Digital revolution has brought about changes to how businesses and economies operate. Most developing economies are now catching up with the trend and investing significantly in areas of information technology and wireless communications.
This revolution has also paved a way for new businesses, making commerce more effective and efficient, and also providing new ways for developing economies to tackle the issue of poverty. On the other hand, consumers are relatively finding entry into the digital economy a lot easier. Mobile technology can enable individuals in even the most out-of-the-way regions of developing economies to catapult into the digital economy by the use of mobile phones for e-commerce, banking and payments.
It is believed that Nigeria has the potential to build on its consistent growth established over the years and also achieve a significant reduction in the poverty level of the nation and eventually become a top-20 economy by 2030. But in order to achieve this, emphasis has to be laid on capitalizing on its strength and also positioning itself to take advantage of emerging global trends according to reports by the McKinsey.
In the first decade of the millennium, these new technologies had a lesser impact on the Nigerian economy than on other emerging economies. However, Nigeria today has the potential to see accelerated growth of its already blooming digital economy. According to McKinsey, Africa as a whole is expected to experience a 34 percent increase in internet penetration by 2025, which is almost triple the current rate of internet access.
Nigeria, Africa’s biggest economy, currently ranked 8th globally in terms of internet usage, is expected to be the next frontier. With a massive population of urban, tech-savvy young people, Nigeria currently has the largest mobile market in Africa with over 130 million mobile phone connections and 74 million internet connections.
Today however, Nigeria is behind other developing economies in terms of deriving economic value from the internet. Reports suggest a less than 1 percent internet contribution of GDP in Nigeria, which is a quarter of the contribution in Senegal.
In addition, Nigeria spends only $0.72 per capital on internet-related infrastructure according to 2014 reports by McKinsey which is far less than 15 percent of the level in South Africa and just over a third of the level in Kenya. In other words, investment has been a lot lower in terms of digital communications infrastructure (Fibre-optics, broadband internet connections, 3G networks, etc.) in Nigeria than in other developing economies.
Only about 49 percent of registered businesses in Nigeria actually have a website, which is a clear indication that most traditional businesses are yet to take advantage of digital technology.
There has already been a crop of successful digital start-ups in the country, such as DealDey, Jumia, Konga, nkataa, etc. in online retail, eTranzact, Cashenvoy, Paga, etc. in mobile payments and Jobberman, an online job market. These companies are also still innovating to deal with the various challenges of payments and last-mile delivery.
The Nigerian government has recently invested significantly in digitisation through initiatives such as the Government Integrated Financial Management System (GIFMS) and the Nigerian National Broadband Plan (NNBP).
For example, the Ministry of Agriculture now uses mobile technology to deliver fertiliser subsidy coupons to farmers.
Limited access to high-speed service, lack of advanced IT skills, funding, poor infrastructures and several others have been among the major constraints slowing Nigeria’s Internet economy.
Mobile connections have been on the rise, increasing by 23 percent annually for the past 7 years running, but penetration is still on the low side when compared with other emerging economies.
Although it is cheaper to get mobile data in Nigeria than in South Africa and Malaysia, according to the CEO Konga, broadband service reaches only about 0.1 percent of the Nigerian public. When compared with the likes of Algeria (2.5 percent), Egypt (1.8 percent) and South Africa (1.5 percent), it explains exactly why the economic impact of the internet has been lower in Nigeria than in other developing economies.