Nigeria’s balancing act: Can reforms fuel a diversified future?

Felix O. Arome is a distinguished Nigerian architect, diplomat, and entrepreneur. He serves as Ambassador to the African Union Agenda 2063 Assembly and the United World Congress of Diplomats (UN-WCD), where he champions infrastructure, energy, and industrial development across Africa. As President/CEO of The Reef Holdings, he leads several companies including The Reef Apartments, Lujo Parades, Oak 67 Farms, Paesaggio Landscape, and Seraphicworld Constructions renowned for landmark projects across Nigeria and the continent. A registered architect and member of the Nigerian Institute of Architects (NIA) and ARCON, Amb. Arome is also a certified management and advertising professional. He is pursuing a PhD in International Business Administration at Rushmore Business School, Switzerland. Driven by purpose and impact, he combines visionary leadership with a passion for sustainable development In a recent interview with Kenneth Athekame, he discussed recent government policies affecting the energy and industrial development sectors. He also addressed Nigeria’s current attractiveness to both foreign and domestic investors. Key factors influencing investor confidence were highlighted, along with recommendations on what can be done to enhance it. Excerpts:

What’s your overall assessment of the current state of the Nigerian economy? What are the biggest opportunities and challenges you see?

Nigeria’s economy is at a pivotal juncture. Recent fiscal reforms, such as the removal of longstanding fuel subsidies and currency devaluation, have begun to yield positive outcomes. The World Bank reports a reduction in the fiscal deficit from 6.2% to 4.4% of GDP in the first half of this year, accompanied by robust growth in the services sector and enhanced stability in the oil industry. Opportunities abound in sectors like telecommunications, agriculture, and the digital economy, driven by a large population and a burgeoning middle class. However, challenges persist, including over-reliance on oil revenues, fiscal deficits, inflation, and unemployment.

How have recent government policies impacted the energy/industrial development sector?

The government’s commitment to economic diversification is evident through significant policy reforms. The removal of fuel subsidies and currency adjustments have improved fiscal stability, fostering a more conducive environment for industrial growth. Additionally, the introduction of automated short-stay visa approvals aims to enhance business travel and tourism, potentially boosting industrial collaboration and investment.

From your perspective, how attractive is Nigeria currently for foreign and domestic investment? What are the key factors influencing investor confidence, and what could be done to improve it?

Nigeria presents substantial market potential, attracting a diverse range of foreign investors, particularly in sectors like telecommunications, agriculture, and the digital economy. However, challenges such as dependence on oil, fiscal deficits, inflation, and unemployment persist.

To enhance investor confidence, the government should continue implementing and sustaining economic reforms, improve infrastructure, and ensure policy consistency. Streamlining regulatory processes and enhancing transparency will also make the investment climate more appealing.

Nigeria has long aimed to diversify its economy away from oil. How effectively are the hospitality and energy/industrial sectors contributing to this diversification effort? What more can be done?

The hospitality sector is experiencing growth, with projections indicating increased demand for quality accommodations. This growth contributes to economic diversification by attracting tourism and creating jobs.

In the energy sector, initiatives like the Dangote Petroleum Refinery, despite facing challenges, aim to reduce fuel imports and boost local production. To further these efforts, investments in renewable energy and infrastructure are essential.

How are inflation and foreign exchange volatility impacting these sectors, particularly in terms of project costs, financing, and profitability? What strategies are businesses employing to mitigate these risks?

Inflation and foreign exchange volatility have led to increased project costs and financing challenges. However, recent fiscal reforms have resulted in a more stable foreign exchange rate, aiding businesses in better planning their trade costs, despite high pricing points.

To mitigate these risks, businesses are adopting strategies such as sourcing local materials, diversifying their supply chains, and engaging in financial hedging. Additionally, advocating for and benefiting from government policies that stabilize the macroeconomic environment is crucial.

What are the major trends shaping the hospitality industry in Nigeria?and What are the growth prospects for the sector in the next 5-7 years?

The hospitality industry is witnessing trends like increased demand for quality accommodations and a focus on health and wellness tourism. With Nigeria’s growing middle class and urbanization, the sector is poised for significant growth in the coming years.

How is the real estate sector adapting to urbanization trends and the need for sustainable development? What are the challenges related to land ownership, titling, and access to financing?

The real estate sector is embracing sustainable development practices, with initiatives promoting Environmental, Social, and Governance (ESG) principles. However, challenges persist, including issues with land ownership, titling, and access to financing. Addressing these requires regulatory reforms, improved land administration systems, and innovative financing solutions.

What is your assessment of Nigeria’s energy landscape, particularly regarding access to reliable and affordable electricity? How is this impacting industrial development?

Nigeria faces challenges with unreliable power generation, which impacts industrial competitiveness. To remain competitive, embracing renewable energy is essential. Improved power supply is anticipated, bolstered by factors like the planned $1 billion support from the African Development Bank.

What are the most promising areas for investment in the energy sector? What are the regulatory and infrastructural hurdles that need to be addressed?

Renewable energy presents a promising investment opportunity, especially in off-grid solutions for rural areas. However, regulatory challenges and infrastructural deficits need addressing. From January 1, 2025, Nigeria requires oil license applicants to demonstrate low carbon emissions and a renewable energy program, aligning with the goal of achieving net-zero carbon emissions by 2060.

How can Nigeria leverage its natural resources to drive industrialization and create jobs? What specific industries do you think hold the greatest potential for growth?

Leveraging natural resources like oil and gas can drive industrialization by investing in refining and petrochemical industries. Additionally, sectors such as agriculture and telecommunications offer significant growth potential, contributing to economic diversification and job creation.

How can the hospitality, real estate, and energy/industrial sectors contribute to Nigeria’s sustainable development goals (SDGs)? What are the key environmental and social considerations that need to be taken into account?

The hospitality, real estate, and energy/industrial sectors are pivotal in advancing Nigeria’s Sustainable Development Goals (SDGs) by integrating environmentally friendly practices and fostering social well-being. Hospitality Sector: By adopting sustainable practices, the hospitality industry can significantly impact environmental conservation and community development. Implementing energy-efficient systems, reducing water consumption, and minimizing waste are essential steps. Moreover, sourcing locally produced goods supports local economies and reduces carbon footprints. Engaging in community-based tourism ensures that local populations benefit directly, promoting inclusive economic growth.