In 1960, Singapore was one of the underdeveloped countries in the world with a GDP per capita of $428. By 2020, the country’s GDP per capita had surged to $65,233—152 times larger in 60 years.
On the other hand, Nigeria’s per capita income was $92.96 in 1960 and $2,250 in 2020—24 times larger within the same period.
The reason for the contrasting fortunes between Nigeria and Singapore is clear. Singapore runs a globalised export-led economy, supported by a strong manufacturing sector and tourism.
Huge investments went into Port of Singapore, making it the world’s busiest trans-shipment port today, surpassing Hong Kong and Rotterdam.
In contrast, Nigeria has a weak manufacturing sector, with low capacity utilisation and unable to compete in the local and the global markets.
Its ports are big impediments to trade, characterised by delays, high cost and lack of scanning equipment. Protectionism is also hurting the capacity of firms to compete.
“In order to attract investors, Singapore had to create an environment that was safe, corruption-free, and low in taxation,” said a researcher Ping Zhou.
Nigeria had 45 percent share of the world’s palm oil market in 1960, which should have given the country access to over $15 billion annually had it maintained that spot today. Nigeria’s share is just 1.7 percent currently, having relinquished that position to Malaysia and Indonesia.
Nigeria ignored economic diversification from 1970s and concentrated on crude oil, which is largely an enclave industry that creates only few jobs.
But a typical vegetable oil company encompasses oil palm plantation, palm oil production, palm olein production and vegetable oil production, creating tens of jobs at each stage.
Africa’s most populous nation is facing a job crisis, with unemployment reaching 27 percent in the second quarter (Q2) of 2020. The economy returned 6 percent negative growth in the same period.
It may be argued that Nigeria is 40 times bigger than Singapore in population, but Africa’s largest economy still significantly underperforms other demographic peers such as Brazil, Indonesia and Bangladesh.
Nigeria’s biggest export product is crude oil, which accounted for 72.12 percent of total exports in the second quarter of 2020. Manufactured goods comprised 22.3 percent of total non-oil exports in Q2 and 6.23 percent of all the exports within the period.
“We need to improve our primary production so we can increase and expand the value chain. We are not generating enough income from exports, and we need to explore research and incorporate value addition in our export in order to effectively utilise it. We also need to change our taste buds,” Ebenezer Onyeagwu, CEO, Zenith Bank, said while speaking at a trade forum recently.
Vietnam has set a record example for Nigeria, moving from a poor and underdeveloped economy to one of the fastest developing economy in the world and attracting diverse investments while growing its non-oil export portfolio. One of the major steps taken by the country is market reforms.
Vo Tri Thanh, a Vietnamese economist, said keys to the country’s growth were an acknowledgement of the private business right; the market-oriented reforms; macroeconomic and social stability, as well as the opening and the integrating of the economy into the regional and world economy, especially in the areas of trade and Foreign Direct Investment (FDI).
By 2019, Vietnam had reduced its unemployment and poverty rate to 2.01 percent and 5 percent respectively amid a population of 95 million. In 2018, Vietnam earned $244.72 billion from export of finished products from garments and shoes to smart phones.
The country earned over $50 billion from export of phones and their components in 2018, according to the country’s General Statistics Office.
How did this miracle happen?
“Vietnam has achieved its success the hard way. First, it has embraced trade liberalisation with gusto. Second, it has complemented external liberalisation with domestic reforms through deregulation and lowering the cost of doing business. Finally, Vietnam has invested heavily in human and physical capital, predominantly through public investments,” Sebastian Eckardt, Deepak Mishra, and Viet Tuan Dinh, three Vietnam economists wrote in Brookings Institute website.
Nigeria is plagued by poor infrastructure with erratic power supply and roads decrepit in many parts of the country.
The Manufacturers Association of Nigeria (MAN) advocates strengthening infrastructure to reduce production cost and increase competitiveness of locally-made products in the global market.
Similarly, experts say value addition will provide more profit from exports beyond the basics and contribute to the country’s economic development and jobs.
The country is facing a foreign exchange crunch with manufacturers getting two to 10 percent of their FX demands. Foreign reserves are depleting, as the CBN intervenes to resolve FX market issues.
Ede Dafinone, chairman, MAN Export Group, said the non-oil export should be providing enough FX and jobs for the economy, lamenting that lack of support was preventing that from happening.
One of the major ways of boosting non-oil export is to fully re-start the Export Expansion Grant (EEG) to push more made-in-Nigeria products to the continent, especially as the African Continental Free Trade Area (AfCFTA) begins in January 2021, Dafinone said.
The AfCFTA seeks to liberalise trade among African countries. It is targeted at a ‘borderless’ Africa, with an eye on a single market for goods and services on the continent.
It is easily the largest trade agreement since the World Trade Organisation (WTO) in 1994, and a flagship project of Africa’s Agenda 2063, targeted at creating a single market for 1.2 billion people and exposing each country to a $3.4 trillion market opportunity on the continent.
Nigeria’s firms stand to gain from it and can expand and create jobs to leverage the continental market. However, high cost of production fuelled by multiple taxation, regulatory pressure and poor infrastructure could hurt them.
“We are excited about the signing of the AFCTA. But we need to get ourselves ready for the pressure of competition inherent in the continental economic integration agenda. A number of commitments were made about the creation of an environment that would enable the private sector to be competition ready. But not much has happened in this regard so far,” Toki Mabogunje, president, Lagos Chamber of Commerce and Industry (LCCI), said.
Nigeria’s lack of jobs may be partly attributed to the poor performance of the manufacturing export sector, which naturally creates more jobs than any other sector in developing countries because of their long value chain potential.
The 2020 World Bank’s ease of doing business index ranks Nigeria 131st position, which is an improvement from its previous ranking of 146.
However, business managers say the upgrade did not reflect on the business performance, Vietnam ranked 70th for which is attributed to the reforms that focused on access to credit and payment of taxes.
The World Economic Forum in one of its reports titled ‘The story of Vietnam’s economic miracle’ noted that the Southeast Asian country’s economic rise was driven by its trade and investment reforms as it encouraged trade liberalisation and foreign direct investments, reduced the cost of doing business and invested heavily in human and physical capital.
