Implications of Nigeria assuming Africa’s number one economy

on   /   in Viewpoint 11:13 am   /   Comments

AT basic economic classes, we were taught to assume that all other things will remain the same before certain economic conclusions can be reached. In the real world, this is hardly possible and thus makes postulations on the economy subject to different interpretations.

Following from the above, you hear economic analysts coming up with terms like “on the one hand and on the other hand”. Which means, economic situations cannot be pigeon-holed into one interpretation. Ray Ekpu writing in those days for Daily Times, requested for a ‘one handed economist’, so we can reach clear conclusions without ambiguities.

The debate that has resulted from Nigeria’s claim as Africa’s number one economy, make this imperative.

I am not an economic analyst in the mould of Bismarck Rewane, Henry Boyo, Lees Meba, Dele Shobowale, Omoh Gabriel and the likes, but I came across this piece in the Harvard Business Review, HBR, current edition, written by one Bryan Chidubem Mezue, a member of the HBR faculty. I felt his analysis was brilliant, devoid of the usual Nigerian sentiments. It also threw more light on the whole issue of forward and backward movements. It gives a factual and objective insight on our new status as Africa’s number one economy. I have reproduced it here in full:

”… Earlier this week, Nigeria ascended to the position of Africa’s largest economy following a recalculation of its GDP by the country’s National Bureau of Statistics. The long overdue exercise (the last one was in 1990) nearly doubled the country’s economy, pushing GDP up to $510bn from $270bn. There is a general consensus among economic analysts and commentators that the changes are merely cosmetic — they certainly do not affect the daily lives of most average Nigerians, and their timing might be politically motivated given the upcoming 2015 elections which are expected to be highly contested. However, from the perspective of managers and CEOs operating in Nigeria, there are some important implications.

“First, there will be some changes in the competitive landscape. Nigeria’s Finance Minister, Ngozi Okonjo-Iweala, mentioned the ‘psychological impact’ of the announcement on foreign investors. Before the announcement, the stock market capitalisation to GDP ratio for Nigeria was 33%, compared to 270% for South Africa. Post announcement, the ratio is 18%. Emerging market investors looking for upside potential in Africa will look at those numbers with interest. At the same time, inbound foreign direct investment into Africa may become more comfortable with basing operations in Nigeria or using the country as an entry point into Africa.

The result for managers presently in Nigeria is that they will likely face more competition for assets and human capital. To succeed, they will increasingly need to craft a differentiated strategy based on superior knowledge of the Nigerian market.

“In providing a better picture of the Nigerian economy’s constitution, the rebasing calculations also highlight the growing importance of the Nigerian (and African) consumer. Before the rebase, oil and gas represented 32% of the economy; under the new set of data it contributed 14%. Much of the balance comes from previously unreported, consumer-driven sectors. For example, Nigeria’s Nollywood film, music, and mobile phone industries have experienced rapid growth over the past decade. Managers that can develop disruptive strategies to tap into this booming consumer market will place themselves in a good position for success in Nigeria. They will need to innovate on platforms for marketing and distribution in order to overcome the persistent infrastructural challenges that the country faces.

“Finally, Nigeria’s rise to the position of Africa’s largest economy provides the perfect sales pitch for raising foreign capital and recruiting foreign talent. Managers and CEOs launching new ventures should exploit the market opportunity to attract new investors with relatively low familiarity to the Nigerian market. They should also take measures to build their talent pipeline by marketing aggressively to well-educated diaspora members and foreign talent abroad.

Nigeria’s GDP rebasing can indeed be considered an exercise in window dressing. But it also provides the perfect opportunity for companies already operating in the country to pause and rethink their strategy for long-term success in what will be a very important market for Africa and the world “.

From the above analysis, it is heart-warming to note that something good can still come out of “Afghanistan”; it is left for us to separate the chaff from the wheat. The question of Nigeria’s potentials have never been in doubt, it is how we harness these multiple and diverse opportunities into real and concrete productivity that has always been our bane. How do we eliminate the impediments – corruption, weak institutions and structures – and maximise the opportunities to our utmost strength.

These are the challenges of those presently at the helms of affairs in this country.

Can it be done? If they have the political will to see it through, with deep personal conviction, in the form of good examples, it is possible.

Let us hope the leadership will take up the gauntlet.

Sunny Ikhioya, a commentator on national issues, wrote from Lagos.

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