Striking a balance: The sector has the potential to be a strong GDP contributor

It may not rank high among the world’s recommended travel destinations, but tourism in Nigeria is among the few sectors with significant potential to support efforts to diversify away from oil in a sustainable and inclusive manner. Though largely guided by business travellers, the sector could also benefit from the nation’s rich cultural heritage and diverse landscapes.

BY THE NUMBERS: According to statistics from the Federal Airport Authority of Nigeria, the inflow of passengers rose in 2011, with over 1.9m arrivals recorded at the international airports of Lagos, Abuja and Port Harcourt, up by about 10% year-on-year. Traffic at domestic terminals was much higher, with 5.5m incoming and 5.4m outgoing passengers. The grand total showed a 4% growth compared to the year before. Despite this growth, the tourism industry continues to play only a marginal role in Nigeria’s economy. Whereas tourism statistics are chronically under-recorded, the World Travel and Tourism Council in its yearly report on the sector’s economic impact put its direct contribution to GDP at 1.6% (N598.6bn, $3.83bn) in 2011, ranking it in 162nd place out of a total 181 countries surveyed. This number was down from 2.7% in 2002. Total contribution, including indirectly related activities such as transport, cafes and restaurants, accounted for 3.3% of GDP, more than double the direct figure. The number of direct employees in the sector was estimated at 838,500, or 1.4%, of the total job market, down from 2.3% in 2002. A slightly more promising figure was that of investments into the sector, which amounted to N251.5bn ($1.61bn) for 2011, representing 7.7% of total investments into the Nigerian economy, most of that going into the hotel industry. The outlook for the sector is positive despite the growth figures coming from a low base. Direct contributions to GDP are forecast to rise by 11% in 2012 and 6.3% a year from 2012 to 2022, while employment by sector as a proportion of the total is likely to go up 7% in 2012. Investments are expected to rise by 2.3%, constituting 7% of total national investment for the year.

Domestic spending generated 88.3% of direct tourism GDP in 2011 and is expected to grow by 12.5% in 2012 to N1.01trn ($6.42bn), showcasing the important role of domestic travel in the industry’s development. Spending by foreign visitors is set to grow at a mere 1.5% in 2012 to a total of N119.4bn ($765.16m).

LION’S SHARE: Remarkably for a sector with few developed facilities, leisure spending constitutes the bulk of revenues, with more than 64%. The remainder originates from business spending such as conference fees, catering and transport. However, given the weak record keeping and high level of informal sector activity, the actual contribution rates are much higher. Moreover, many indirect activities affecting tourism revenues such as transportation, tourist markets and visits to guesthouses, are ignored. Regardless of the industry’s actual size and economic impact, all stakeholders agree the potential for expansion is substantial.

POLICY: In its First National Implementation Plan (FNIP) outlining the priorities of Vision 20:2020 for 2010-13, the federal government states its ambition to make tourism one of the five major income earners by 2020. Nigeria estimates an annual rise of 10% per year in tourist arrivals and projects that the sector’s contribution to GDP will stand at 2.7% by the close of 2013. An additional 10,000 tourism and hospitality workers are to be trained by 2013 and reforms to immigration procedures should limit the duration of tourism visa applications to two days. The strategy to achieve these ambitions is partly based on a master plan that was developed in 2006 under the presidency of Olusegun Obasanjo in partnership with the UN World Tourism Organisation and the UN Development Programme.

The FNIP announced investments of up to N27.91bn ($178.62m) to be made in the sector before the end of 2013. Allocations will go towards developing five resort clusters, including the Sahara Gateway around the northern city of Kano, the Conference Cluster in the Federal Capital Territory, the Scenic Cluster in the highlands of the Plateau region, the Atlantic Gateway along the Lagos-Badagry corridor and the Tropical Rainforest Cluster in the south-east.

