Nigeria's high economic growth not reaching nation's well-being
Nigeria has enjoyed strong growth over the past 15 years as political turmoil reached relative stability. A new report reveals, however, that the country is not transforming its growing wealth into well-being; failing to capitulate its growing economy into providing the infrastructure needed to increase non-oil dependent growth, health-care to improve the lot of its people, and policies and institutions needed to end systematic corruption.
Nigeria began its modern statehood following British colonialism, which started in the 19th century, culminating in the merging of the Southern Nigeria Protectorate and Northern Nigeria Protectorate in 1914. In 1960, the country gained formal independence from the British state. In 1967, the country plunged into civil war, with decades of alteration between elected democracies and military dictatorships following. In 1999, a relatively stable democracy was established, although corruption remains rife in the country.
Following relative stability over the past fifteen years, the country entered a period of sustained economic growth at 7.5% annual since 2000. In a new report, titled ‘Unlocking Nigeria's Potential: the path to well-being’, global management consultancy Boston Consulting Group (BCG) considers in how far that economic growth has filtered throughout the country’s wider economy, as well as comparing the country to others within a similar situation according to the firm’s SEPA method.
SEDA score
As part of BCG’s bid to better understand the state of economies across a range of metrics, the firm developed its so-called Sustainable Economic Development Assessment (SEDA) model. The SEDA is based on the premise that the purpose of economic development is to improve the overall standard of living – the well-being – of a nation’s population.
The SEDA model evaluates a number of key indicators to identify how well a country is able to transform wealth into well-being. The SEDA score is comprised of a three indices: economics, investments and sustainability, which are further broken into a total of ten sub-indices (dimensions). The model itself allows the firm to generate a number of outputs, including the current-level score, which measures the country’s current score based on the ten sub-indices, and the recent-progress score, which is a measure of the change in the ten indices over a seven year period. The SEDA score has been developed for 149 countries, allowing the firm to compare the current-level score and recent-progress score of countries across the globe.
No trickle down
The SEDA score highlights that Nigeria is currently not able to create prosperity from its high economic growth. The wealth-to-well-being coefficient for the country is one of the lowest recorded for all counties surveyed. More than 80% of the country’s 182 million people live on incomes of less than $2 per day, compared to 26% in South Africa. Poverty in the country remains stubbornly high, while those in education lags well behind many of its peers as well as emerging economies of similar size and with similar commodity wealth.
Diversified economy
The effect of low oil prices has seen a number of countries around the world find themselves in recession. Nigeria too has seen its economic growth impacted by the large drop in oil, and other commodity prices. However, the county has a relatively well diversified economy, with oil and gas, mining and quarrying making up around 13% of GDP. While internal consumption is relatively strong, oil and gas is the primary export of the country. The government too is highly dependent on revenues from oil and gas, with up to 70% of its income derived from the sectors.
Areas of concern
The research also considers the difference between Nigeria in a range of dimensions and the average across a range of other comparison countries’ SEDA scores for various dimensions. The comparison groups include sub-Saharan peers, oil and gas peers (such as Mexico, Columbia, Egypt, etc.), and aspirational countries (emerging economies such as Brazil, Turkey, etc.)
The research highlights that compared to its sub-Saharan peers, the country is relatively close in most categories outside Civil Society and Governance – highlighting that the country has a long way to go to shake off the yoke of corruption. Compared to other oil and gas producers, the country is a long way behind in almost every category. Faring particularly badly, in comparison, in the categories of health, education and infrastructure. Again, relative to aspirational economies, the country lags behind in the most categories.
Hans-Paul Bürkner, the former CEO (2004 - 2012) and now the Chairman of BCG, who attended the launch of BCG's new office in Lagos last month, comments: “Nigeria's challenges are significant—but they are more than matched by the talent and entrepreneurial drive of its people. However, the Nigerian people need better infrastructure, health, education, and institutions to be able to translate their energy and drive into prosperous personal lives and a prosperous society."
