The Nigerian economy offers significant potential but it must widen its tax base and broaden its activities away from oil, a new report by UBS Wealth Management’s Chief Investment Office has found.

The report shows hat liberalisation of the naira exchange rates will be crucial in attracting foreign investment.

The report, tagged, Africa– Cradle of Diversity, was launched by the UBS Wealth Management’s Chief Investment Office on Tuesday.

The report focuses on the continent’s economic prospects and challenges.

It highlights that one of the 64 nations the International Monetary Fund projects to have average real GDP growth of more than four per cent in the next five years, more than half are in Africa.

The report read in part, “As Africa’s largest country both in terms of GDP and population, Nigeria offers enormous potential for the nation’s domestic market. The United Nations expects Nigeria’s population to reach up to one billion people by 2100, offering unusual potential for growth.

“At the same time, population growth presents a significant challenge in terms of job creation for new labour market entrants and the nation’s geographic limitations, considering Nigeria’s territory is approximately the size of Texas.”

In addition, UBS CIO research showed that indicators relating to governance and ease of doing business were clearly weaker than for peers, thus underpinning the need for reforms as foreseen in the Economic Recovery and Growth Plan.

The report added, “Decisive factors outlined in the report include efforts to broaden the country’s tax base and to diversify its economy. Nigeria’s revenue base heavily relies on oil-related activities, which exposes the nation’s fiscal balance to energy price shocks and volatility risks.

“Nigeria is Africa’s largest oil exporter and while commodity exports remain a major growth driver in many African countries, their importance is slowly declining as domestic demand plays an expanding role in sustaining growth. Some of the continent’s fastest growing economies are concentrated in non-resource-rich countries like Côte d’Ivoire, Senegal, Kenya and Ethiopia, which are expected to grow between six per cent and eight per cent in the next few years.

The report pointed out that the manufacturing industry was probably one of the most overlooked sectors in Africa, despite the continent’s potential to become the world’s next low-cost manufacturing hub and a leading global player in resource-intensive manufacturing.