Though often overlooked, Nigeria may become one of the world’s most populous countries and largest economies.
Most discussions of emerging markets tend to focus on the economies of Asia and Latin America, which are home to many of the world’s future powerhouses. Little attention is paid to Africa, which lags far behind even most emerging markets in terms of per capita GDP and other indicators of economic development. But over the coming decades, Africa could experience both population and economic growth that will raise its visibility on the global stage. And it is Nigeria that will likely lead the way, potentially completing the transformation from a corrupt and backwards country to one of the most important economies in the world.
Below are four charts highlighting Nigeria’s size and potential for massive economic growth over the next several decades.
Fact #1: Nigeria will be the world’s third-most populous country by 2050.
If asked to name the three countries expected to have the world’s largest populations in 2050, most respondents would likely fail to include Nigeria. The current population of approximately 183 million makes it roughly 55 percent the size of the U.S. But in coming decades, the country is expected to experience a massive expansion of its population, eventually overtaking the U.S. and ranking behind only India and China.
Fact #2: Lagos is huge, dense, and growing rapidly.
The Nigerian city of Lagos is already among the world’s largest cities; the population of approximately 13.4 million puts it behind only Shanghai, Karachi, Beijing, Tianjin, and Istanbul. In terms of density, it surpasses all of those cities already; that population fits into an area that is just 386 square miles. With nearly 35,000 people per square mile, Lagos is more crowded than even New York City:
For Americans, the density of Lagos can be illustrated another way: consider the combined populations of Los Angeles, Chicago, Houston, Philadelphia, Phoenix, San Antonio, and Boston in an area slightly larger than Indianapolis.
Fact #3: Nigeria has a diverse economy.
The assumption by many Western investors is that Nigeria is an oil-driven economy. Although oil is certainly important, it represents only about 17 percent of the country’s GDP. Nigeria’s oil production is only about one-quarter of the output of the U.S. and has contracted in recent years.
Agriculture is by far the largest industry, but Nigeria’s economy is surprisingly diverse. Nollywood, the country’s film industry, employs more than a million people and exceeds the movie output of the U.S. (though the average budget is only a fraction of Hollywood films).
Fact #4: Nigeria will be a top 10 economy.
By 2050, Nigeria is expected to have the ninth-largest economy in the world, surpassing every developed market except the U.S. and Japan. In its climb from 20th largest, Nigeria is expected to pass Australia, Spain, Canada, Saudi Arabia, South Korea, Italy, the United Kingdom, France, and Germany (among others):
Image Source: PWC World in 2050 Report
There are, of course, several hurdles for Nigeria to clear to become one of the world’s major economies. The rule of law in the country is generally described as weak, with corruption being relatively common. The ongoing struggles against Boko Haram and other terrorist groups in the country illustrate the challenges the government faces in securing its citizens and fostering an environment that can support economic growth. Inflation has exceeded 8 percent during the past two years, and the country has accumulated a debt burden equal to about 12 percent of its GDP.
Investing in Nigeria
For many investors, options for achieving exposure to the Nigerian economy are relatively limited. The Global X MSCI Nigeria ETF (NGE) is the best pure-play option available; that fund offers exposure to a basket of 25 Nigerian stocks. About half of the NGE portfolio is allocated to financial stocks, with consumer companies (such as breweries and food manufacturers) representing another 30 percent of assets. The largest individual holdings include divisions of multinational companies such as Guinness and Nestle and a cement company founded by Africa’s richest man.
Economic potential and actual economic growth are, of course, two very different things. Nigeria has the ingredients to build one of the world’s largest economies; the coming decades will tell how the growth story plays out.
About the Author: Michael Johnston
Michael Johnston is senior analyst for All Emerging Markets, and also serves as COO of parent company Poseidon Financial. His investment expertise has been featured in The Wall Street Journal, Barron’s, and USA Today, among other publications. He resides in Chicago.