The country’s rich cultural heritage is to be explored more effectively by the success of festivals in Lagos, Kano, Katsina and Calabar, and by encouraging other state governments to follow their lead. Funds have also been allocated to open a National Theatre and Gallery in the capital and to improve the city’s National Institute for Cultural Orientation. Additional funds have been set aside to establish a culture and tourism fund to promote cultural tourism at home and abroad.

Other key focuses of the budgeted allocations include enhancing the country’s image and improving the ease of entry for foreign visitors. Tourism officers are to be posted to Nigerian embassies and more funding is to be allocated to the Nigeria Tourism Development Cooperation (NTDC), the tourism regulator responsible for the promotion and marketing of the sector worldwide.

DEVELOPMENT FUND: Though progress on the plans so far has not been disclosed, there was a positive sign at the start of 2012 when the Tourism Development Fund was launched. Once available for disbursement, the N5bn ($32m) fund will be used to support a variety of aspects, including funding and capacity building. Whilst details have yet to be finalised, the fund will be financed by private sector contributions and supported by a percentage from sales of, among other things, airline tickets and hotel rooms, according to the minister of tourism, culture and national orientation, Edem Duke. “Our vision is that 70% of the tourism fund will go to visual art, some towards tourism infrastructure, while a certain percentage will be set aside for the development of tourism products, as well as training,” Duke told local media at the beginning of 2012. The training component will see the establishment of tourism education programmes throughout the country, which are intended to provide new opportunities for the more than 20m unemployed young people.

CHANGING TRACK: Meanwhile, the NTDC has changed its marketing approach. Various past campaigns under the slogans, “Tourism is life” and “Nigeria: Good People, Great Nation” were aimed at improving Nigeria’s image abroad but overlooked the quality of the tourism offerings. “We are now focused on practical projects,” Adja Muhammed, the NTDC’s marketing director, told OBG. “The idea is to bring as many operators into the system, from handicraft shops to tour guides, bring them up to standard and then package them into a product that the NTDC can promote on its road shows.”

Private sector initiatives to attract international attention to the sector move in tandem with public policy. As such, a project titled “The Seven Wonders of Nigeria” was concluded in July 2012, finalising a 24-month tour of Nigeria’s 55 most visited tourism sites and events. A team of travel journalists, academics and private sector operators voted on the list’s final composition, which included the Obudu Mountain Resort in Cross River State, which came out on top; the Sukur Heritage Site in Adamawa State; the Osun Groove in Osun State; the 17.5-km Kano Walls in Kano State; the Oke Idanre Hills in Ondo State; the Benin Moat in Edo State, which is home to one of the world’s largest man-made excavations; and the National War Museum in Umuahia, Abia State, which houses the Ojukwu Bunker, from where the Biafra war command operated during the Nigerian Civil War. The next step of the project will consist of developing access to facilities around the sites in collaboration with state governments and the NTDC.

OPPORTUNITIES ABOUND: The tourism industry’s biggest potential is unquestionably the sheer size of the country. Given its large population and religious and ethnic diversity, domestic tourism is likely to remain the mainstay of the industry. As considered by the numbers above, the value and growth of local travel far exceeds receipts from foreign visitors. As the emerging middle class develops an appetite for the multitude of cultural festivals, virgin beaches on the Atlantic Coast and mountain resorts in the south-eastern countryside, the domestic share will continue to grow.

The high number of regional connections supports these developments, and as efforts to renovate and expand the network of domestic airports continue to unfold, more locations will become accessible for visitors in the months and years to come.

In addition to the resident population, Nigeria has a large and well-spread diaspora, in particular in the US and the UK. Direct connection flights from key cities in these markets to the international airports in Lagos and Abuja bring in significant numbers of passengers that are visiting the country to see friends and relatives. Whereas most of this segment will find accommodation outside of the hotel industry, contributions to domestic travel and consumption of goods and services add significantly to sector revenues.

