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Analytics,  Articles

How Competitive is the Nigerian Economy Compared to its Peers in Africa?

 

Overview

The Global Competitive Index (GCI) is an index introduced by the World Economic Forum (WEF) which is an annual yardstick (anchored on how efficiently units of labour and capital are combined for generating output) for policy makers to look beyond short-term and reactionary measures and to instead assess their progress against the full set of factors that determine productivity. These are organized into 12 pillars: Institutions; Infrastructure; ICT adoption; Macroeconomic stability; Health; Skills; Product market; Labour market; Financial system; Market size; Business dynamism; and Innovation capability.

The index recognizes the need for economies to rely on fiscal policies and public incentives to allocate more resources towards the full range of factors of productivity to fully leverage new opportunities as monetary policies (over 10 trillion dollars injected into economies of the world by the different central banks, yet world growth is still slow) begin to run out of steam.

According to the WEF, a country’s performance on the overall GCI results as well as each of its components is reported as a ‘progress score’ on a 0-to-100 scale, where 100 represents the ‘frontier’, an ideal state where an issue ceases to be a constraint to productivity growth. This means that the more a country moves closer to 100 points, the better it is for her. The 2019 edition of the report therefore focuses on 141 economies of the world which account for 99% of the world’s GDP.

This research work therefore takes a look into how Nigeria has performed among its peers in Africa and in relation to Sub-Saharan Africa’s average.

Nigeria in View

According to the World Economic Forum in April 2019, Nigeria’s population is 193.9 million, GDP per capita is $2,049.1, and has an average annual GDP growth rate of 3.5% in the last 10 years. Ranked 116th out of 141 countries, it represents that the country dropped by 1 place from 115th it was ranked out of 140 countries in 2018.

Of the 12 pillars of the GCI, the only pillar Nigeria ranked high is in terms of market size as it scored 71 points (average for Sub-Saharan Africa (SSA) at 40 points) thereby making it the 30th largest in the world in terms of market size (30th position) while china ranked first.

Based on the Data obtained from the WEF GCI

The chart above shows that out of 12 pillars, Nigeria ranked above the sub-continent only in 5 pillars which are the product market, labour market, market size, and business dynamism and innovation capability.

With a score of 33 points (SSA average at 35), it shows the level of ICT adoption is still very low in the country and Africa at large. One major reason for this is the low level of access to financial activities as it has been linked to have a positive relationship with how the citizens have access to internet. And internet usage is a function of having to adopt to ICT.  Also, in our previous article, we explained the link between literacy rate and internet usage where we established a positive correlation between literacy rate and internet usage. Since the literacy rate is still low on the continent, it is therefore expected that the level of ICT adoption will also be low.

Nigeria Compared With Some African Countries

Here, Nigeria was compared with 6 other African countries (Ghana, Kenya, Egypt, Algeria, Mauritania and South Africa) based on 6 metrics such as security, public performance, transport infrastructure, trade openness, depth of the financial system, and entrepreneurial culture. The scores of the respective countries was used for the comparison.

Security

Nigeria and South Africa both ranked the lowest among the countries of interest while Algeria is the most secured of them all with a score of 80.4 and ranked 49th out of the 141 countries in terms of security.

Public Sector Performance

In terms of the performance of the public sector, South Africa ranked top among the countries of interest while Mauritania and Nigeria both ranked lowest with score of 21.2 and 37 respectively.

Based on the Data obtained from the WEF GCI

Transport Infrastructure

In terms of transport infrastructure, Egypt ranked first among the countries of interest followed by South Africa as they have GCI of 59.1 and 58.7 respectively. Nigeria on the other hand still ranked low and joins Mauritania in the bottom list with GCI of 31.6 in transport infrastructure.

Based on the Data obtained from the WEF GCI

Depth of Financial System

Ranked, 20th out of 141 countries of the world, South Africa has the biggest depth in financial system, among the countries of interest with a score of 75.6.

Based on the Data obtained from the WEF GCI

Nigeria however, still ranks lows in this metrics just behind Algeria and ahead of Mauritania. On the continent, South Africa has the highest internet usage and literacy rate at 94% and 94.4% respectively. As such, it is expected that its financial system will go to the depth of reaching its citizens. The same can be said for Kenya and Egypt as their literacy rate is at 78% and 80% respectively while internet usage is however low in Egypt at 49%.

Trade Openness

Nigeria moved some places to the top in terms of trade openness as it is ranked 4th among the countries of interest. This is an improvement relative to the other metrics previously looked into. It is however to be noted that the land borders have not been closed by the time the WEF Global Competitive index came out in April 2019. That said, South Africa topped the list in terms of trade openness with an index score of 56.5% while Ghana followed suit with an index score of 54.6.

Based on the Data obtained from the WEF GCI

Entrepreneurial Culture

Along with Kenya, Nigeria tops the list of selected countries in terms of entrepreneurial culture with a score of 57.9 and is ranked 31st in the world while Isreal is ranked 1st in terms of the entrepreneurial culture of its citizens. Could this be linked to the large informal sector in comparison with the formal sector of the country? Or could it be linked to the level of unemployment in the country which makes the citizens embrace entrepreneurship activities?

Based on the Data obtained from the WEF GCI

It is however to be noted that the components for comparison is not all encompassing as they are just the selected ones. That said, Congratulations on reading this to the end. Based on the metrics therefore, how competitive do you think the Nigerian economy is when compared to the rest of its peers in Africa?

The Dashboard can be downloaded here:  DashBoard on Global Competitive Index

Please feel free to drop your comments in the comment section or contact the writer on 08098374664

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