Despite facing several economic challenges, Nigeria continues to stand tall as Africa’s largest economy, with a Gross Domestic Product (GDP) that remains unmatched on the continent, the World Bank has affirmed. This reaffirmation comes amid growing concerns over the country’s private sector constraints and fluctuating foreign direct investment (FDI) levels, which have sparked significant debate in economic circles.
Speaking at a key event in Abuja, Dr. Ndiame Diop, the World Bank’s Country Director for Nigeria, highlighted that while Nigeria’s economic growth is often stunted by various hurdles, the country still holds a dominant position within Africa. Dr. Diop, who was addressing stakeholders during the Country Private Sector Diagnostic (CPSD) and Stakeholder Engagement forum, emphasized that despite receiving far less FDI than countries such as Indonesia or South Africa, Nigeria’s sheer economic size continues to keep it at the top of Africa’s GDP rankings.
“The challenges that face the private sector in Nigeria are real, but they do not overshadow the country’s economic potential,” Dr. Diop stated. “Nigeria remains the largest economy in Africa and has immense potential if the right structural reforms are implemented.”
The CPSD report, which is expected to be published in the coming weeks, will shed light on the ways private sector constraints hinder Nigeria’s economic performance. Dr. Diop pointed out that, despite Nigeria’s promising macroeconomic reforms, the country’s potential remains underutilized due to inefficiencies and regulatory challenges that have long plagued key sectors.
He mentioned the importance of targeted interventions to remove these barriers, noting that such actions could propel Nigeria toward higher levels of economic performance and investment.
The Role of Macro-Economic Reforms
According to Dr. Diop, Nigeria’s recent economic stabilization efforts, including adjustments to the exchange rate market and improved access to foreign exchange, have already started to positively affect investment conditions. These reforms, he suggested, have laid the foundation for future growth, especially in critical sectors that require private sector participation to thrive.
“The steps taken to stabilize the economy are essential,” Dr. Diop explained. “The framework is in place for sustained growth, but it’s now up to the private sector and the government to collaborate on addressing structural issues that hold back investments.”
Four key sectors—Information and Communication Technology (ICT), agribusiness, solar energy, and pharmaceuticals—were identified by Dr. Diop as the areas with the most potential for massive growth and job creation if the right reforms are put in place. These sectors, he added, could unlock billions in investments and create hundreds of thousands of jobs for Nigerians.
In the ICT sector alone, Dr. Diop cited a potential $4 billion in investment, with more than 200,000 new jobs. Similarly, agribusiness could see a $6 billion influx, while the solar photovoltaic industry could attract up to $8.5 billion, creating over 129,000 jobs. The pharmaceutical sector, although smaller, holds the promise of generating $1.6 billion in investments, translating into 30,000 to 40,000 new jobs.
Breaking Down Sectoral Barriers
A major obstacle in the ICT sector, according to Dr. Diop, is the inconsistent and unpredictable nature of right-of-way fees, levies, and informal charges. These fees can make up as much as 70% of the costs associated with broadband rollout in the country, slowing down the expansion of crucial infrastructure. The World Bank’s involvement in addressing these regulatory inconsistencies, Dr. Diop said, has already begun to show promise.
“Regulatory inconsistency in the ICT sector is a major hurdle, but we’re seeing progress in addressing these challenges,” he remarked, pointing to a World Bank-supported initiative aimed at resolving these issues.
Challenges such as vandalism, limited funding for rural broadband expansion, and difficulties in accessing wholesale fiber also remain, but efforts are underway in collaboration with the Nigerian government to tackle them, Dr. Diop noted.
Nigeria’s Solar Power Future
In the solar energy sector, Nigeria is showing signs of positive growth despite its historically difficult energy sector. Dr. Diop acknowledged the sector’s struggles but pointed to the rising interest in solar photovoltaic (PV) technology as a bright spot. Investments in renewable energy, particularly solar power, have been limited by high costs and uncompetitive tariffs, but blended finance mechanisms developed by the World Bank and the International Finance Corporation (IFC) are starting to bridge the gap.
He highlighted the ongoing Distributed Energy Solutions (DES) project, which aims to provide solar power to 17.5 million households and businesses in Nigeria. This initiative signals a growing interest in the private sector’s potential to tackle Nigeria’s energy deficit through off-grid solutions. However, Dr. Diop stressed that reforms to improve the grid power supply were still crucial for Nigeria’s industrial growth.
The Need for Policy Consistency
Dr. Dahlia Khalifa, Regional Director for Central Africa and Anglophone West Africa at the IFC, echoed the importance of regulatory stability. She noted that inconsistency in policies, especially in areas such as customs duties and revenue agency fees, continues to deter much-needed private sector investment.
“Businesses rely on a stable regulatory environment for long-term planning,” Dr. Khalifa explained. “Unpredictability in government policies only increases the risks for investors and discourages them from committing to projects in the country.”
Government’s Economic Reforms and Private Sector Confidence
The Nigerian government has also taken significant steps to bolster the economy, according to Mr. Wale Edun, the Finance Minister and Coordinating Minister of the Economy. Mr. Edun lauded the IFC’s support across critical sectors such as agriculture, infrastructure, and pharmaceuticals, and highlighted key financing initiatives like the $1.2 billion investment for the expansion of Indorama’s fertilizer facility in Eleme.
He also pointed to the government’s commitment to tackling the cost-of-living crisis, particularly through increased food production. While the removal of fuel subsidies and the implementation of market-based pricing mechanisms have triggered short-term inflationary pressures, Edun reassured that the government’s interventions—such as direct cash transfers to vulnerable citizens, supported by the World Bank—will help mitigate the impact.
The finance minister praised the reforms introduced by President Bola Tinubu’s administration, emphasizing that the strengthened finances, coupled with enhanced security that has resulted in a boost in oil production, are beginning to restore private sector confidence in Nigeria’s economic future.
“The reforms we’ve undertaken are bold and necessary for Nigeria’s long-term prosperity,” Edun declared. “We are committed to ensuring that the economic environment remains conducive for both local and international investors.”