RETRACING HISTORY: One particular opportunity to further develop receipts from local residents and the diaspora are the former slave routes, along the coastal areas. Although Nigeria’s role in the West African slave trade is not very well known compared to that of other countries in the region, it was significant, with estimates putting the number of slaves traded well into the millions. In former trading centres such as Calabar, Port Harcourt and Badagry old structures continue to remind visitors of this past. Other former trading stations in countries from Benin and Ghana to Senegal have successfully incorporated these sites into the tourism offering, setting an example for Nigeria.

Beyond Nigerian nationals, the country’s uniquely diverse cultural and ethnic character can be capitalised on to attract foreign visitors. Provided government efforts to restore security in and access to regions with rich cultural heritage, new experience seekers from well established tourism markets in the US and Western Europe could potentially be convinced to visit. Other development opportunities are to be found along Nigeria’s beaches, which, at over 700 km in length, make up the longest stretch of the Gulf of Guinea. They are also present in the country’s national parks and game reserves, and pristine mountain landscapes in the Middle Belt or south-eastern territories.

FOREIGN INVESTMENTS: The sector’s biggest driver of growth is business tourism. According to estimates by the Institute of Hospitality (IoH) Nigeria, roughly 98% of foreign visitors come for business purposes. Demand for internationally benchmarked accommodation is therefore on the rise, particularly in Lagos. The past few years have seen a number of international chains opening their doors in the city, including Southern Sun Ikoyi, Four Points by Sheraton, Radisson Blu, Ibis and Legacy. A number of other projects are also currently in the pipeline in Lagos as well as other large and mid-sized cities (see analysis). Demand for accommodation is far from its saturation point, which offers potential for an influx of foreign investment in hotel developments in the years ahead.

Tourism-operators are hopeful that the trend in business tourism will spin off to other areas of the sector. With a large variety of cultural, natural, ethnic and religious heritage, Nigeria certainly has the potential to make visiting businesspeople extend their stay for a leisure weekend, or even return for another trip with friends or family for a holiday. “As business tourism will continue to be a key driver of growth, it is also a trigger for expansion into different sub-sectors. Business travellers are the ideal vehicle to promote our natural and cultural attractions to the outside world,” Olatunde Oluloye, the chairman of IoH Nigeria, told OBG.

With the number of visits made by business tourists on the rise, there has been increased demand for conference space. Already business hotels are capitalising on the lack of designated conference facilities in Lagos. The Eko Hotel can host large-scale conferences in its Expo Centre, as can the 471-room Golden Tulip in Festac Town. Other established business hotels such as Federal Palace have added dedicated structures to their facilities in response to the increasing demand. Lagos State has regularly announced plans to build one of the largest conference centres in Africa and is currently in search of a co-investor and private sector operator to continue with the project.

In the capital, the Abuja International Conference Centre has substantial capacity, with space to accommodate 2000 delegates in its main conference hall, while the Sheraton, Transcorp Hilton and Nicon Luxury all host weekly gatherings of up to 1500 people. Whilst security challenges have drastically affected the number of Abuja-based conferences, demand from the city’s rapidly growing business and diplomatic community will pick up again as soon as stability has been restored.

EDUCATION: Ever since the early days after independence, the government has been the dominant provider of hospitality education. Since 1977 this was managed largely by the National Board for Technical Education overseeing polytechnic education and the provision of Higher National Diplomas, which for decades were the highest certification in the hospitality industry.

Since the early 2000s, bachelor-level courses have been introduced at some federal, state and private universities, overseen by the National University Commission. In more recent times, a third provider has been established in the shape of the National Institute for Hospitality and Tourism (NIHOTOUR), a state-owned training entity overseeing hospitality degrees in educational institutions in six geopolitical zones: Bauchi, Benin, Enugu, Lagos, Kaduna and Lagos.

But years of underinvestment in education have caused the quality of the curricula and teaching to fall behind the needs of the private sector. Moreover, due to the disconnect between the institutions and the private sector, students often complete degrees without enough practical experience, increasing the need for significant on-the-job training. Given the multitude of new, internationally benchmarked hotels in the pipeline, the sector’s most urgent need is a locally trained labour force. “It is a mistake to apply international formulas to training and development without taking into consideration local conditions. Nigeria has a strong identity of its own and this should be reflected in education,” said Mark Loxley, the general manager of Southern Sun Ikoyi.

