Nigeria's 'champagne' economy bucks Boko Haram effect

Nigerian fashion models Image copyright Getty Images
Image caption Fashion, films and luxury goods are boosting Nigeria's economy

Nigeria is one of the world's fastest growing markets for champagne and private jets, thanks to a booming economy boosted by the thriving sectors of mobile phones, banking and Nollywood.

There are at least 138 private jets registered in the country, according to Bombardier.

The country became Africa's largest economy in 2014, if the latest overhaul of statistics is to be believed. Changing the base year calculations from 1991 to 2010 certainly seems to have had a flattering effect.

Nigeria has also become the region's top destination for foreign direct investment, with inflows now no longer just concentrated on the oil and gas industry.

Multinationals, such as Nestlé, Heineken, SABMiller and Unilever, are pouring in millions of dollars to expand production, shrewdly tapping into the rich consumer market of the emerging middle classes of Lagos and Benin.

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Image caption Oil still accounts for about 90% of Nigeria's exports

Newcomers Procter & Gamble and Nissan are also wading in, investing in manufacturing and assembly plants, while General Electric is investing in power.

Militant disruption

However, its spectacular growth has been somewhat checked in the last 12 months by the threat of the Islamist militant group Boko Haram.

Large-scale attacks, including the abduction of over 200 schoolgirls last year, has taken its toll on local businesses in the poverty-stricken northern states, where the terrorist group has gained most ground.

Currently, the three northern states of Adamawa, Borno and Yobe are under a state of emergency due to the increasing violence.

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Image caption Dawanau grain market, near Kano: Business activity in the city has dropped 80% because of the violence

The local chamber of commerce estimates that business activity in Kano has dropped by 80% over the past three years.

Sa'id Dattijo Adhama, the owner of a textile business in the city of Kano, says: "Lots of projects are being cancelled in the region because people are scared.

"They are scared that factories can become targets; commuters to work can also become targets; and this is impacting everyone here.

"Lots of women here normally work part-time or sometimes full-time. They cannot anymore. It is too dangerous for them - even the employers do not want to hire them.

"So, families are suffering - they might have had two incomes before, now they only have one."

Spoils of growth

The only economic impact the group has had so far is in slowing down production in the regions that are already struggling.

Many analysts feel that the spoils of growth and prosperity are concentrated on the few, as nearly 70% of the population lives below the poverty line, according to the National Bureau of Statistics.

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Image caption Nigerian soldiers have stepped up their campaign against Boko Haram in the north

Many in the south of the country feel that the threat of Boko Haram, whilst unfortunate, is confined to the north.

The economic divide between the two regions, if superficial before, is now very much entrenched.

David Ladipo, managing director of energy company Azura Power West Africa, says: "We're diversifying now. Non-oil sector growth is 7% - Nigeria's infrastructure is changing and foreign investors are not deterred.

"My business focuses on the electricity sector and I don't have problems with foreign investors despite it being an ambitious venture."

Oil drop

The rise of extremist Islamic militancy has come at a time when the price of oil has dropped to $55 a barrel, posing a larger threat to Nigeria's economy.

"The north-eastern states make up a small fraction of Nigeria's economy," says Jon Ashbourne, Africa economist at Capital Economics.

Image copyright EPA
Image caption While traditional crafts still flourish, newer sectors are adding to economic growth

"Estimates say those affected states account for 7% of the economy, and Boko Haram is only active in a portion of those states.

"Whereas oil accounts for 90% of Nigeria's exports and over three-quarters of government revenue. So the falling price of oil has meant that government spending has had to be cut back."

The oil price fall may have also led to the devaluation of the Nigerian currency, the naira, which fell 7.5% against the dollar last year.

"The currency weakening is also worrying," says Mr Ashbourne. "Nigeria imports lots of goods, including fuel and food, so the cost of the essentials will increase."

Capital Economics says it has cut its 2015 growth estimate for Nigeria from 6.2% to 4% as a result.

Niger Delta

Boko Haram is threatening to bring its insurgency to Lagos and the oil fields of the Niger Delta - the southern regions that drive the economy. Growth could suffer significantly if militants succeed in bringing mayhem to Lagos, economists fear.

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Image caption If Boko Haram militancy extends south to the oil-rich Niger Delta, Nigeria's economy could be severely hit

As poverty persists across the country, the number of Nigerian millionaires will jump by 47% over the next two years, say analysts at New World Wealth.

Last year, whilst attacks accelerated in the central city of Abuja, the World Economic Forum still held its meeting there, just weeks after the schoolgirls went missing.

And in Lagos, start-up incubators, fancy cafes and luxury car dealerships continue to multiply across the city.

"We feel for our fellow countrymen, of course," says Mr Ladipo. "And it saddens me every time I hear about another attack.

"But this country is still an attractive market for businesses both large and small around the world. The evidence is clear."