Nigerian business leaders and top corporate executives expect two possible outcomes for Africa’s most populous nation in the next decade through 2030.
In the next 10 years, Nigeria could host a fourth of the world’s poorest or it could be in the league of the top 20 global economies, an expectation that had failed to materialise in the last decade, according to corporates at the BusinessDay Nigeria economic outlook.
The experts who spoke on the theme ‘Nigeria’s Prosperity Ahead 2030: Population, Data, Productivity’, said although Africa’s largest economy might have missed the shot in the last decade, it has an opportunity of getting its economic prosperity right by rolling out the appropriate reforms that would retain and attract private capital and control rising poverty.
“Depending on whether or not reforms are embarked on, Nigeria could end up with the continuity of a broken middle-class,” said Olu Akanmu, executive director, FCMB Retail. “Or it can rebuild its middle-class population and lift people out of poverty.”
Segun Omosehin, managing director, Old Mutual Life Assurance, said Nigeria must ensure it addresses the country’s gaping infrastructure deficit and security challenges as well as reform and diversify the economy to ensure it is able to record appreciable growth in the next decade.
“For a nation struggling to finance its annual budget, the government doesn’t have the finance to plug the infrastructure gap and so there is need to tap private capital,” Omosehin said.
Global consulting firm, McKinsey, estimates Nigeria’s infrastructure deficit requires $31 billion in annual investments over a 10-year period to fix. The Federal Government made about $13.3 billion in the whole of 2019, according to Central Bank data published this week.
Still reeling from an oil price downturn that halved government revenue and plunged the economy into recession, the Federal Government resorted to borrowing to plug an annual budget deficit that has become mainstay in recent years.
That borrowing has not translated to economic growth which has remained below 2.5 percent since 2015 and lower than population growth rate.
In the next years, however, Nigeria has a chance to rewrite its future, the experts said.
Ogho Okiti, an economist and managing director of BusinessDay, projects that if Nigeria’s growth rate continued to languish at 2 percent per annum, it would remain a $400 billion economy by 2030.
In another scenario, should the economy grow at 5 percent, Okiti said the country would have a GDP of $500 billion by 2030. This would, however, still not be enough to drive inclusive growth.
Okiti said Nigeria could boost its economy to $800 billion at a growth rate of 7 percent, while it could have a $1 trillion economy and emerge among world’s top 20 economies if it grew at 10 percent. This is also the growth rate (10 percent) targeted by Rwanda, Africa’s fastest growing economy.
Business leaders at the economic outlook event told BusinessDay that a 7 percent and 10 percent growth rate that is independent of a sharp upward swing in oil prices could attract the needed investment which can change the dynamics of the country in the new decade.
Nigeria started the last decade with growth around 8 percent but fortunes quickly changed with the downturn in global oil prices.
Oil prices have recovered since then but remain volatile amid disruptions in the Middle East, geo/political tensions between Iran and the US, and the latest threat, the deadly Coronavirus disease spreading from China. Brent oil was trading lower at $59 per barrel at 4pm Tuesday, according to Bloomberg data, as the swift spread of the Coronavirus disease rattles global markets.
In the last decade also, aggregate labour productivity for Nigeria fell to around 10 percent of the average US worker in 2017, according to latest World Bank estimates. The figure extended a downward trend seen since Nigeria’s productivity stood as high as 26 percent in the 1970s.
While this is above the sub-Saharan Africa (SSA) average (lower than 10 percent), the gap between Nigeria and SSA is narrowing owing to Nigeria’s decline.
Meanwhile, non-SSA developing countries which had similar productivity with Nigeria in the early 1960s are now heading towards 30 percent (as of 2017) with advanced economies seeing a sharp increase to around 80 percent of the average US worker.
The implication of this is that Nigeria’s population, which is growing at 2.6 percent according to World Bank and 3.2 percent according to the National Population Commission (NPC), would tilt from a blessing to a curse given that it is projected to hit 263 million by 2030 with Nigeria becoming the fourth largest country in the world.
In the new decade, CEOs say ‘data’ would shape Nigeria’s prosperity.
Business heads and chief executive officers said for Nigeria to achieve inclusive growth that would usher it into a new decade of prosperity, it must focus on generating reliable data that would facilitate informed decision making both in the public and private sectors.
The need for this, they say, stems from the fact that most data available are largely estimated and fail to capture the informal sector which accounts for about 60 percent of economic activities.
The experts also stressed on the need for Nigeria to use technology to drive economic growth through business and informal sector.
“The efficiency that technology brings, even though it’s also a disruption, is a thing that can automatically improve productivity. Also just by using data, business and government can take decisions that are precise and that are relevant for productivity,” said Ebehijie Momoh, senior vice president, Mastercard West Africa.
Mastercard estimates that 1 percent increase in usage of electronic payment on an average would lead to a $104bn increase in GDP.
“If the informal sector is really as large as the numbers are saying, we then need to look at how we can use technology to drive productivity in that space,” Patrick Nwakogo, country director/ CEO, Dale Carnegie Nigeria, said.
Giving a keynote address at the BusinessDay’s economic outlook, Andrew Nevin, chief economist at PwC, said going into the next decade, Nigeria would need to bring more people from the informal economy to the formal economy.
He also said Africa’s largest economy would need to unlock its dead capital, the country’s underutilised asset that can’t be used productively. “The biggest source of debt capital in this country is real estate,” he said, estimating it to be around $900 billion.
Nigeria has an active informal economy, large informal trade, informal tax to non-state actors and billions in informal remittances.
According to PwC estimates, Nigeria’s informal sector in 2018 accounted for 55.8 percent of the country’s GDP. This is higher than the 49.6 percent contribution reported the year before. The informal sector employs about 89 percent of the total labour force in Nigeria.
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