Covid-19 hit Nigeria about a month behind Europe. However, the Nigerian economy has already been affected by the drop in world oil prices as a result of the OPEC+ talks in March. The pandemic has forced Nigerian authorities to make unplanned spending and economic policy changes, but these will be limited by soaring inflation and reduced fiscal revenues due to low oil prices.
In 2020, we therefore expect the biggest economic recession since 1983, which will hopefully be overcome in the following years. There will be a devaluation of the local currency (naira) which is dependent on the price of oil as Nigeria’s main export commodity.
Conditions are expected to improve in the next 2 years, when the situation on the world markets will improve and thus exchange rates will stabilize. Devaluation will be the main driver of double-digit inflation in 2020-2022, dependent on foreign exchange restrictions on imports and low agricultural output.
The crash in oil prices in 2020 will keep the current account in deficit in 2021 and 2022. From 2022, the current account balance will return to surplus, provided oil prices recover and the naira devaluation is dampened by import demand.
The government invested approximately 2.4% of GDP in supporting the economy, and further investments are expected in view of the upcoming national Economic Recovery Plan. In April 2020, President Buhari allocated EUR 761 million for the fight against covid-19, forcing him to amend the State Budget Act. The changes in the 2020 state budget also took into account the falling price of oil, on whose export Nigeria depends, and the associated devaluation of the local currency. Related to this are the necessary budget cuts in capital expenditure of 1% of GDP.
The World Bank, the IMF, the African Development Bank, the EU and a number of other international organizations and private foundations have provided Nigeria with financial assistance in the form of grants and loans to manage the pandemic in the order of several billion euros.
At the same time, the World Bank and the IMF granted the country’s request for debt moratoriums. In June 2020, the Central Bank of Nigeria released funds for earmarked loans to help households and small and medium-sized enterprises in the amount of approximately EUR 111 billion. In order to mitigate the effects of the pandemic on citizens, the planned increase in electricity prices in July 2020 was postponed to January 2021.
Post-covid-19 opportunities for foreign exporters
The need in the construction industry, agriculture, water supply and oil industry is growing. Lack of electricity and very frequent blackouts will continue for a long time, despite the government’s efforts. The generator is essential equipment for all residential and public buildings, as well as workshops and manufacturing plants. The transmission system is outdated.
According to allcountrylist, privatization was completed in 2013, residents expect a rapid improvement in the situation. The private investors who privatized the systems must carry out a rapid modernization, which is currently taking place slowly.
In connection with the Nigerian government’s repeated interest in using alternative sources for the production of electricity, the demand for technologies for the use of hydropower and waste recycling is growing. Due to the limited waste collection system (only in big cities), solutions in this area are welcome.
Healthcare and pharmaceutical industry
This traditional Czech export item is one of the priorities of the Nigerian government. Public hospitals mostly have outdated and insufficient equipment, which needs to be gradually modernized. The number of new private clinics for demanding and mobile patients is growing.
In connection with the onset of the pandemic, the government was forced to release approximately USD 761 billion from the budget for the fight against covid-19 and request an additional state loan of USD billion in order to purchase the necessary medical supplies and equipment.
Aware of the dismal state of public health care in the country and under-investment in the health sector, the Nigerian government has prepared a program to release funds for the construction and equipment of health facilities in all regions of the country in response to the pandemic.
At the same time, the Nigerian Ministry of Health is requesting the missing 1,000 beds and standard hospital equipment, from end-to-end solutions to individual products. This also applies to private healthcare facilities. Related to this is the demand for providing professional education/training for both medical and technical personnel (maintenance of machines).
Agricultural and food industry
As a result of the pandemic and the restriction of foreign imports, which also dominates the area of ensuring the supply of basic foodstuffs, which is no longer able to be covered by domestic production (rice, oil, etc.), the Nigerian government has refocused on this key sector. The population is growing rapidly, within 20 years Nigeria is expected to have up to 500 million inhabitants.
The number of consumers of ready-made fast-moving products, including food, is growing. The government therefore considers the reform of agriculture and the development of the food industry to be one of the main priorities.
According to the Minister of Agriculture, Nigeria needs 300 thousand tractors, now it has only 30 thousand. Nigeria is blessed with large tracts of arable land, making agriculture a sector with high potential for job creation, food security and poverty reduction.
Although the self-sufficiency model of production has long prevailed in this industry, the use of improved seedlings and the application of more modern agricultural practices are gradually increasing yields. This is the goal of government measures to promote commercial and mechanized agriculture and gradually build a developed agricultural and agro-industrial market.
Although the government has started increasing the budget chapter of the agricultural sector, the budget is still insufficient to ensure sustainable growth and expansion of the agricultural sector. Therefore, the federal government relies on private businesses, individuals and foreign investors. This sector is open to private participation and offers attractive investment opportunities in the following areas:
- mechanized production of crops such as rice, maize, millet, cassava, sugarcane, tomatoes, and cash crops such as cocoa, palm kernel, rubber
- food processing and preservation across industry value chains
- beef processing and packaging
- fruit juice / preserved fruit
- drinks and sweets
- processing of purpose crops – among others cocoa, palm kernel, rubber
- logging and wood processing
- livestock breeding – development of dairy products and aquaculture (fishing)
- development of horticulture
- agricultural input materials and machinery
- development of water resources, especially for irrigation and flood control infrastructure
- trading and transportation of goods
- development and production of suitable small mechanized technologies for local processing (on-farming) and secondary processing of agricultural production
- development of private irrigation facilities
- production of improved seeds and agrochemicals
- production of veterinary drugs, vaccines, chemicals, feed and feed additives
- market research
- professional education
Due to the fact that the population is growing rapidly, the share of the young generation is also increasing in percentage and the demand for cheap goods necessary for life (including school supplies) is increasing. In connection with the closure of borders during the pandemic, the need to ensure technological and production self-sufficiency and the ability to limit the importation of products, mainly from China, which Nigeria will be able to produce on its own and as a result of the involvement of a young generation of educated people, after professional training, will thereby achieve a reduction in unemployment.
Nigeria suffers from a lack of traditional craftsmen and knowledge of basic technologies.