WORK IN PROGRESS

Nigeria 2017 | TOURISM | REVIEW

Despite its abundance of touristic offerings, Nigeria's travel and tourism sector still struggles to gain the traction that many of its African counterparts do. Through diversification efforts, however, there is hope.

Nigeria is not a leading destination for foreign tourists. In fact, the country's travel and tourism sector has predominantly depended on locals. The World Travel & Tourism Council (WTTC) reports that foreign visitor spending represented only 3.2% of travel and tourism's contribution to Nigeria's GDP while domestic traveler spending denoted the remaining 96.8%. This imbalance is telling of Nigeria's ineffectiveness in luring internationals to its many attractions as well as the country's setbacks in addressing core infrastructural, security, and cleanliness issues, which prevent tourists from making Nigeria a go-to destination in Africa that can compete with the likes of Morocco, South Africa, Tunisia, and Algeria.

According to the WTTC, in 2016, Nigeria attracted some 562,000 international tourists and generated NGN88.12 billion in visitor exports. By 2026, Nigeria hopes to nearly double its international tourists to 1,135,000 per year. In 2015, leisure travel spending among both international visitors and locals comprised 54.4% of the travel and tourism's contribution to GDP while the remaining portion was from business spending. These figures grew 5.2% and 4.3%, respectively, in 2016.

Even with the crutch of domestic tourism, the overall travel and tourism sector in Nigeria remains diminutive. According to the WTTC, in 2015, the direct contribution of travel and tourism to Nigeria's GDP was NGN1,632 billion (USD8.28 billion), or 1.7%. In 2016, this figure rose by some 4.8% and over the next 10 years is expected to increase by 6.4% per year to NGN3,189.7 billion (USD16.18 billion). In 2026, the sector will still only represent 1.7% of the country's GDP.

Including the wider effects, such as that from investment, the supply chain, and induced income impacts, Nigeria's travel and tourism sector contributed as much as NGN4,051.8 billion in 2015 and NGN4,252.8 billion in 2016 to the GDP, signifying a 5% increase. Meanwhile, it is estimated that the sector directly supplied 661,000 jobs in 2016. By 2026, this figure is expected to rise to 943,000 jobs, an increase of 3.6% per year.
Nigeria's potential as a tourism hub is undeniably big. The country is home to 10 UNESCO World Heritage Sites and boasts tropical rain forests, mangrove swamps, and coastal beaches. Nigeria has dozens of national monuments and sites. The Calabar Carnival in Cross River has also become an international attraction since its inception in 2004. In 2015, the event attracted participants from nine countries, including Brazil, Spain, France, and Italy.

The former Director General of the Nigerian Tourism Development Corporation (NTDC) Sally Uwechue-Mbanefo told TBY how Nigeria's tourism sector fares against other African countries, “Globally, tourism contributes 10% to GDP. In Gambia, tourism contributes as much as 17.7%, in Kenya 11%, and in South Africa 8% […] In Nigeria, the sector's contribution is below 5%.”

Uwechue-Mbanefo remains optimistic. She continued, “We have to work together to develop the tourism value chain, which affects every sector in the country. Tourism involves everything from power to transport, manufacturing, agriculture, retail, and SME growth. We want to develop the tourism sector through PPPs and turn tourism into an asset. We should see tourism sites as real estate investments.”

Investment Incentives

According to WTTC reports, in 2015 the tourism sector attracted investment worth NGN1,035.5 billion, an amount that increased by 9.23% in 2016. To attract more investment to Nigeria's tourism sector, the government is providing a host of incentives.

The NTDC offers a five-year, 120% tax holiday for investors interested in coming to the country. After the first five-year stretch, investors receive a 50% discount on taxes for the next five years. The tourism industry also has no expatriate quota.

Meanwhile, 25% of hotels' income generated from tourism is tax-exempt, but only if the income is put in a reserve fund and spent within five years on expansion or construction projects involving new hotels, conference centres, or other facilities beneficial for tourism development.

In June 2016, the Central Bank of Nigeria issued the Revised Guidelines for the Operation of the Nigerian Interbank Foreign Exchange Market to address the declining naira. As part of the scheme, foreign private equity investors are allowed to remit the proceeds of an investment that they make in Nigeria for their own accounts.

Hotels

One segment that has seen significant investment in the past decade has been the hotel business. International hotel brands had avoided Nigeria in the 1990s due to security concerns. However, since 2008, these same brands have come to fill room shortages in Nigeria's commercial capital of Lagos, where business tourism is rife. The many business travellers passing through Lagos have pushed room rates up, making them the second-highest rates in the world in 2013, with an occupancy rate of 67%. Available rooms rose from 7,229 in 2010 to 11,335 in 2013.

