigeria, a Federal Republic located in West Africa, shares its borders with Niger to the north, Chad and Cameroon to the east, Benin to the west, and to the south, it meets the Gulf of Guinea of the Atlantic Ocean. This diverse nation, known as Africa's most populous, has its capital in Abuja and a thriving commercial and industrial hub in Lagos. Other important cities are Port Harcourt, Ibadan, and Kano. The official languages spoken here include English, Hausa, Yoruba, Igbo, along with various regional languages. As of 2023, Nigeria boasts a population estimated at 223,804,632 and had a GDP of USD 477.39 Billion, utilizing the Nigerian Naira as its currency.

Politics

The post-independence transition in Nigeria saw a smooth transfer of governance from British officials to Nigerian leaders. Today, Nigeria is a culturally diverse federation with 36 autonomous states and the Federal Capital Territory (Abuja). It's important to note that Nigeria is a land of immense potential and opportunities for investors. The political landscape is currently dominated by the All Progressives Congress (APC) which holds sway in executive and legislature at federal and state government levels. The recent general elections held in February and March 2023 marked the transition of leadership from President Muhammadu to President Bola Ahmed Tinubu, a former Lagos state governor. The Presidential Elections in Nigeria is usually a two-horse race between the All Progressives Congress (APC) and the People’s Democratic Party (PDP). But, for the first time since 1999 when the country returned to democratic rule after a long period of military interventions, the Labour Party emerged as the third force in the Presidential elections. The President Bola Ahmed Tinubu, of the APC, received 37 percent of the votes, or nearly 8.8 million, while the main opposition candidate, Former Vice President, Atiku Abubakar won 29 percent with almost seven million. Third-place finisher Peter Obi took 25 percent with about 6.1 million. Following the declaration of results, the Labour Party mounted a legal challenge against the election of the newly elected President Bola Tinubu. President Tinubu, since his election, has indicated his commitment to boosting domestic revenues mobilization and attracting foreign investment.

Nigeria, despite being considered socially and economically diverse in some areas, offers vast untapped markets and resources. President Tinubu's focus on improving the economic landscape and attracting foreign investments is a positive sign for potential investors. His efforts to diversify the economy beyond oil are noteworthy. While there have been challenges, such as a decline in oil revenue and discussions about fuel subsidies, these are part of a broader effort to strengthen the nation's economic foundation. President Tinubu's commitment to addressing these challenges demonstrates his dedication to ensuring a stable and prosperous Nigeria, which is ultimately beneficial for investors.

Nigerian Leadership of ECOWAS

On the Economic Community of West African States (ECOWAS) front, President Tinubu was elected Chairman of the West African regional body on 9th July 2023. He took over from President Umaro Sissoco Embaló of Guinea Bissau. President Tinubu’s first task as ECOWAS Chairman was to coordinate ECOWAS’s response to the July 26th Military Coup in Niger which deposed President Mohamed Bazoum. Despite committing to a diplomatic resolution of the situation in Niger, President Tinubu did not rule out military intervention by the ECOWAS Standby Force. An ultimatum of one week was issued to the military junta to restore the deposed President Bazoum or face military intervention. ECOWAS has since suspended Niger, closed its land and sea borders to the country and imposed economic and financial sanctions on Niger. In compliance with ECOWAS sanctions, Nigeria, which supplies about 70% of Niger’s electricity needs has cut power supply to the country, in breach of a bilateral agreement between both countries. Under the agreement, Nigeria is obligated to supply electricity to Niger to augment its northern neighbor’s meager production. This was also on the basis that Niger would not dam the River Niger which feeds the Kainji dam on its downstream in Nigeria. However, in order to free itself from its dependence on its southern neighbor, Niger has, nonetheless, initiated the construction of the Kandadji dam on the upstream River Niger with the expectation to generate 629 gigawatt hours (GWh) annually.

Economics

The economic outlook for potential bilateral trade between Thailand and Nigeria shows abundant opportunities with a cautionary tale of common risks associated with West Africa. The Nigerian economy witnessed a GDP growth rate of 3.1% in 2022 and 2.31% during the first quarter of 2023. The IMF economic growth forecast for Nigeria stands at 3.2% in 2023, with an expected decrease to 3.0% in 2024. However, Nigeria's recovery from trade deficits incurred due to the impact of COVID-19 has been sluggish. Coupled with this is the decline in oil production. In the second quarter of 2023, Nigeria's oil production saw a year-on-year decline of 14.69%, falling to 1.22 million barrels per day (mb/d), down from the 1.43 mb/d reported during the same period in 2022. Also in 2022, the country’s trade surplus was a modest $2.85 billion, a significant drop compared to the robust $54.1 billion surplus recorded in 2014. In August 2023, Nigeria experienced an annual inflation rate surge, reaching its highest level in 18 years at 25.8%, making the domestic currency less desirable for international trade.

