The new economy: This African powerhouse might be opening a new chapter towards prosperity
Nigeria’s vice president, Kashim Shettima, announced last month that Nigeria plans to become a leading player in the global halal economy. He also stated that Nigeria’s economic and demographic potential puts it in an advantageous position to develop an active investment sector within the halal economy.
What is halal?
It should be noted that ‘halal’ is a designation for products authorized for consumption by Muslims that meet specific standards and religious norms. However, while halal is more often referred to in the context of food, it is not limited to it, but applies to virtually every sphere of human life, including the economy.
Halal economy (or Islamic economy) is directly related to the idea of justice in Islam, the ethical behavior of followers of the religion. In addition, halal economy in more applied terms is related to trade, financing, provision of services, and products that meet the requirements of Islamic ethics. There are several sectors of the halal economy: Food, clothing, pharmaceuticals, cosmetics, tourism, finance, education, and media. While each sector is usually different from the other, common faith-based values unite them into a cohesive whole.
For example, Islamic banking (finance), which is an important part of the halal economy, is a set of rules conditioned by the religious precepts of Muslims in the sphere of financial and economic relations, affecting the conduct of financial transactions, prohibiting usury (riba) and prescribing equal responsibility of depositors. The growing demand of Muslims in the world for halal products and services has influenced the extensive growth of the halal economy in recent years.
Halal in Nigeria
Nigeria is keen to capitalize on its potential on this front by leveraging the global growth of the halal economy. It is valued at over $2 trillion as of 2024 and will exceed $2.8 trillion in the coming years. This is further supported by the growing number of Muslims in the world, which already exceeds 1.8 billion and will reach 2.2 billion by 2030.
The market for halal products in Nigeria does indeed have ample prospects for growth given the social, demographic, and religious characteristics of the country. Nigeria is the largest country in Africa by population with over 220 million people, over 51% of whom are Muslims. Given that Nigeria is one of the fastest growing countries in the world in terms of population (2.5% per year), the number of Muslims in the country will keep growing. This position makes Nigeria the largest country in terms of the number of Muslims living there in the whole of Africa, ahead of Egypt.
It is not surprising in this background that Nigeria is already the second largest halal economy in Africa (after Egypt), accounting for $107 billion or 22.7% of the market for the entire halal economy in Africa, which has the potential for significant growth. The halal economy in Nigeria is planned to reach $180 billion by 2027, equivalent to an average annual growth rate of 10.7%. Globally, as of 2023, Nigeria was ranked 8th among the top ten halal economies in the world, accounting for over 4.7% of the world’s halal economy.
As the halal ecosystem in Nigeria is still in its early stages of development, an important issue for future growth remains the certification of halal products. The country still lacks a single certification body for halal products, which creates additional challenges due to possible divergent requirements of different organizations.
As early as 2022, Nigeria’s Ministry of Industry, Trade and Investment established a Halal Certification Technical Committee, and in 2023, the Standards Organization of Nigeria began work to establish an operational framework for halal products that will meet the standards of both domestic and foreign consumers.
Nigerian share in the world
The Nigerian government is also working with international organizations such as the Arab Bank for Economic Development in Africa, Islamic Development Bank, and Halal Products Development Company to ensure that Nigerian products meet global halal standards. This is particularly important since the notable growth prospects for Nigeria’s halal economy lie in foreign trade.
As of 2023, Nigeria was only the 11th largest exporter (about 5.8%) of halal products among African countries to the Organization of Islamic Cooperation countries, amounting to about $380 million. Aliyu Sheriff, the special assistant to the president of Nigeria on export expansion, highlighted the economic potential of halal products, noting that if Nigeria can increase halal exports to Organization of Islamic Cooperation countries from 2% to 6% over the next four years, it could increase GDP by $548 million.
The African Continental Free Trade Area is seen as an important factor in the potential expansion of Nigeria’s halal trade, given that a notable number of countries (27 out of 57) of the Organization of Islamic Cooperation are located in Africa. While Nigeria’s halal exports to these countries amount to only $59 million, there is a notable chance of increasing trade with them through a general expansion of regional trade.
Imports and exports
The most promising halal exports in Nigeria are meat and edible meat offal, cocoa and cocoa preparations, animals, sugars, and sugar confectionery, which Nigeria will focus on developing trade in.
At the same time, given the large demand, Nigeria remains highly dependent on halal imports, which account for more than 70% of the products consumed in the country. Consequently, the country is interested in expanding its own production capacity to reduce this dependence. Moreover, increased production capacity has the potential to create jobs and economic growth, especially in the agriculture, food processing, and logistics sectors, which will have a positive impact on the overall economic health of the country, opening up opportunities for businesses and investors.
Nigeria already has a huge domestic market for halal investment. Nigeria accounted for 3% of halal investment in 2023, amounting to about $450 million and placing Nigeria in the top ten economies for Islamic financial technology. At the same time, Nigeria continues to need further investment in infrastructure for the production, processing, and distribution of halal products that will positively impact the entire ecosystem.
Islamic finance sector
The Islamic finance sector is one of the fastest growing sectors in Nigeria’s halal economy. In 2023, Islamic finance assets in Nigeria amounted to $3.8 billion, which is still extremely low globally (0.09%). At the same time, of these funds, about 59% come from outstanding ‘sukuk’ (the Islamic equivalent of bonds), making Nigeria the largest sukuk market in Africa ($2.3bn or 42% of sukuk in Africa). In addition, Nigeria has three national Islamic banks: Jaiz bank, Taj bank, and Lotus bank, with significant potential for growth given that a notable number of Nigerian Muslims do not yet utilize banking services.
According to Nigerian government officials, further initiatives to strengthen the halal economy in the country are expected to bring together government agencies, major private sector companies, and international partners. Among the immediate plans voiced are the development of a comprehensive ecosystem of halal products, harmonizing strategies to take a leadership position as an exporter of halal products targeting high value-added markets, attracting international investment, and increasing local awareness of halal products.
This shows that the government is serious about developing this area, and Nigeria’s next steps will be to strengthen domestic capacity, improve infrastructure, and introduce modern technology, with increasing regional halal trade in Africa, strengthening its own role in the halal economy on the continent.
Amid ongoing changes in the world order, the emergence of new security challenges, the increasing influence of various political, economic, and socio-cultural factors on the stability of world markets, and the slowdown of economic growth, the halal economy appears to be one of the options for the formation of new fair economic frameworks. It is especially important that these instruments are available to “world majority” countries, and not just Islamic countries.