In 2016, the hotel boom experienced a setback. More than 15 hotel projects across Nigeria were put on hold as hoteliers struggled to source investments and loans in lieu of the unpegging of the naira and an 11% interest rate.

Despite the slowdown in the hotel boom, many projects are continuing in stride and many investors are betting on success. In 2015, Nigeria's largest hotel booking website, Hotels.ng, received a USD1.2-million investment from seed-stage technology fund the EchoVC Pan-Africa Fund. Hotels.ng encompasses more than 7,000 hotel listings in 21 regions across the country. In 2014, the site experienced more than 1 million hotel searches and capped off the year with an operating profit.

In 2016, Hilton signed a management agreement with Quality Inspection & Testing Services Limited for the erection of a 350 guest-room and suite hotel at the Murtala Muhammed International Airport in Lagos. The project signifies international brands' growing portfolios in Africa as well as the growing faith in business tourism in Lagos, the seventh-fastest growing city in the world. The project is slated for completion in 2023.

Nigerians Abroad & En Route

According to the Travel & Tourism Intelligence Centre (Tourism IC), a UK-based solutions company for global travel and tourism intelligence, by 2018 the number of Nigerians traveling within the African continent is expected to grow faster than the number of Nigerians travelling to other continents.

Tourism IC predicts outbound tourists to reach 1.8 million in 2018, an increase from the 1.4 million in 2013. Only 39% of outbound Nigerians visited other African countries in 2013, but this is expected to change.
African countries are becoming more popular destinations for Nigerian travelers as domestic income levels rise, promotional efforts by other African countries become more effective, and geographical proximity becomes a decisive factor. In 2014, South Africa launched a tourism campaign in Nigeria, opening an office in Lagos to attract tourists. As a result, Tourism IC expects an increase from 76,000 Nigerians who visited South Africa in 2013 to 112,000 tourists visiting South Africa in 2018, exhibiting a growth rate that will outperform the increase in Nigerian tourists visiting the US and the UK, currently the two most visited countries by Nigerians.
But when it comes to medical treatment, Nigerians are looking to other continents. Nigerians are reportedly spending USD1 billion per year on outbound medical tourism, particularly in India. It thus comes as no surprise that the country's Ministry of Health is now looking to retain the USD1 billion it loses yearly as well as attract foreigners to its medical facilities.

At the fourth annual meeting of the Nigerian-American Medical Foundation in December 2016, physicians from all over the world, particularly from the US, discussed the need to improve Nigeria's infrastructure and optimize human resources in order to unleash the country's potential as a hub for medical tourism in Africa. Nigerian doctors in the diaspora were encouraged to return to Nigeria and help to achieve this goal.

The foundation claimed that the hospital sector could quadruple the revenue generated by the hotel industry from the same amount of investment. It also suggested that a focus on medical tourism would help diversify Nigeria's economy away from oil, a necessary move amid the current low oil price environment.

Nigerian Diaspora

But what is even more interesting than Nigerians' travel trends is the way the money of Nigerians in the country's diaspora is finding its way back to the homeland. According to the Global Knowledge Partnership on Migration and Development, Nigerians in the diaspora sent home USD20.8 billion in remittances in 2015, making the country the sixth-largest receiver of remittances in the world. This figure is estimated to reach USD35 billion by the end of 2016.

Nigerians at home received USD5.7 billion from the US and USD3.7 billion from the UK in 2015, together comprising nearly half of all remittances. Approximately 20 million Nigerians are living abroad and comprise the bulk of international money transfers coming into the country.

In recent years, however, the Nigerian government has been cracking down on the remittance business. Western Union, Moneygram, and Ria are the country's three registered international money transfer operators (IMTOs). However, there are many operators who are not registered IMTOs and who form a large portion of the USD35-billion industry. To harness better control over remittances, Nigeria's central bank has been enforcing new laws to filter the masses and ultimately limit their operations so that the government can maintain the stability of the exchange rate and lessen the gap between the official and black-market exchange rates.
After having tightened qualifications for operating a remittances business in 2015, when the Central Bank required such companies to prove a net worth of USD1 billion and at least 10 years of industry experience, the Central Bank released a new directive in 2016. This time, the law all but erased the remittance industry in Nigeria, leaving only the three registered IMTOs to continue operations. The move was met with backlash and was argued that it would move remittance prices higher, creating an anti-competitive market and encouraging inefficiency. Some say that the newest mandate will only encourage the black market to flourish.