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Country Commercial Guides for FY 2000: NigeriaReport prepared by U.S. Embassy Abuja, released July 1999Note* |
CHAPTER V: LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENTNo: Code: Sector Description --- ----- ------------------- 1. OGM Oil and Gas Machinery 2. CPT Computers, Software and Peripherals 3. TEL Telecommunications Equipment 4. APS Automotive Parts and Accessories 5. MED Medical Equipment 6. AVS Aviation Services 7. COS Cosmetics & Toiletries 8. CON Construction Equipment 9. TXF Textiles and Fabrics1. A) Rank of Sector: 1 B) Name of Sector: Oil and Gasfield Machinery C) 3 Letter ITA Industry Sector Code: OGM1998 1999 2000 ---- ---- ---- D) Total Market Size in $ millions) 500 550 575 E) Total Local Production -0- -0- -0- F) Total Exports -0- -0- -0- G) Total Imports 500 550 575 H) Imports from U.S. 300 320 350 I) Exchange Rates $1 = Naira 85 85 100NOTE:1) The above statistics are unofficial estimates. 2) Certain estimates from the FY '99 Country Commercial Guide have been adjusted based on more recent information.
COMMENTS
Oil and gasfield machinery is ranked number one because it is unrivaled, either as a source of national income or investment opportunities. Business observers believe that the oil and gasfield sector offers consistent opportunities for marketing essential production equipment. Drilling equipment appears to hold the most promise for U.S. exporters, with total sales in this subsector projected to exceed $350 million in 2000.
2 - A) Rank of Sector: 2 B) Name of Sector: Computers, Software and Peripherals C) 3 Letter ITA Industry Sector Code: CPT
1998 1999 2000 ----- ----- ----- D) Total Market Size (in $ millions) 300 350 455 E) Total Local Production -0- -0- -0- F) Total Exports -0- -0- -0- G) Total Imports 300 350 455 H) Imports from U.S. 180 250 319 I) Exchange Rates $1 = Naira 85 85 100COMMENTSNigeria's computer sector has witnessed tremendous expansion resulting in millions of dollars in imports from around the world.
The United States is Nigeria's chief supplier of computer hardware and software, accounting for well over 80 percent of its annual imports, estimated at more than USD 250 million in 1999. A substantial quantity of Nigeria's imports in this sector come as accompanied baggage through the airport and usually are not reflected in import statistics.
Judged by the success of post's local IT trade event, CTO'99 (Computer, Telecommunications and Office Equipment) exhibition Nigeria's computer industry will see sustained, strong growth over the next several years. As the Nigerian government pushes economic reforms and more educated young Nigerians venture into business, the demand for information technology and equipment, particularly computers, is expected to rise. Micro-and mini-computers and state-of-the-art printers represent the best sales opportunities and will account for the bulk of imports in this sector over the short and medium term.
U.S. suppliers will continue to face aggressive competition from European and Asian companies, but U.S.-origin equipment is generally considered superior. However, end-users prefer suppliers who, in addition to prompt delivery of products, are able to provide timely after-sales support, including spare parts at competitive prices. Stiff competition in this sector is expected from European and Asian countries who now export computer parts and peripherals for local assembly of PCS in Nigeria. Experts predict that this trend will likely continue over the next 3-5 years. The agent/distributor service provided by the Commercial Service at the American Embassy in Lagos remains the most reliable option to penetrate this sector, while market-share expansion can be achieved through local representatives' participation in CTO exhibitions.
3 - A) Rank of Sector: 3 B) Name of Sector: Telecommunications Equipment C) 3-Letter ITA Industry Sector Code: TEL
1998 1999 2000 ---- ---- ---- D) Total Market Size (in $ millions) 200 300 405 E) Total Local Production -0- -0- -0- F) Total Exports -0- -0- -0- G) Total Imports 200 300 405 H) Imports from U.S. 40 55 122 I) Exchange Rates $1 = Naira 85 85 100COMMENTS Deregulation and partial privatization have changed the market picture for Nigeria's growing telecommunications sector. The market reforms started some years ago (in 1993) have unleashed private-sector-led innovations that are generating demand for various telecommunications equipment and accessories. Topping the list of equipment are digital and mobile phone sets, cellular, transmission and switching equipment, 220V PABX and voice mail facilities.The Nigerian Communications Commission (NCC), the agency responsible for Nigeria's telecom regulation, has approved about 200 operating licenses for private providers of various telecommunications services across the country, including internet service providers. This has generated a pent-up demand for telecommunications equipment, accessories, consultancy and technical partnerships.
