Nigeria has the potential to be one of the world’s top 20 economies by 2030 with a consumer base exceeding the current populations of France and Germany, according to McKinsey & Co.
Africa’s biggest economy may expand about 7.1 percent a year through 2030, boosting gross domestic product to $1.6 trillion, possibly pushing it above Netherlands, Thailand and Malaysia, the New York-based company said in a report today. About 60 percent of Nigeria’s estimated population of 273 million by then may live in households earning more than $7,500 a year, fueling a consumer boom, McKinsey said.
“Nigeria has a very positive outlook,” Acha Leke, co-author of the report, said in an interview with BloombergTV Africa in Johannesburg. “The most important thing that needs to be done to get it there is execution” of government policies.
As Africa’s largest oil producer with a population of about 170 million, Nigeria has consistently posted annual growth rates in excess of 4 percent over the past decade. That’s spurred foreign investors such as Unilever Plc, Nestle SA and Shoprite Holdings Ltd. to expand operations despite an upsurge in violence by militants in the north.
Based on McKinsey’s growth estimates for the economy, annual sales in consumer goods could more than triple to $1.4 trillion by 2030 from $388 billion currently, it said.
The retail and wholesale trade industry will probably become the largest contributer to Nigerian growth by then and 35 million households are expected to earn more than $7,500 a year, according to the report.
While oil accounts for 70 percent of government revenue and most of Nigeria’s export earnings, its share of the economy has waned. After the statistics office overhauled its GDP data in April, oil’s contribution to economic growth between 2010 and 2013 was 5.1 percent, compared with 14 percent for manufacturing and 20 percent for trade, according to McKinsey.
The Nigerian Stock Exchange All-Share Index has gained 2.9 percent this year, adding to its 47 percent surge in 2013. The naira has dropped 1.1 percent against the dollar since January.
McKinsey’s estimate of Nigeria’s growth potential comes with significant caveats. The government needs to address poverty, lower the cost of basic services, such as housing and energy, expand electricity supply and boost productivity in farming, according to the report.
“If execution doesn’t happen there’s actually a big risk for the country, even from a security stability perspective, to create jobs and lift millions of people out of poverty,” Leke said. “That has to be a big focus, to grow in a way that is inclusive.”
The most recent poverty survey by Nigeria’s statistics agency, published in 2012, showed that 61 percent of Nigerians were living on less than a dollar a day in 2010, up from 52 percent in 2004. Life expectancy is 54 years, eight years lower than in Ghana and 20 years below Brazil, according to McKinsey.
“The policy world, economists can build all manner of scenarios,” Folarin Gbadebo-Smith, managing director for Lagos-based Center for Public Policy Alternatives, said by phone. “It’s a totally disconnected discussion between what we can be and what we will be.” The outcome “depends on what our government does,” he said.