It is barely two weeks until the people of Africa’s largest economy goes to the polls on the 16th of February 2019. Violent clashes between farmers and herders, undefeated terrorist group Boko Haram, poverty, and slow economic recovery from the worst recession in 25 years are all troubling issues to be considered. At the same time, the population is continuing to grow. The urban population has been growing at an average rate of 6.5% in the last 50 years. Birth rates are at around 38%, exceeding death rates by 26%.
Previously, I looked at Japan’s ageing and declining population and the impact that has on the country. Nigeria is a stark contrast. With 197mn people and growing, Nigeria is the most populous country in Africa and the 7th globally. Nigeria’s population is growing faster than the economy and is expected to reach 400mn by 2050. In 2018, the population growth was 2.8% compared to a GDP growth of 1.9%.
Following in the footsteps of China and India, the government in Nigeria has disclosed plans to limit each mother to two children, in order to curb the fast-growing population. Around 45% of the population is below 14 years of age, compared to 28% in India and 17% in China. Limiting the number of newborn children may not be the right move. Improving infrastructure and social welfare ought to be higher on the agenda, considering the vast economic disparities in Nigeria, where it is estimated that around 50% of the population lives in poverty. The IMF predicts that GDP per Capita will fall during the coming years. In 2018, Nigeria’s GDP per Capita was USD 2,247, just above India’s USD 2,079.
Climate change, combined with rapid population growth, has also created a resource crunch. At the agricultural symposium in October 2018, the Lagos Chambers of Commerce and Industry called for more funding and industrialisation of agriculture, and risk mitigation through insurance in order to secure more produce for the growing population.
Compared to other emerging economies, insurance plays a very small role in Nigeria. The country’s insurance penetration is only 0.3%, compared to 3.3% in India and 4.4% in China. The Nigerian insurance regulator, NAICOM, has introduced measures to increase insurance penetration with a programme called 'Reaching the Unreached'.
The maritime information company, Ships & Ports Ltd, stated that “the population of uninsured Nigerians is a goldmine awaiting appropriate actions”. But, with poverty and lack of amenities, insurance may not be on people’s mind.
It is not all doom and gloom, however. With such a large and young population, there is a growing middle class in Nigeria and a big home-market with over 85mn economic active people. There is both a massive potential workforce and a consumer base.
Lagos, Nigeria’s commercial and industrial hub, is a flourishing city and its dynamics are not unlike those of cities in Asia. Its GDP per Capita is ca. USD 5,000, more than double to the national average. The success story of Lagos is impressive against the backdrop of the overall situation in the country. The city's economy is larger than the whole of Kenya's. It has also been forecasted to become the 3rd largest urban area in the world by 2040, behind Tokyo and Delhi. Lagos has developed self-contained grids, powered by solar, gas and waste material. This is unlike the rest of Nigeria which struggles with poor infrastructure - less than half the population have electricity.
Whilst many feel that the current and previous governments have not realised the opportunities for Nigeria’s growing population and economy, some businesses plan to take advantage of the natural resources and available workforce. One of those companies is the Nigerian firm Dangote Industries, a cement, sugar, flour and other commodities manufacturer. Their latest project includes building the world’s largest single-train petroleum refinery, situated in the Lekki Free Zone outside Lagos and is scheduled to be completed in 2019. With the ability to process 650,000 barrels of crude oil per day, the new refinery would double Nigeria’s refining capacity, and help meet increasing domestic demands for fuel, as well as creating ca. 35,000 new jobs. If successful, this would mean a shift for Nigeria, from relying on importing fuel to exporting instead.
Whilst the outcome of the upcoming election is anyone’s guess, whoever wins need to take a better approach than previous, often corrupt, administrations. To quote Kinsley Moghalu, former Deputy Governor of Nigeria’s Central Bank, on the performance of the current president, Muhammadu Buhari has 'seized every opportunity to miss an opportunity'.
Whether you operate in Nigeria, France, or America, you always need to be prepared for change. Take a look at our regulatory alerts to find out how they can help keep you up to date on any insurance regulation changes in multiple regions across the world.
The potential economic powerhouse of the continent, the country has all the ingredients for success. A huge population gives it the scale other African economies lack. It is a coastal trading hub and the world’s sixth-biggest oil exporter.