‘Digital entrepreneurs need a conducive business environment to experiment, thrive’
Chigozie Muogbo, Head of Research and Intelligence at Verraki, in this interview with BusinessDay’s Frank Eleanya speaks on the company’s latest Nigeria’s Digital Economy report: 7 Major Growth Drivers for 2022. He makes recommendations on what the government at every level needs to do unlock new growth pathways for rapid economic growth, innovation, job creation, and access to social services.
How would you describe Nigeria’s digital economy ecosystem?
The digital economy ecosystem encompasses five major subsystems: the business ecosystem, the regulatory ecosystem, the consumer ecosystem, the digital platforms, and communications technology ecosystem, and the ecosystem of talent and innovation. These sub-systems facilitate the use of digital technology and innovation to catalyze ‘progress’ in the production of goods and services, creating efficiencies that yield better living standards for humanity. In Nigeria (and elsewhere) the digital economy is the economic activity that results from billions of everyday online connections and interactions among people, businesses, and devices, enabled by digital transformation, big data, and the internet of things, and that creates value for the people, businesses, and the government.
To a very large extent, Nigerians have embraced and adopted digital technology to transform their lives, services, or businesses. Nigeria today has a teledensity (defined as the number of active telephone connections per one hundred inhabitants) of 102.4 percent and 141.6 million mobile internet subscribers. Broadband penetration in the country has increased from 20 percent in 2017 to 41 percent as of December 2021. A lot of manual processes in both public and private sectors are being replaced with digital ones, even as outdated technology is upgraded continuously. We have a thriving nascent digital ecosystem in Nigeria as evidenced by the growth in a number of startups, increased employment, transaction volume, and record valuations.
You mentioned that 5G is an important driver of the digital economy. How much of an impact can that have?
As we know, the world is continually changing, and one of the key drivers of this change is digital transformation. Arguably, the most anticipated enabler of digital transformation of the Fourth Industrial Revolution is the fifth-generation wireless technology, popularly referred to as 5G technology. So, how much of an impact can 5G have on the economy? The future depends on connectivity, be it of persons, machines, or elements. The Fourth Industrial Revolution has created the need to build technological support for 21st-century connectivity demands of smart cities, smart cars, 3D video, enhanced cloud environment experience, remote medical services, virtual learning, virtual and augmented reality, and machine-to-machine communications for industrial automation.
5G comes with the speed and bandwidth that supports hitch-free and seamless connections, communication, and file sharing, with transformative implications for transport, health, logistics, education, insurance amongst other sectors. In terms of speed, 5G spectrum offers 10 times more speed than the 4G and 4.5G networks, using shorter frequencies (millimeter waves between 30GHz and 300GHz). For context, the advanced 4GLTE has a potential speed of 1,000Mbps, whilst 5G changes the game with up to 10,000Mbps. Users could share large files in seconds as compared to minutes. In terms of latency, 5G comes with a game-changing 1-millisecond latency (compared to 200 milliseconds in 4G). This enables real-time interactivity for cloud-based services and is key to the success of self-driving cars and other IoT applications. Furthermore, 5G’s bandwidth spectrum includes the 28 and 39 GHz radio frequencies and delivers higher capabilities and experience compared to 4G (which uses less than 6 GHz).
Is 5G a need-to-have? We haven’t fully ensured pervasive 4G coverage: should our priority be 5G at this moment?
5G is an absolute need-to-have. The global economy is undergoing a digital transformation, and it’s happening at an unprecedented speed. The Fourth Industrial Revolution has created the need to build technological support for 21st-century connectivity demands of smart cities, virtual and augmented reality, and machine-to-machine communications for industrial automation. The established use cases of 5G offers enough motivation for any serious government to support its urgent deployment. In the healthcare industry, for instance, 5G use cases will enable doctors and patients to stay more connected than ever. In logistics, 5G offers the potential for greater communication among vehicles, as well as between vehicles and other business infrastructure. In agriculture, farms of the future will use more data and fewer chemicals as farmers use big data and sensors for precise interventions.
The promises of 5G are enormous. It is more than just hype. In Verraki, we are convinced that the deployment of 5G networks in Africa will be driven by supply-side market forces, as mobile network operators compete for market share and competitive positioning to meet the needs of Generation Z consumers and the businesses that serve them. Connected cars, smart cities, advanced robotics, and gaming amongst others— will all soon rely on 5G networks. We expect 5G technology to be integrated with, and not replace, existing core telecommunication infrastructure in the country to achieve a more cost-effective connectivity mix across the nation. It must be noted however that 3G and 4G broadband networks are great and roll-out must continue towards achieving the 90 percent 4G/5G target coverage set in the Nigerian National Broadband Plan (2020 – 2025) and to also allow consumers the opportunity to choose the most appropriate communication option based on the nature of their demand.
