Africa’s Largest Economy
Nigeria is the largest economy in Africa with impressive GDP growth rate. With a population that could become the third largest in the world by 2050, Nigeria presents a large market of consumers.
GDP growth averaged 7 percent between 2007 and 2015 but has slowed down with the global drop in commodity prices. The country has a high propensity to consume with a growing middle class and a youthful population. Nigeria is currently the eighth most populous country in the world with a population of 188.5 million. It is projected to become the third most populous country in the world by 2050. It.
Figure1: Top Five (5) economies in Africa (Source: World Bank 2015)
Figure 2: GDP Growth Rate of Comparable Countries (Source: World Bank 2015)
Although the largest economy in Africa, Nigeria is still a middle income, mixed economy and emerging market, with expanding financial, service, communications, technology and entertainment sectors. Nigeria is ranked as the 21st largest economy in the world in terms of nominal GDP, and the 20th largest in terms of Purchasing Power Parity.
Economic reforms initiated since the return to civilian rule (in 1999) have put Nigeria back on track towards achieving its full economic potential. Nigerian GDP at purchasing power parity (PPP) has almost tripled from $170 billion in 2000 to $451 billion in 2012, although estimates of the size of the informal sector (which is not included in official figures) put the actual numbers closer to $630 billion.
Correspondingly, the GDP per capita doubled from $1400 per person in 2000 to an estimated $2,800 per person in 2012 (again, with the inclusion of the informal sector, it is estimated that GDP per capita hovers around $3,900 per person).
Figure 3: Nigeria’s GDP Per Capita (Source: World Bank 2015)
Nigeria’s manufacturing sector is the third largest on the continent and produces a large proportion of goods and services for the West African sub-region. The recent resizing of the Nigerian economy show that other sectors of the economy, such as telecommunications, banking and the film industry, are rapidly growing contributors to Nigeria’s GDP.
Nigeria’s petroleum sector accounts for about 90 percent of Nigeria’s foreign income earnings. Although the petroleum sector is important, it remains in fact a small part of the country’s overall vibrant and diversified economy. The largely subsistence agricultural sector has not kept up with rapid population growth, and Nigeria, once a large net exporter of food, now imports a large quantity of its food products, though there is a resurgence in manufacturing and exporting of food products.
Labour Force: Nigeria has a young and rapidly growing youthful population that translates to an ever increasing labour force. The rate of unemployment has however dropped from the 2011 high.
Trade: Nigeria trade relations do not have any barriers as is shown by the consistency in total trade figures from 2012.
Poverty and Literacy Rate: The higher literacy rate for Nigeria’s youth population is a sign of the embracing of education in Nigeria.
Nigeria Tax System
The top individual income tax rate is 24 percent, and the top corporate tax rate is 30 percent. Other taxes include a value-added tax and a capital gains tax. The overall tax burden equals 3.1 percent of total domestic income.
The Federal Inland Revenue Service has simplified the tax filling and payment process and ensured that everyone now has a unique Tax Identification Number (TIN). A Joint Tax Board has been set up to help curb the multiple taxation challenge.
Nigeria has signed agreements with many countries on issues concerning tax. Nigeria has existing treaties with the United Kingdom, France, Netherlands, Belgium, Pakistan, Canada, Czech Republic, Philippines, Romania, etc.
Tax Administration in Nigeria: The administration of taxation in Nigeria is vested in the various tax authorities depending on the type of tax under consideration. Broadly, there are three categories of tax authorities, namely:
- Federal Inland Revenue Service,
- State Internal Revenue Service, and
- The Local Government Revenue Committee
Tax Types: The following tax types are administered in Nigeria:
- Companies Income Tax
- Petroleum Profits Tax
- Value Added Tax
- Personal Income Tax
- Withholding Tax
- Education Tax
- Stamp Duties
- Capital Gains Tax
- National Information Technology Development Fund Levy
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Nigeria Economic Freedom
Since its return to democracy in 1999, Nigeria has consistently pursued economic reforms to enhance management of public finance and make business regulations more efficient. These reforms have resulted in a 2016 Economic Freedom Score of 57.5 (up 1.9 points), which is higher than the score for Sub-Saharan Africa (55.5). Nigeria is ranked eight in West Africa.
The current administration has restated its commitment to improve the economic freedom of Nigeria. For instance, the government has removed the minimum capital requirement for starting a business, introduced measures to improve access to finance for local small and medium enterprises. It is currently working towards improving its regulatory efficiency and rule of law.
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|Nigeria Top Trading Partners 2014|
|Rank||Partner||Value (US$bn)||Rank||Partner||Value (US$bn)||Rank||Partner||Value (US$bn)|
|1||China||16.99||1||European Union||33.8||1||European Union||46.79|
|8||South Africa||1||8||South Korea||2.8||8||South Korea||4.3|