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Monday, 2 February 2015

Nigeria's economic future and the threats of Boko Haram

The horrific kidnapping of nearly 300 Nigerian school girls has directed global attention to Africa's largest economy.
Nigeria has been one of the hottest destinations for foreign investment in the developing world in recent years. Big companies and investors have been attracted to the country's booming economy, abundant natural resources and rapidly-expanding middle class.

But the fact that militants from Boko Haram were able to carry out their brazen attack on a boarding school could scare away Western investors. Clearly, security is still a real threat.

"The government has proven unable to prevent large-scale bombings and incapable of curtailing activities of Boko Haram in northern cities," said Geoff Porter, head of security consultancy North Africa Risk. "I don't think Nigerian security forces have a grasp on what's taking place."

So far, Nigeria's economy appears to be withstanding the security conundrum. Stocks have barely dropped since the abductions last month, and Western companies have not announced plans for a mass exodus.

But Nigeria must watch investors' willingness to make commitments going forward.

More than $21 billion of foreign direct investment poured into Nigeria in 2013, up 28% from the year before. The country has attracted the most foreign direct investment in sub-Saharan Africa since 2007, according to Ernst & Young.

It's not just energy firms. Western companies sinking cash into Nigeria include General Electric (GE), Procter & Gamble (PG), Yum! Brands (YUM), Hugo Boss (BOSSY), Nestle (NSRGF), Siemens (SI) and SAB Miller (SBMRF).

Nigeria has been diversifying its economy away from energy and subsistence agriculture. The nation's GDP is now $490 billion, just shy of the economies of countries like Norway and Sweden.
But this bullish backdrop is being threatened by Boko Haram, the Islamist group behind the massive kidnappings.

Their four-year insurgency has cost more than 4,000 lives, destroyed countless schools and government buildings and displaced almost 500,000 people, according to the International Crisis Group.

CNN Money originally published this article on May 12, 2014.

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