What role will the 7 growth drivers play?
At Verraki, we strongly believe that Nigeria must think big on digital development and these seven growth drivers represent the foundation of such big thinking. World Bank research estimates that a 10 percent increase in broadband penetration in developing countries is associated with a 1.4 percent increase in Gross Domestic Product (GDP). The seven growth drivers identified in the referenced report – digital infrastructure and commercial 5G rollout, digital entrepreneurship, digital government, digital skills, digital identification, digital platforms, and digital policies – have the potential for some transformative impact on economic growth and wellbeing. Nevertheless, the realization of these potential depends on how governments and businesses respond to the call for needed investments, supportive policy environment, and entrepreneurial capital. The seven growth drivers can enable the rapid digitization of the economy to drive innovation, fuel job opportunities, social transformation, and ‘technical progress’ which acts to multiply economic growth outcomes.
The report mentions digital entrepreneurship as one of the triggers. However, digital entrepreneurship growth seems concentrated to Lagos and Abuja. How can digital entrepreneurship be fostered in places without infrastructure?
Digital entrepreneurship is a critical enabler that economies leverage to ensure that technological innovation turns problems into solutions and eases frictions across diverse economic sectors leading to job creation, productivity growth, and wealth creation. There are entrepreneurs in all parts of the country given the national spread of MSMEs, as well as tech hubs in many cities such as Lagos, Abuja, Kaduna, Jos, Enugu, Port-Harcourt, etc. Lagos and Abuja became dominant tech hubs not by deliberate design but by necessity as clusters of technology-minded individuals leveraging existing infrastructure and systems give rise to an ecosystem (incubators, venture capital companies, digital start-ups) that have evolved to support digital entrepreneurship over the years.
Lagos has benefitted from being the financial capital of the country with the presence of Angels and Venture Capital firms while infrastructure played an important role in the emergence of technology hubs in Abuja beyond other locations in Northern Nigeria. Nonetheless, there is a golden opportunity for forward-thinking state governments to deliberately create the environment to promote market access, talent development, and basic infrastructure for tech hubs that can attract tech entrepreneurs. Digital entrepreneurs require a conducive business environment to experiment and thrive, devoid of bureaucratic bottlenecks, epileptic infrastructure, policy ambiguities, multiple taxations, and levies. Government must deliberately promote digital inclusion, early-stage financing for these businesses through innovative de-risking mechanisms, as well as expand market opportunities for the businesses beyond the local opportunities.
What impact can digital skills have and how do we grow those needed skills?
Digital capabilities and skills are needed to build, use, sell and deploy digital technology solutions to solve everyday problems. As the nature of work continues to change, digital skills have now become a necessity, and stakeholders are investing to develop these skills. We must prepare the current and future generations to take advantage of future opportunities by looking at the elements of the school curriculum with a focus on lifelong digital learning. With rapid developments in technology including artificial intelligence (AI), the Internet of Things (IoT), data-driven decision making, virtual/augmented reality, and robotics, the future workforce must be digitally equipped to remain relevant. The federal, state and local governments must explore innovative ways of making digital education compulsory through all levels of schooling.
During my undergraduate years, we had a compulsory first-year course called ‘Computer Appreciation’; but in 2022 it will be a joke to think that such a course still serves the demands of today. This is to highlight the need for curriculum review that meets the complexity of emerging technologies and that also meets the changing needs of business enterprises. Nigerian youths must also take advantage of available private sector-led interventions to develop their skills, such as by Andela, Google, and Microsoft, as well as some home-grown organizations such as Decagon Institute, EduBridge Institute, Utiva, amongst many others. Corporate entities must also provide training and skills development opportunities for their employees along their chosen professional career.
The digital economy report mentioned the importance of the national identification numbers. How much of a trigger is that, given the current delays with the NIN?
The National Identity Database creates a digital asset that can be elevated to build a robust digital identity for all Nigerians and legal residents. Digital identification is crucial for KYC, KYB and unlocking access to banking, social benefits, education, municipal services and many other critical services in a digital economy. Digital ID also yields inclusive economic gains given that it solves major (identification) friction experienced by businesses in all sectors. Recent research by the McKinsey Global Institute estimates that digital ID has the potential to unlock economic value equivalent to 3 percent to 13 percent of GDP in 2030, assuming high adoption rates. The ongoing NIN-SIM linking and introduction of Digital ID token are significant progress towards the development of digital identification in Nigeria. Nigeria has achieved 66 million unique National Identity Numbers (NIN), with an average of 3 to 4 SIMs linked to the NIN. Notwithstanding delays at the enrollment centers, Nigerians and residents should endeavor to participate as the new March 31, 2022, deadline approaches. This is one of the ways we can support the government to build the digital economy we all desire.