• Sunday, July 21, 2024
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Why Nigeria must unlock the potentials of its secondary cities

Economic diversification in Nigeria. Why context matters

Nigeria is Africa’s largest economy. But it owes this position to its enormous population, which currently stands at about 210 million, rather than its economic ingenuity.

Perhaps, there is no indicator that lays this bare as effectively as the GDP per capita of the country. According to the latest figures released by the International Monetary Fund, Nigeria’s nominal GDP per capita – which measures the economic output of each individual in the country – hovers around $2,273.

By comparison, South Africa’s GDP per capita is estimated by the same report to be $6,861, while that of Seychelles – the African country with the highest output per individual – is $13,140. Outside the continent, countries like Switzerland, Ireland, Norway, Singapore, Australia, Qatar and the United States of America boast of GDP per capita that are well above the $50,000 mark.

This means that if all countries in Africa had the same population, Nigeria would only be the 20th largest economy on the continent and if all countries in the world had the same population, Nigeria would be in the bottom half of the economic league table.

Several factors have contributed to Nigeria’s low economic productivity. The ills of the country’s export and fiscal overdependence on petroleum and petrodollars, for instance, are well-documented. Corruption has also pervaded and undermined many public and private institutions in the country.

But an important factor that barely gets a mention or provokes deep thought is the uneven geographical spread of economic development and opportunities across the country or, simply put, Nigeria’s geo-economic overdependence on Lagos.

Lagos is Nigeria’s economic capital. It first rose to prominence as a British colony before becoming the administrative capital of the amalgamated Nigeria, prior to the transfer of the seat of power to Abuja.

Its status as a colonial gateway and then as a national capital enabled it to enjoy the best infrastructure in the country, while the availability of employment and entrepreneurship opportunities drew economic migrants from far and near. Succeeding state government administrations have done well to build on this foundation to consolidate Lagos’ position as the undisputed economic heartbeat and melting pot of Nigeria.

Today, Nigeria’s economy largely revolves around Lagos. Basically, all of the country’s major private establishments are head-quartered in Lagos. The city also leads in virtually all measures of economic activity in the country, ranging from local and international aviation traffic to maritime cargo freight and from energy consumption to manufacturing activity and bank deposits, by some distance. In fact, all things being equal, one’s chance of getting a decent job and earning a decent income in Nigeria multiplies when he moves to Lagos.

On the one hand, this imbalance has transformed Lagos into a megacity that may one day compete with the likes of New York City, London, Shanghai, Dubai and Tokyo for global talent and investment. On the flip side, other parts of the country are in near economic desolation. Nigeria’s secondary cities, in particular, have floundered and struggled to attract investors or even retain their economically active population, all of whom gravitate towards Lagos.

The widening gulf between Lagos and other cities in Nigeria can be likened to the rising income inequality between the so-called global top 1 percent and the rest of the population, with Lagos pulling further away from the chasing pack. Nigeria’s economy is underperforming partly because it is almost solely driven by Lagos.

It is, however, imperative to state at this juncture that this piece is not a criticism of Lagos, rather it’s a spotlight on the problem at hand and a call to action for other cities in Nigeria to rise to the occasion and begin to pull their weight. Historical factors may have given Lagos a head start but other cities must now catch up quickly.

Cities like Port Harcourt, Kano, Onitsha, Aba, Ibadan, Enugu, Abeokuta, Kaduna, Owerri, Calabar, Uyo, Warri, Benin City and Jos must devise innovative ways of attracting and retaining talent and capital, so that they can build a critical mass, through agglomeration economies, that will make it easier for them to compete with Lagos and effectively drive economic growth and development in Nigeria.

A natural first step towards achieving this would be the enactment of business-friendly policies by the Federal Government and the state governments of these cities, to enable the private sector to thrive in them.

Following this would be the upgrade of their infrastructure to match – or, at least, come close to – Lagos’ standard. The importance of decent intracity and intercity transportation networks, reliable power supply, cutting-edge communication networks, standard healthcare facilities and high-quality schools, among others, in facilitating private sector development cannot be downplayed.

Read also: Six forces pulling down Nigeria’s economy

The third step should be strengthening the capacity of the local businesses (especially SMEs and startups) operating in those cities to grow and scale through business advisory, financial access and market access support. Most Nigerian state governments make the mistake of seeking to attract foreign direct investment (FDI) without first improving the competence of their local firms.

Local firms form the local network of suppliers, vendors and distributors that the multinationals will depend on to source their inputs and deliver their products and services to their customers. Weak local firms will lead to defective supply chains and inefficient distribution channels. Providing these local companies with the necessary support will also make them more competitive, resilient and resistant to displacement by the multinationals.

Fourthly, the Federal Government and the relevant state governments must adopt innovative investment promotion strategies that will encourage foreign and local investors to increasingly look beyond Lagos to discover other cities with huge, largely unmet potentials. Among other things, they need to identify and prioritise the economic industries where these cities possess comparative advantage over Lagos and over one another.

As much as developing the capacity of local businesses is important, most of them are too small and inexperienced to compete favourably in the global market and attract foreign exchange to the economy. This is where the multinationals come in.

Beyond their ability to generate employment opportunities at scale and raise the revenue profile of the government, multinationals also serve as a link between their host communities and the global economy.

They facilitate the flow of goods, services, capital, labour and information across national borders and create a knowledge spillover effect in the communities where they operate as the local companies interacting with them will over time learn and adopt their so-called global best practices.

Regional economic integration is a strategy that Nigeria’s secondary cities should also explore. Most of the states of the second-tier cities in Nigeria have low revenue profiles, making it difficult for them to individually embark on catalytic infrastructural projects. It then becomes imperative for such cities that are in close proximity to one another to band together and pursue common economic goals.

Supporting Nigeria’s second-tier cities to maximise their potential will spread economic opportunities across the country, create flourishing regional economic powerhouses and extricate millions of Nigerians from the web of poverty.

Nnawetanma, an economic development enthusiast, writes from Lagos