The replacement of Nigeria's outdated telecommunications infrastructure through both multilateral and Nigerian funding still is a priority program of the Nigerian government. According to the Communications Minister, Nigeria plans to install at least 3 million telephone lines by the year 2005.
Currently, Nigeria has about 700,000 telephone lines for its highly mobile population estimated at 110 million. Nigerian Telecommunications Limited (NITEL), the nation's sole carrier until 1993, has approved eight private firms to be connected to its switching system in order to provide services to different Nigerian zones. Seven of these firms, VGC Communications, Mobitel, Multilinks, Intercellular, EM-Telecommunications, Spar Communications and GSM Celia have begun operation in Lagos area.
The Government of Nigeria (GON) is considering a proposal to introduce two second network carriers to compete with NITEL and three mobile phone operators to compete with M-Tel, currently Nigeria's sole cellular phone provider. Additionally, all existing laws impeding total deregulation of Nigeria's telecommunications sector are being reviewed.
European firms, particularly from Germany, dominate a market that is estimated at USD 300 million in 1999. Adaptability of European equipment to local conditions, especially electricity voltage, gives it an advantage over U.S.-origin equipment. However, suppliers from the U.S. are increasing their market share by appointing more agents/distributors and entering into new technical agreements especially with newly licensed private telecommunications operators. Over the next 1-2 years, imports of telecommunications equipment and accessories from the U.S. are expected to grow at an annual average growth rate of 30 percent.
4 - A) Rank of Sector: 4 B) Name of Sector: Automotive Parts and Accessories C) 3 Letter ITA Industry Sector Code: APS
1998 1999 2000 ---- ---- ---- D) Total Market Size (in $ millions) 450 500 500 E) Total Local Production 120 100 100 F) Total Exports 5 15 15 G) Total Imports 325 385 385 H) Imports from U.S. 8 80 100 I) Exchange Rates $1 = Naira 85 85 100COMMENTSEven though used cars (over 8 years old) account for more than 75 percent of automobiles imported into Nigeria in the last four years, it is expected that demand in this sector will grow in subsequent years. The low value of Nigeria's currency against the US dollar, from 22 Naira in 1994 to 100 in 1999, has continued to make new automobiles costly. Also, with the lifting of a restriction placed on importation of used vehicles that are over eight years old, more automobiles are expected to be imported in 2000.
U.S.-origin automobiles are becoming popular among Nigeria's elite especially in the four-wheel drive and sport utility vehicle (SUV) range as well as luxury cars. Most of the commuter buses in Nigeria are over ten to fifteen years old and new U.S.-origin buses or fairly used ones would be in high demand to cater for such mode of transportation especially in large city centers.
Local production of automotive spare parts and accessories has increased thus raising the total market to over $350 million in 1999. Estimated sales in 2000 are $500 million, with the U.S. share put at $100 million.
5. A) Rank of Sector: 5 B) Name of Sector: Medical equipment C) 3-Letter ITA Industry Sector Code: MED
1997 1998 1999 ---- ---- ---- D) Total Market Size (in $ millions) 580 570 600 E) Total Local Production (in $ millions) 150 150 150 F) Total Exports (in $ millions) 30 20 20 G) Total Imports (in $ millions) 400 400 400 H) Imports from U.S. 12.5 15 20 Exchange Rates $1 = Naira 85 85 100COMMENTSNigeria still depends on imports for most of its medical equipment needs. Local production is limited to peripheral items such as hospital beds and gurneys.
In 1998, this sector remained almost stagnant as most of the imports were drugs/pharmaceuticals. The slight growth in this sector was fueled by the rehabilitation of old installations as well as expansion and completion of abandoned projects under the Petroleum Trust Fund (PTF). The government of Nigeria will spend an estimated USD 125 million on hospital equipment this fiscal year from the PTF. The PTF also restated its commitment to the resuscitation of the nation's health care delivery system through a systematic funding and mobilization in line with the Bamako Initiative Program, a series of reforms in response to the deterioration of public health systems in developing countries. As in the previous years, private sector participation continues to account for much of Nigeria's imports in 1998, valued at approximately USD 400 million.
The 1998 - 2000 National Rolling Plan objectives also include the completion of Teaching Hospital projects at Ahmadu Bello University, Zaria, University of Nigeria, Nsukka, and Ado Bayero University, Kano, rehabilitation of Ibadan University Teaching Hospital and equipment of several medical health centers and primary health care centers. Also within this plan the PTF has commenced work on a special program to establish seven health centers of excellence, in addition to the rehabilitation of 733 health institutions nationwide.