Foreign direct investment (FDI) flowing into Nigeria's economy plummeted from $2.2 billion in 2014 to a mere $0.47 billion in 2022. Furthermore, the budget deficit has surged by an astonishing 370.54% from 2016 to 2023. The cost of servicing the nation's debt has exceeded public revenues, with public debt expanding tenfold in a decade. As of June 2013, the total public debt stood at N7.93 trillion, but it has now ballooned to approximately N77 trillion. Throughout this period, external debt experienced an alarming growth of 473%, while domestic debt skyrocketed by a staggering 7,029%. Critics argue that the Central Bank of Nigeria's uncontrolled lending to the federal government has played a role in driving inflation rates to as high as 22.41% as of May 2023. These economic challenges, coupled with security concerns, have contributed to surging food prices, leaving 63% of the population grappling with multidimensional poverty. In 2020, the unemployment rate stood at 33.3%, and it is estimated that it may climb even higher to 40.6% this year.

The current situation reflects the stagnation of Nigerian primary industry, the efforts to shore up the domestic food supply, and the effects of contractionary monetary policy. Meanwhile, the fiscal deficit is projected to narrow to below 5% of GDP in 2023-24, financed by borrowing and the planned removal of the subsidy on Premium Motor Spirit (PMS) and increased revenue, thereby decreasing the crowding out of private investment, and the rising inflation. Thus, the gateway of direct investment and bilateral trade to Nigeria goes beyond natural resources into the territories of solving and making full potential use of Nigeria's labor forces, digitalization and application for youths, and agricultural development.

On the regional and domestic side, Nigeria has several import policies that aim to increase local production through subsidies, tariffs, quotas, etc. Nevertheless, Nigeria is keen on establishing ease for international markets, such as signing the African Continental Free Trade Area Agreement (AfCFTA) and ratifying the agreement in December 2020, requiring member countries to remove tariffs on 90% of goods. Nigeria has two types of free trade zones: general and specialized. The Oil and Gas Export Free Zone is the only specialized zone regulated by the Oil and Gas Free Zones Authority, while the Nigeria Export Processing Zones Authority regulates the general free trade zones. New markets for international exports to Nigeria are achievable but may require a deep dive into Nigerian uncharted culture and regulations.

Nigerian Business Culture

Primary Contact: While scheduling appointments and notifying your meetings well in advance holds importance, it's worth noting that Nigerian business culture places a strong emphasis on personal relationships and values trust. To increase your chances of connecting with key decision-makers, relying on referrals is often more effective. People are generally more receptive when introduced by someone they already know and trust. Consider seeking an introduction from a mutual friend or colleague as you move forward.

Punctuality: Nigerians may have a relatively relaxed attitude towards meeting times, influenced by factors like heavy traffic. Nevertheless, it is crucial to show respect for scheduled meeting times, as many professionals maintain a high level of professionalism and adhere to punctuality. Strive to honor the agreed-upon meeting times to the best of your ability.

Greetings: When engaging in face-to-face meetings, initiate with a friendly yet not overly assertive handshake. Pay close attention to hierarchical norms, as an individual's age and status should guide your approach.

Gifting: While gift-giving is expected when visiting someone's home, it is less customary in the business culture. However, presenting a gift is generally appreciated in a business context, as long as it is not overly extravagant. When giving a gift, use either the right hand or both hands. Avoid offering a gift with the left hand, as it is considered unclean within their culture.

Dress Code: Dressing appropriately is of significance in Nigeria, as your attire often signifies your perceived level of importance. Men are typically expected to wear dark suits and ties, while women are encouraged to opt for dark, modest business-style suits. Kaftans are also highly patronized by both men and women for business casual events and also as office wear.

Business Cards: Ensure that you have your business card readily available. Business cards hold substantial importance in Nigeria, and some individuals may not take you seriously if you do not possess a professional business card. Thus, exchange business cards as a means to establish credibility before delving into discussions.

Business Meetings: In-person meetings are the most effective means of communication with Nigerian professionals. Face-to-face meetings are highly efficient for evaluating potential business partners and assessing their professionalism. It is not uncommon for a Nigerian professional to request an in-person meeting even when discussing business matters over the phone. Nigerian business people often believe that if a matter is significant, you will make the effort to visit their office for discussions, even if the meeting is brief, lasting only 15 minutes.

By Mr.Sarawut Thiramanit, Dr. Prachaya Suwanhirunkul

Enterprise Thailand