A bright digital future for Nigeria amid rising security and economic challenges | Analyst Picks| RiskMap 2021
A bright digital future for Nigeria amid rising security and economic challengesBukola Bolarinwa | Analyst
Like most countries in Africa, the pandemic’s economic effects will dominate much of the coming year for businesses in Nigeria. While the country has been spared the worst of the human impacts of COVID-19, the economy entered another recession in November having yet to recover from the oil price crash of 2016. The collapse of global oil prices and disruptions linked to COVID-19 have dimmed economic prospects and worsened government debt. There are few fiscal buffers with which to respond: amidst rising inflation, the Central Bank remains firmly opposed to devaluing the naira (currency) and is set to maintain the expensive dual exchange rate regime. Foreign investors will face increasing regulatory risks as policies on repatriating funds and accessing foreign exchange will remain volatile.
The economy is not Nigeria’s only pressing concern in 2021. Improving the growing range of security challenges across the country is near the top of the agenda. Islamist militancy in the North-east is set to continue; banditry and kidnapping in the North-west region has increased while crime in urban areas will remain a challenge. Add to this growing allegations of police brutality which fuelled the country’s largest protest movement led by young people in October. The government’s handling of these challenges including adequate policing will continue to impact businesses and investors in the country.
Politicking for the 2023 elections has already begun. In-fighting is set to drive growing factionalism in the ruling party from the end of next year. Unlike other countries in the region that have seen their leaders pursue third term ambitions, Nigeria’s democracy and electoral process has strengthened in recent years, making peaceful transitions likely.
Companies will continue to have to navigate the complexities of Nigeria, but as the largest economy and population in Africa, the rewards can often be well worth the risks. Over half of all venture capital deals in the tech and digital sector going into Africa went to Nigeria, with the continent attracting a record USD 2.02bn in 2019. This represents a 74% growth from the previous year and this trend is set to continue in the coming years with Africa forecast to generate USD712bn from the internet economy by 2050. In the first 8 months of 2020, African tech start-ups raised more than $600 million in venture capital funding, contrary to global economic slowdown in light of COVID-19. With a median age of 18, more than half of Nigeria’s population is under 30 years of age and this demographic will continue to be an attractive market for investors.