SEATTLE — Emerging economies, such as that of Nigeria, hold promise for outside investors. Nigeria, which has around 87 million inhabitants living off of less than $2 a day, is attracting investors from all over the world. The idea is that investing in Nigeria will create jobs and lead people out of poverty. Many corporations invest in emerging economies since they tend to grow at a rapid rate, rising out from third world country status to eventually become regarded as a second world country.
Natural Resources in Nigeria
Due to Nigeria’s underexploited mines, which are rich in coal, gold, iron ore and many other natural resources, there is vast potential for external companies to invest in Nigeria’s mining industry. In 2015, the mining industry only accounted for about .3 percent of the Gross Domestic Product (GDP). The Nigerian government is currently focused on oil since Nigeria is the thirteenth largest producer of petroleum in the world.
Most of Nigeria’s oil fields are minuscule in size and mismanaged, yet the country is still Africa’s biggest oil producer. The Nigerian economy is petroleum based, and corruption and mismanagement by the government have squandered the potential revenue of its oil-rich land. If external companies can persuade the Nigerian government to set-up their own operations in the natural resource-rich country, then potentially tens of thousands of jobs could be created.
Supporting the Private Sector
Atiku Abubakar is a Nigerian presidential candidate and businessman who opposes the government’s strict and overriding control of the oil industry. He believes the way to reduce poverty and notorious government corruption is by investing in Nigeria, particularly by giving the private sector more control. If he becomes the new president, Abubakar said he would pledge $25 billion to fund infrastructure.
Abubakar’s method of eradicating poverty and investing in the private sector would be especially useful in the energy sector. In 2013, more than 95 million Nigerians lived without electricity, with access for only 45 percent of the total population. Only 55 percent of the urban population used electricity, with only 37 percent in rural areas. A government usually regulates electricity, yet there is little interest by the Nigerian government in powering Nigeria with reliable, affordable and widespread electricity.
In 2017, the U.S. invested more than $1.3 billion in Nigeria through Foreign Direct Investment (FDI). More than 74 companies were involved in investing in Nigeria. Investment areas included job creation, training and development, tax contribution and corporate social responsibility. A survey with the U.S. companies involved expressed the companies concern about important issues before investing in Nigeria, such as specific industry regulations, crime and security. Even though $1.3 billion is a small amount for a population of more than 190 million, it’s a good beginning for future investment.
Countries such as China, which invested more than $1.79 billion in Nigeria through FDI, and the U.S. have shown increased interest in investing in emerging economies like Nigeria. There are still underexploited industries, such as the mining and oil industry, but the mismanagement and corruption by the government have made it difficult to invest in Nigeria.
Abubakar believes in giving control of the oil industry to the private sector, and if this is achieved, Nigeria will be one step further to eradicating poverty from within, using its own power without heavy involvement from foreign aid. Nigeria’s current leader, President Muhammadu Buhari, began opening up refineries to private investors in 2017, but still will not sell equities. Before Nigeria can effectively use its resources to reduce poverty, it will need to invest in the emerging economies’ private sector.