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Evolving Digital Economy in Nigeria

Nigeria is a key market for anyone interested in Africa. The size of its population, the resilience and dynamism of the people and huge market gaps are all drawcards. Advancing the digital economy will boost export growth and facilitate international revenue generation, job creation and enable poverty alleviation.

International trade is highly important in the development of the economy of a country because it allows for the development of markets, creates employment, cuts back the rate of poverty, and breaks monopolies by discouraging the domination of a market by a few.

Export trade is a sub-division of international trade where goods manufactured in one country are being shipped to another country for sale or trade and as a crucial element of a country’s economy, exports stimulate economic development. Some of the biggest companies in developed countries derive a sizeable portion of their annual earnings from exports. The Chinese economy led the world in exports in 2019. China was followed by the United States, with exports valued at 1.64 trillion US dollars, and Germany, with exports valued at 1.49 trillion US dollars.

The Nigerian government has undertaken reforms to help grow the business environment, including making starting a business faster by allowing electronic stamping of registration documents, and making it easier to obtain construction permits, register property, get credit, and pay taxes. Reforms undertaken since 2017 have helped boost Nigeria’s ranking on the World Bank’s annual Doing Business rankings to 131 out of 190.

Nigeria manufactures relatively few of the products it consumes and despite efforts to increase local industry, it remains largely import dependent. Further exports increase the trade balance and strengthens countries’ currencies, consequently causing it to appreciate in value and improve the economy.There are so many opportunities to tap into the commodities market and there are lots of gaps to fill.

Therefore, the pace of rapid technological advances is set to alter the future of work and create constraint for governments in building a policy environment that stimulates meaningful and large-scale employment for fast-growing populations post-COVID-19. There is also a recognition that streamlined policy frameworks and regulatory best practices are likely to drive the advancement and adoption of cutting-edge tools, such as the Internet of Things (IoT) and artificial intelligence (AI), which are likely to boost the development of the digital economy.

As the largest economy in Africa with one of the largest youth populations in the world, Nigeria is well-positioned to establish a strong digital economy. This would have a transformational impact on the country.

Digital leadership

Nigeria’s long-term economic performance remains broadly positive, driven by rising oil and gas production. One of the future challenges would be to intensify fundamental diversification of the economy, form oil into sectors such as ICT and services. However, Information and Communication Technology (ICT) is a key tool in the transformation agenda for Nigeria in the areas of job creation, economic growth and transparency of governance.

A significant improvement in the current broadband penetration of 35.4% is critical for the development of a digital economy in Nigeria. According to a study by ITU, a 10% increase in mobile broadband penetration in low income countries yields an increase of at least 1.6% in the Gross Domestic Product (GDP).

Moving From Basic to Knowledge Economy in Sub-Saharan Africa

The Federal Government of Nigeria recognizes ICT as the enabler for developing other critical sectors including agriculture and manufacturing. Thus, in its drive to diversify the economy from oil and gas, the Nigerian government is encouraging partnerships between local ICT companies and multinational/foreign investors. To promote these partnerships and grow an entrepreneurial eco-system in the technology sector, the federal government has supported creating government or private sector led incubator hubs, youth innovation programs, and science technology parks. Abuja Technology Village Science and Technology Park, which serves as an example, received the Abuja government support to become a destination for research, incubation, development, and commercialization of Information and Communications Technology.

In January 2016, the Federal Government announced the ICT Sector Roadmap (2016-2019), with the goal of addressing the key challenges plaguing the ICT sector and promoting President Buhari’s SMART Digital Nigeria Initiative. The focus of this policy document includes improving infrastructure and quality of service, promoting national broadband penetration and security, and supporting e-commerce. The policy will also encourage continuity of private sector-led continuous innovation and capacity building.

Digital and Technological Inclusive Innovation Road Map for African Governments

Correspondingly, the Nigerian ministry of Communications and Digital Economy has developed the National Digital Economy Policy and Strategy (NDEPS) 2020-2030, the Nigerian National Broadband Plan (NNBP) 2020-2025 and several other policy initiatives to ensure effective digitisation of the Nigerian economy both from public and private sector perspectives.

There is need to develop the Nigerian non-oil export sector through youth development in relation to digital economy. Nigeria should be able to export software and allied products as an alternative foreign exchange earner in much the same way India has done over the years. Nigeria should identify the need to mainstream the talents and skills of their young people positively by consciously building a structure and framework to enable them acquire these skills and it became an export product for Nigeria and the rest of the world.

Digital entrepreneurship

With the digital economy predicted to account for a quarter of global Gross Domestic Product (GDP) over the next few years, many businesses are looking to accelerate digital adoption to drive growth and ensure efficiency. COVID-19 has caused businesses to see the urgent need to leverage technology in doing business.

Although, finance is one challenge that greatly affects the ability of Nigerian SME’s to access international markets. However, with the aid of e-platforms which are made possible by the internet, SMEs can now do large-scale exports from the comfort of their homes as this method does not require huge finance.

With the largest population in Africa (estimated at nearly 200 million), Nigeria continues to represent a large consumer market for investors and traders. Nigeria has a very young population with nearly two-thirds under the age of 25. The growing young adult urban population is more inclined to shop online and they are increasingly using their smartphones to make their purchases, which has helped drive a rise in the internet retailing in the last few years.

Exportation business can be built with services, not only products. If you opt in for products, then channel your focus towards consumer goods. Here are 3 industry sectors with some ideas:

  • African natural herbal medicine industry – Export raw herbs, semi processed herbs, fully processed herbal based products.
  • Fashion industry in Africa – Export services such as mass production ability. Export fabrics that are hand woven.
  • The Media industry – Export content created for digital consumption. Venture into documentary and show reality to a global audience. Export services such as photography.

Digital platforms

E-commerce is an area of global investor confidence in Nigeria. The figures show that Nigeria is one of the leading IT markets in Africa, where there has been a rapid surge in the development of e-commerce businesses.

According to Euromonitor International Market Research, e-commerce advancements have been most notable in Nigeria because of the surge in telecom investments and smartphone purchases which have fuelled growth in internet usage from 20% in 2009 to 41% in 2014 [Chart above].

Nigeria has the largest online market particularly for apparel and footwear in Africa, which is expected to grow from US$104 million in 2014 to US$1,077 million in 2019[Chart above], due to the dynamic development of trusted e-tailers, Jumia and Konga, according to Euromonitor International data.

Investing in Nigeria gives investors easy access to close to 550 million people–200 million from Nigeria, another 200 million West Africans and about 150 million Central Africans, according to Nigeria’s minister of Communications and Digital Economy, Isa Pantami.

Digital economy activities are key for diversification because they are systemic. Software development solves local economic problems, with local content; expanding knowledge and education in the process and deepening integration with the global economy. The relevance of the internet economy are the spin-off benefits for the modernization and diversification of the Nigerian economy; and, solving efficiency losses.

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Nigerians have developed successful IT solutions which attracted attention of global players in the sector.A Nigeria developed Koniku, a device that employs artificial intelligence to create an electronic-nose that can ‘smell’ the COVID virus. A deal has already been signed with Airbus to deploy this solution on their aircrafts.

Companies like Kobo360 are demonstrating how digital innovation is transforming Nigeria’s economy. And while reshaping the hauling industry is an exciting start, it’s only the tip of the digital iceberg.

Additionally, PiggyVest is one example. The company, launched in 2016, is expanding access to affordable financial services in a country where, according to the Global Findex Database, only 40 percent of the population has a formal account. It is already helping users save nearly $7.5 million a month through its popular mobile savings and investment app.

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