Threatened by Islamist insurgency, corruption and divisive politics, Nigeria has shown it is possible to overcome challenges of manufacturing in the West African country and take advantage of fast-changing demographics, according to a report in Financial Times.
Instant noodle-maker Dufil Prima Foods is one example of why investors are so excited about Nigeria, especially when it comes to consumer goods, the report says. Dufil is credited with taking an unknown product – instant noodles – from obscurity to a $600 million-a-year business in Nigeria and one of the country’s most popular foods. The company has a 70 percent share of the market, the report says.
The most populous country in Africa, Nigeria has almost 170 million people. A United Nations forecast predicts by 2050 there will be more Nigerians than Americans. By 2100, it could be the second most-populous country on earth. The economy has been growing by 7 percent a year for the past 10, a rate expected to continue.
Makers of beer, chocolate milk and cement have seen sales soaring, forcing investors to pay attention, the report says. Fund managers have poured money into the Nigerian Stock Exchange. The All Share Index overall up more than 70 percent. Consumer stocks have surged even more. Share prices in local Nigerian Nestlé and Unilever divisions have doubled. Cadbury Nigeria is up nearly 300 percent, according to Financial Times. Nigerian company Dangote Sugar, owned by Africa’s richest man, Aliko Dangote, has tripled in price.
“(There are) not many places in the world that are growing at 7 percent and can be reasonably expected to maintain that for some years,” said Graham Stock, chief strategist at Insparo Asset Management, which focuses on Africa and the Middle East.
But Nigeria’s not out of the woods. Islamists in the North have claimed thousands of lives and hurt the economy there, the report says. Corruption is endemic, and the country’s politics, “divisive and poisonous.” Industrial-scale oil theft prevents the government from saving for a rainy day and Nigeria is vulnerable to a drop in the price of crude. Infrastructure is slowly improving, but still impedes business, the report says.
Dufil has shown that most of these problems can be overcome, given the size of the market. During its 17 years of noodle production in Nigeria, the population has grown by more than 50 million (the entire population of South Africa, the continent’s biggest economy). Nigerian women typically give birth to five or six children, higher than average in sub-Saharan Africa and more than three times the average of the developed world.
Dufil, once the only noodle maker in Nigeria, now has 16 competitors including Dangote, who launched his own noodle brand. The competition is good news for a country that has historically been unfriendly to manufacturers, the Financial Times report says.
Nigerian ports are congested, roads in poor condition, and the country suffers chronic power shortages. Dufil generates its own power at its three noodles factories, its palm oil refinery and packaging plant.
Nigeria’s official unemployment rate is 24 percent and increasing. Among those aged 15 to 24, unemployment is 37 percent, according to the report.
Poor prospects for youth have been cited as contributing to the Boko Haram insurgency in Northern Nigeria, a campaign that has claimed almost 4,000 lives in the past four years, the report says.
Dufil’s sales have declined in the north over the past year because markets in some areas are open for business only a few days a week due to the violence. The government has declared a state of emergency in Northeast Nigeria.
Efforts to oppose President Goodluck Jonathan are growing, the report says. The Congress for Progressive Change and the Action Congress of Nigeria, the main opposition, formed an alliance with two other parties this year. Discord within the ruling People’s Democratic Party may result in splintering ahead of the 2015 presidential election, analysts say.
In May, the total amount of electricity generated in Nigeria fell to 3,520 megawatts. South Africa, Nigeria’s rival for the continent’s largest economy, produces more than 40,000 megwatts and has only a third of Nigeria’s population. The disparity is even more puzzling, the Financial Times reports, considering Nigeria is Africa’s largest oil producer with vast reserves of gas that can power plants.
Large-scale privatization of the country’s power supply is under way but results may not be seen for several years, the report says.