There is no doubt that the political situation and the resultant economic crunch had some negative effects on imports. However, with the change in government possible political reforms, in the near term, this sector promises strong growth rates that will be sustained by an increasing demand for equipment such as analytical and examination instruments, ultra sound scans, anesthesia equipment, mortuary and laboratory equipment.
Nigeria's health policy is centered on primary health care delivered through an estimated 15,500 health institutions. The caption "Health for All by the Year 2000", still remains the cornerstone of the Nigerian health care sector and therefore health care delivery is still high on the Nigerian government priority list. In addition to the PTF commitment, a number of projects are funded by the World Bank under different loan agreements, especially for the rural areas.
The purchasing power of most Nigerian end-users is waning owing to devaluation of the national currency, and the widening gap between new technologies and developing economies. Refurbished and used equipment are therefore in high demand. A significant segment of this market in Nigeria is dominated by imports from Europe. However, U.S. suppliers stand a good chance of competing successfully because Nigerians like U.S. equipment.
6 - A) Rank of Sector: 6 B) Name of Sector: Aviation/Avionics C) 3-Letter ITA Industry Sector Code: AVS/AIR/APG
1998 1999 2000 ---- ---- ---- D) Total Market Size 250 250 300 (in $ millions) E) Total Local Production - - - F) Total Exports - - - G) Total Imports 200 250 300 H) Imports from U.S. 150 150 180 I) Exchange Rates $1 = Naira 85 85 100COMMENTSMost of Nigeria's domestic airline operators often have had to suspend flight operations because of unserviceable or obsolete aircraft. Nigerian aviation authorities continue to enforce safety regulations and are monitoring airline operators to ensure compliance with required checks on their aircraft. Grounded planes will need replacement of engines, component parts and navigational equipment from U.S. sources. Some airline operators will also need to purchase used but reliable aircraft to replenish their fleet and the U.S. aviation market will be the first choice. Privatization of the national carrier (Nigerian Airways) is in the pipeline. It is expected that the airline's fleet will need to be increased to make the airline profitable.
Nigeria's Federal Aviation Authority hopes to improve navigational aids at all the local and international airports between 1999 and 2000 with provision of instrument landing systems of U.S. origin. Aviation sources predict a boom in this sector in the next few years.
7 - A) Rank of sector: 7 B) Name of sector: Cosmetics (including perfumes and hair care products) C) 3-letter ITA Industry sector code: COS
1998 1999 2000 ---- ---- ---- D) Total market size (in $ millions) 80 93 100 E) Total Local Production 12 13 15 F) Total Exports N/A N/A N/A G) Total Imports 68 80 85 H) Imports from U.S. 15 22 28 I) Exchange Rates $1 = Naira 85 85 85COMMENTSNigeria's demand for imported cosmetics, perfumery, skin- lightening lotions, and hair care products continues to grow amid harsh fiscal economic policies and an anemic supply of foreign exchange. Local production remains low with many local producers running at less than a third of capacity, as scarcity of foreign exchange makes it hard to import essential raw materials.
Competition in this sector is intense; price and country of origin are the highest priorities in making a buying decision for such items.
8 - A) Rank of Sector: 8 B) Name of Sector: Construction Equipment C) 3 Letter ITA Industry Sector Code: CON
1997 1998 1999 ---- ---- ---- D) Total Market Size (in $ millions) 120 150 180 E) Total Local Production 15 20 50 F) Total Exports 5 10 15 G) Total Imports 70 100 120 H) Imports from U.S. 48 60 75 I) Exchange Rates $1 = Naira 85 85 100COMMENTSConstruction equipment is another essential sector likely to grow in 1999. The Government of Nigeria will continue to repair existing road networks and also construct new ones. Increases in imports for earthmoving and road building machinery are anticipated though U.S. exporters will continue to face stiff competition from well-established European suppliers. The attendance of high-powered Nigerian teams at international shows such as the Builders' Show and International Hardware Industry Week has established new trade links with U.S. companies in the construction industry. These links may result in increased exports of construction and building equipment to Nigeria.