NARROWING THE GAP: Belinda Nwosu, the head of department at Wavecrest College of Hospitality, a nonprofit provider of hospitality education and supplier to many high-end hotels in Lagos, pointed out that the biggest gap in preparing the workforce is at the operational level. “Specialist institutions are needed to address specific technical needs of the industry, in particular related to culinary skills,” Nwosu told OBG.

As part of efforts to reduce reliance on foreign trainers, operators have embraced initiatives like Wavecrest’s, offering internships, inviting guest lecturers, and organising open discussions of priorities and requirements for a more compatible educational framework. Nonetheless, more needs to be done. According to Nwosu, Wavecrest’s graduates are often employed before they finish school and there is a shortage of qualified staff, with poaching rife across the industry, especially whenever a new hotel comes onto the market.

In recent years, Western universities have also started to take an interest in travel and tourism. One such example is Vienna-based MODUL University, which has announced plans to provide professional refresher courses in the areas of tourism, entrepreneurship, hotel and hospitality training with international accreditation. MODUL plans to open in September 2012 at Tinapa, a business resort in Cross River State.

CHALLENGES: As illustrated by the growing human resource deficit, the weak performance of the sector is largely attributed to supply-side constraints. The country’s vast population and diversity create strong foundations for the sector, but operational obstacles have prevented it from reaching its full potential. As with any industry in Nigeria, the development of tourism is significantly hindered by infrastructural inadequacies in power, road and airport connections. Travelling inland is mostly done by air for those who are able to afford it as the alternative by road is considered uncomfortable and, in some parts, unsafe.

The regulatory framework is deemed inadequate as various parastatals at both the federal and state level have overlapping and conflicting roles. The NTDC is mandated to oversee the licensing and classification of tourism facilities at the federal level, but various state governments presume similar responsibilities. The Lagos State government has a licensing scheme in place that regularly clashes with that of the NTDC, leading to over regulation and double taxation. Resolution of the dispute currently lies with the federal court system, but little progress has been made as both parties claim they are constitutionally entitled to continue supervision and taxation of the sector.

Over-reliance on the country’s prolific oil and gas sectors has led to limited and inadequate funding of both private and public initiatives. Awareness campaigns have been weak and few and far between, especially at the international level, with a subsequent lack of uptake by tour operators in overseas markets.

Nigeria continues to suffer from security challenges in south-south and northern regions. Whereas the Delta Amnesty programme has had significant success in stabilising the region, religious and ethnic clashes in the north continue to occur with an alarming frequency. The weak infrastructure and regulatory oversight has also led to safety issues in air and road transportation.

The current visa regime deters tourism as applicants must provide invitation letters and apply at the embassy in the country they reside. The fees are also significantly higher than those of neighbouring countries. There have been some improvements under the Jonathan administration. As such, business visas for nationals of Nigeria’s key business partners, in particular the US, can be extended by up to five years, while people from countries with whom Nigeria has no diplomatic relations can theoretically get visas upon arrival. Although these efforts will go some way to facilitate foreign visitors, tourists in the world’s leading markets such as the US, China, Japan and Western Europe will not be affected. It is unclear what the Goodluck Jonathan administration plans to further implement visa liberalisation.

OUTLOOK: While there is no doubt that Nigeria’s tourism industry is faced with some severe structural challenges, the country has a variety of resources that should not go unnoticed. A concerted effort by policymakers at the federal and state level to alleviate restrictive regulations and facilitate access to tourism sites is taking shape. In various states across the country, tourism has been embraced as a vehicle for sustainable development and poverty reduction. However, it is the private sector that will eventually hold the key to success. A strong balance of product development, capacity building and promotion is needed to attract and retain local and foreign visitors. With all stakeholders on board, the tourism sector is set to support Nigeria’s continued efforts at economic diversification.