The other Nige­ria

Financial Mirror (Cyprus) - - FRONT PAGE -

Nige­ria has been get­ting a lot of bad press lately, ow­ing largely to the mil­i­tant Is­lamist group Boko Haram’s ab­duc­tion of more than 200 school­girls in April, part of a bru­tal cam­paign of kid­nap­pings, bomb­ings, and mur­der. But, while these de­vel­op­ments cer­tainly merit in­ter­na­tional con­cern, they should not be al­lowed to ob­scure Nige­ria’s re­cent achieve­ments – or spur the out­side world to turn its back on the coun­try.

What is lost in most dis­cus­sions about Nige­ria to­day is the strong eco­nomic record that it has es­tab­lished over the last decade. In fact, a re­cent year-long study of the coun­try by the McKin­sey Global In­sti­tute (MGI) showed that, over the next 15 years, Nige­ria has the po­ten­tial to be­come a ma­jor global econ­omy. With roughly 170 mln in­hab­i­tants, Nige­ria has Africa’s largest pop­u­la­tion. But it has only re­cently been ac­knowl­edged as hav­ing the con­ti­nent’s largest econ­omy – 26th in the world – fol­low­ing the re­lease of “re­based” data putting GDP at $510 bln last year.

MGI es­ti­mates that, in 2013-2030, Nige­ria could ex­pand its econ­omy by more than 6% an­nu­ally, with its GDP ex­ceed­ing $1.6 trln – mov­ing it into the global top 20. More­over, if Nige­ria’s lead­ers work to en­sure that growth is in­clu­sive, an es­ti­mated 30 mln peo­ple could es­cape poverty.

The prob­lem is that Nige­ria re­mains sub­ject to out­dated as­sump­tions, which are lim­it­ing its prospects, es­pe­cially among for­eign com­pa­nies and in­vestors. For ex­am­ple, many be­lieve that Nige­ria is a petro-econ­omy, wholly at the mercy of the world oil mar­ket. But the re­sources sec­tor ac­counts for only 14% of GDP – mean­ing that, while oil pro­duc­tion re­mains a crit­i­cal source of rev­enue and ex­ports, the Nige­rian econ­omy is far more di­verse than many as­sume.

A re­lated myth is that Nige­ria’s eco­nomic growth is un­sta­ble, with large and un­pre­dictable shifts in per­for­mance from year to year. In fact, as Nige­ria has di­ver­si­fied its econ­omy and de­tached pub­lic-spend­ing plans from cur­rent oil prices (part of a 2004 bud­get re­form), it has be­come in­creas­ingly sta­ble, both eco­nom­i­cally and fis­cally. In­deed, in re­cent years (2010-13, in “re-based” terms), GDP has grown by a steady 6- 7%, ow­ing more to ris­ing pro­duc­tiv­ity than to fa­vor­able de­mo­graph­ics. Fi­nally, there is a gen­eral mis­un­der­stand­ing about the Nige­rian econ­omy’s evo­lu­tion. De­spite wide­spread poverty and low (though im­prov­ing) pro­duc­tiv­ity in al­most all in­dus­tries out­side of the re­sources sec­tor, Nige­ria has a rapidly grow­ing con­sumer class that will play an in­creas­ingly im­por­tant role in driv­ing growth.

By 2030, more than 34 mln house­holds, with about 160 mln peo­ple, are likely to be earn­ing more than $7,500 an­nu­ally, mak­ing them as­pir­ing con­sumers. This im­plies a po­ten­tial rise in con­sump­tion from $388 bln an­nu­ally to $1.4 trln – a prospect that is al­ready at­tract­ing in­vest­ments by multi­na­tional con­sumer-goods pro­duc­ers and re­tail­ers.

Nige­ria’s prospects are en­hanced fur­ther by its strate­gic lo­ca­tion, which will en­able it to take ad­van­tage of boom­ing de­mand across Africa and other parts of the de­vel­op­ing world. Add to that a large and grow­ing pop­u­la­tion and an en­tre­pre­neur­ial spirit, and the fu­ture looks bright.

In order to un­leash this po­ten­tial and en­sure that the next decade of growth brings sharp re­duc­tions in poverty, Nige­ria’s lead­ers must pur­sue re­forms aimed at in­creas­ing pro­duc­tiv­ity, rais­ing in­comes, and de­liv­er­ing es­sen­tial ser­vices like health care and ed­u­ca­tion more ef­fi­ciently. For ex­am­ple, to in­crease pro­duc­tiv­ity and in­comes in the agri­cul­tural sec­tor, the govern­ment could pur­sue land-ti­tle re­form aimed at open­ing more farm­land with­out de­for­esta­tion; ex­pand the use of fer­tiliser and mech­a­nised equip­ment; and sup­port a shift to more prof­itable crops. More­over, im­prove­ments in dis­tri­bu­tion and mar­ket­ing would al­low farm­ers to keep more of the pro­ceeds from the sale of their crops.

In ur­ban ar­eas, pro­duc­tiv­ity suf­fers from a high de­gree of in­for­mal em­ploy­ment, some­times even by ma­jor cor­po­ra­tions. This keeps too many Nige­ri­ans in low-skill, low-pay­ing jobs and de­prives the econ­omy of the dy­namism that com­pet­i­tive small and medium-size en­ter­prises cre­ate. The spate of In­ter­net star­tups that have emerged in Nige­ria demon­strates that the skills are there, and tap­ping Nige­ria’s di­as­pora can aug­ment that tal­ent pool.

To make it eas­ier to do busi­ness in Nige­ria, the govern­ment also will need to stream­line pro­cesses for reg­is­ter­ing and run­ning a le­gal busi­ness and, to­gether with aid agen­cies and the pri­vate sec­tor, in­crease in­vest­ment in in­fra­struc­ture. It will also need to in­ten­sify its fight against en­demic cor­rup­tion, which rep­re­sents a tax on all busi­nesses.

Fi­nally, to pro­mote in­clu­sive growth – es­sen­tial to re­liev­ing hu­man suf­fer­ing and mit­i­gat­ing so­cial and po­lit­i­cal ten­sions – Nige­ria must im­prove pub­lic-ser­vice de­liv­ery dra­mat­i­cally. The fact that Nige­ria lags be­hind coun­tries that spend com­pa­ra­ble amounts on pub­lic ser­vices proves that it has scope to im­prove. All that is needed to en­sure that as­sis­tance – from seed sub­si­dies to im­mu­ni­sa­tion – reaches those who need it most, re­gard­less of where they live in the coun­try, is a strong com­mit­ment from Nige­ria’s lead­ers to build more ef­fec­tive and trans­par­ent govern­ment agen­cies.

Nige­ri­ans do not need sym­pa­thy or even out­rage from the global com­mu­nity. What they need is sup­port and en­cour­age­ment. Only with sta­ble and in­clu­sive growth can Nige­ria es­cape the clutches of bru­tal forces like Boko Haram and give its cit­i­zens the se­cu­rity and pros­per­ity that they de­serve.

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