9. A) Rank of Sector: 9 B) Name of Sector: Textile and Fabrics C) 3 Letter ITA Industry Sector Code: TXF
1998 1999 2000 ---- ---- ---- D) Total Market Size (in $ millions) 118 142 172 E) Total Local Production 25 24 29 F) Total Exports 5 6 8 G) Total Imports 93 118 143 H) Imports from U.S. 15 23 34 I) Exchange Rates $1 = Naira 85 85 100COMMENTSNigeria's market for textiles will be one of the best prospects, and is expected to expand following current liberalization of textile imports. The markets potential for growth favors U.S. exports, as made in the U.S. textiles are perceived to be of higher quality. All categories of textile fabrics and fashion goods and accessories, except used clothing can now be imported. Availability and quality of imported textiles are some factors that will keep demand high for the next couple of years.
Local production of textiles, on the other hand, constituted just about a third of the total market size in 1999. Thin product lines and stiff economic conditions impact adversely on local producers. Variety, price and easy availability are key success factors in the Nigerian market.
PART II: BEST PROSPECTS IN AGRICULTURAL GOODS
No. Code Sector Description 1 Wheat 2 Dairy 3 Rice 4 Wines and Spirits1. A) Rank of Sector N/A B) Name of Sector WHEAT C) PS&D - NI 9006
1998 1999 2000 ----- ----- ----- D) Total Market Size (in 1000 mt) 1,220 1,640 1,745 E) Total Local Production 20 40 45 F) Total Exports 0 0 0 G) Total Imports 1,100 1,500 1,600 H) Imports from U.S. 800 1,200 1,300 I) Exchange Rates USD 1 = Naira 85 92 100COMMENTSNigeria is the leading destination in Sub-Saharan Africa for U.S. wheat, accounting for some seventy percent of all U.S. shipments to the region and the sixth largest market for U.S. wheat in 1998/99. Nigeria's wheat imports for the year 1999/2000 are projected at 1.5 million tons, and it is the only market among the top six save Japan which purchases U.S. grain on a cash basis. US wheat has a controlling share of about 80 percent of the total wheat imports to Nigeria. However, competition from Argentina, Australia and Canada is growing.
2. A) Rank of Sector: N/A B) Name of Sector: DAIRY C) PS&D Commodity Heading - NI 30281998 1999 2000 ----- ----- ----- D) Total Market Size (in volume MT) 345,000 350,000 360,000 E) Total Local Production 68,000 68,500 69,000 F) Total Exports: -0- -0- -0- G) Total Imports: 277,000 281,500 291,000 H) Imports from U.S. 18,500 20,500 21,000 I) Exchange Rates USD 1 = Naira 85 92 95COMMENTSAbout 80 percent of total dairy products consumed in Nigeria are imported. The dairy products market in Nigeria is dominated by the EU, and the U.S. share of the market remains small. Freight costs from the U.S. are well above those from the EU. However, U.S. dairy products are making determined inroads into the Nigerian market based on quality.
3. A) Rank of Sector: N/A B) Name of Sector: Rice C) PSD Commodity Heading : NI 90061998 1999 2000 ---- ---- ----- D) Total Market Size (in 1,000MT) 2650 2700 2750 E. Total Local production 1850 1850 1900 F. Total Exports -0- -0- -0- G. Total Imports 700 750 750 H. Imports from U.S. 10 15 25 I. Exchange Rate USD 1=Naira 85 92 100COMMENTSNigeria's rice market is highly competitive and price sensitive. Uncle Ben's rice has been relaunched into the Nigerian market, however, the bulk of Nigeria's rice imports comes from Southeast Asia because such imports enjoy a much lower landed cost compared to U.S. rice in this price-sensitive market.
4 - A) Rank of Sector N/A B) Name of Sector : Wines and Spirits C) PS&D Commodity Heading - N/A (Only FAS estimates)
1998 1999 2000 ----- ----- ---- D) Total Market Size (in 1,000 cases of 12 x 70 cl) 3875 4000 4000 E) Total Local Production 3160 3200 3400 F) Total Exports 300 300 300 G) Total Imports 1020 1100 1150 H) Imports from U.S. 250 255 300 I) Exchange Rates USD 1 = Naira 85 92 100COMMENTSImporters complain of high landed costs on wines imported from the United States. Overall, the importation of wines and spirits is stagnating due to high foreign exchange cost.
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[end of document] Note* International Copyright, United States Government, 1998 (or other year of first publication). All rights under foreign copyright laws are reserved. All portions of this publication are protected against any type or form of reproduction, communications to the public and the preparation of adaptations, arrangement and alterations outside the United States. U. S. copyright is not asserted under the U.S. Copyright Law, Title17, United States Code.
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