Can Nigeria become 20th largest economy by 2030?
That Nigeria is facing an existential challenge is not in doubt. Bomb blasts across the country, a restive northeast, socio-economic inequality and politicking ahead of the next general elections make the headlines daily. There is another Nigeria beyond the repeatedly reported and stereotyped oil cursed, corruption-infested, ethno-religious split and conflict-ridden failing state.
This other Nigeria has a dynamic economy where agriculture and trade are larger and growing faster than the oil and gas sector. Today, Nigeria’s rich oil reserves, though a vital source of government income and exports, contributes only 14 percent of GDP. According to Acha Leke, a director in McKinsey’s Nigeria office, this dynamic and diversified Nigeria “is a huge opportunity for inclusive growth that should not be missed”.
A new report: Nigeria’s Renewal: Delivering Inclusive Growth in Africa’s Largest Economy, by the McKinsey Global Institute (MGI) and McKinsey’s Nigeria office is a manifesto which declares that with the right reforms and investments Nigeria can become one of the top 20 economies in the world by 2030.
Political and economic stability coupled with a large population have been attributed to Nigeria’s progress so far. Add to that the updated data which show Nigeria is far more diverse than previously thought. This reality however is persistently overshadowed by what McKinsey calls “outdated beliefs and assumptions”.
The report calls for a re-focus on Nigeria’s extraordinary advantages; “a large consumer market, a strategic geographic location and a young and highly entrepreneurial population.”
Unfortunately the benefits from these advantages are not evenly spread. A lot of Nigerians are poor, lack access to public goods and can’t boast of a decent standard of living. Currently, Nigeria’s growth is hampered by low farm productivity (because farmers don’t have access to fertilizer and mechanized tools) and inefficient markets together with the slow pace of skilled formal jobs in the cities, despite rapid urbanization.
A bad situation that risks becoming worse if government fails to improve its ability to deliver its programmes and services such as providing the poor with a safety-net, healthcare, education and infrastructure. Using education as a yardstick, Nigeria is far behind its peer economies. McKinsey notes that basic literacy among 15- to 24-year olds – a crucial indicator for potential economic success – is just 66 percent, compared with 99 percent in South Africa.”
The report says the economy has the potential to grow into a $1.6 trillion by 2030 at a growth rate of nearly 7.1 percent a year and identifies trade, agriculture, infrastructure, manufacturing, oil and gas (particularly gas) as the levers of growth.
It projects that wholesale and retail trade will grow into the largest sector of the economy. By 2030, consumption is expected to triple to $1.4 trillion for packaged foods and fast-moving consumer goods companies and will likely spur further linkages with agribusiness and manufacturing. Agriculture could double in growth to $263 billion in 2030 from $112 billion in 2013 while a four-fold increase in manufacturing output is projected.
Higher yields, better equipment, more valuable crops grown on more cultivated land as well as lower post-harvest losses will need to be complemented by roads and bridges that connect farms to the market. Infrastructure investments – for roads, railways, ports airports and electricity – could reach $1.5 trillion between 2014 and 2030 enabling growth across the economy.
With the right reforms, which will attract fresh investments, and the tackling of security the oil and gas has the potential to contribute as much has $22 billion to GDP by 2030.
To turn its potential to reality Nigeria has to do things differently. Guided by competent leaders, policymakers, officials of ministries, departments and agencies will have to work as a team. Together with private sector and other stakeholders they must link growth to poverty reduction and raising living standards.