In 2022, Nigeria reported a nominal GDP of 477 billion USD, making it the largest economy in Africa. With its population projected to nearly double to 377 million by 2050, Nigeria also stands as the continent's most populous nation. Historically reliant on resource extraction for foreign exchange and employment, the government is now making ambitious plans to unlock the economic potential of a young and tech-savvy population.
Leading this drive is the National Digital Economy Policy And Strategy (NDEPS), introduced in 2019 under the Buhari administration. This bold digital approach is intended to galvanise Nigeria's economic growth and diversification. While challenges remain, the strategy has already unleashed some of the country’s potential.
Nigeria faces strong inflationary pressures, but efforts to reduce the security risks and stabilise the economy are ongoing. In the aftermath of the COVID-19 crisis, the nation’s economy is recovering and growing, seeing a reversal in the deficit tendency in 2022 compared to the three previous years.
The road ahead remains long and full of obstacles, but with challenges come opportunities. Here, we look at the current state of digitalisation in Nigeria and explore opportunities for investors and businesses interested in participating in this emerging economy.
The Imperative of Nigeria’s Digitalisation
Approximately 60 per cent of global GDP is driven by digital communications technology, underscoring digitalisation's role as essential in the growth trajectories of emerging economies. Digital solutions offer a wide range of opportunities from automatisation to access to international markets, opening the doors for a small local company to become an efficient international actor. Ensuring that businesses have access to digital solutions is key to economic growth and internationalisation of the economy.
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Digitalisation creates economic opportunities but requires infrastructure, resources, and skilled labour. For digital solutions to truly catalyse growth, digitalisation needs to become home-grown. While only a few countries in the world can claim complete digital autonomy, investments, policies, and time can enable a country to become a digital hub.
Nigeria's march toward digitalisation has bolstered the demand for skilled workers capable of working in all areas of the Information Technology (IT) field. Many schools and universities offer programmes to learn information technologies and other technical skills such as engineering. Thus, the infrastructure and knowledge base are continually strengthened, setting the stage for the NDEPS.
IT is already playing a key role in the country’s economy. With 29 per cent of Africa’s internet usage, Nigeria is a big player in the field. This influence is projected to amplify with IT being a driver of economic growth. A successful digitalisation drive harmonises policy enablers with industrial innovation, a concept Nigeria embraced with its national digital strategy unveiled in 2019.
The ambitious NDEPS for 2020-2030 aims to enhance infrastructure and knowledge distribution within the country, fostering an environment conducive to a burgeoning digital economy. The strategy hinges on eight pillars designed to localise expertise, infrastructure, R&D, and related elements.
Digital literacy & skills
Digital services development & promotion
Digital society & emerging technologies
Indigenous content development & adoption
Synchronising with this strategy, the National Broadband Plan 2020-2025 champions the deployment of 5G cellular broadband. As of September 2023, a 5G network operated by major telecommunication service providers such as Airtel, MTN, and Mafab Communications has been established in several Nigerian cities and is poised for further expansion.
Exploring Opportunities in a Dynamic Digital Landscape
The existing demand for reliable infrastructures and solid knowledge, both from policy and societal perspectives, bears testimony to Nigerian society's dynamism. The Broadband Plan and the subsequent development of the 5G network by local telecom companies are emblematic of these developments. And while broadband penetration is around 45 per cent as of mid-2022, opportunities for businesses active in the IT field are becoming more and more interesting. With the fast development of the knowledge base and infrastructure, investments in the country could prove to be profitable. From knowledge-building to infrastructure, through technological development, the opportunity landscape is vast.
International companies active in the digital field can bring the knowledge that is required for running digital projects. Online business academies have proven to be an efficient way to spread a certain way of working and train people while ensuring that the pool of potential candidates meets the requirements of skills and knowledge. The Digital Nigeria Training Portal was created to foster precisely this kind of dynamics. This public-private initiative aimed to develop a knowledge pool within the country, generating two potential effects. First, it would support the activities of a company active in the country by extending its operations and hiring locally. Second, it would contribute to nurturing a knowledgeable community within the country, ensuring sustained local economic development. These effects could prove to be a win-win situation for the businesses active in the country.
Instead of relying on government funds, the private sector can be the driving force behind the digitalisation efforts initiated by the government. The World Bank initiative Digital Economy for Africa (DE4A) is a catalyst for digitalisation. Leveraging its resources, the private sector can serve as the engine driving the development of new digital solutions. Investing in research and development or participating in projects will help build the know-how in the country. While access to the internet and infrastructures in Nigeria is already highly developed, societal demand calls for further enhancement. Therefore, funding projects within Nigeria could enrich the reputation of the investing business while fuelling the country's economic growth.
The landscape in Nigeria is progressively becoming more investor-friendly. In recent years, the Nigerian government has demonstrated an active role in building a favourable policy environment, notably facilitating administrative procedures. With strong incentives from the government and society, developing IT solutions in Nigeria could prove to be a worthwhile investment.
Corruption and Security Remain the Biggest Challenges in Nigeria
Corruption issues remain the most serious hurdle to economic growth, and Nigeria is no exception to this rampant issue. The discussions on corruption remain polarised, especially concerning its measurement parameters; however, its real and damaging effects on business development are indisputable.
Nigeria's performance in terms of corruption is far from satisfactory, scoring a meagre 24 out of 100 on Transparency.org's index, a trend that has remained steady for the past decade. Despite anti-corruption policies and attempts to address this issue, corruption remains systemic and a serious hurdle to business development in Nigeria.
Besides corruption, security has been and remains one of Nigeria’s most serious challenges, especially with persistent threats of terrorism in the country's northern regions. Although efforts over recent years to counter criminality have yielded some results, they continue to be a work in progress. However, the rural areas of the country are particularly affected by security concerns.
Monitoring Nigeria's Digital Potential
Nigeria represents an array of opportunities in the field of digital technologies. While the country needs better infrastructure, resources, and skilled labour, these challenges could inversely serve as the impetus that fuels Nigeria's ongoing digital transformation. Whether it’s supporting knowledge-building in the country or investing in ambitious new projects to support the NDEPS, Nigeria offers wide-ranging opportunities.
However, it is crucial to consider the obstacles that underscore potential risks to business expansion in the country. The prevailing issues of corruption and security concerns stand as significant impediments to executing business activities in Nigeria, which will remain for years to come.
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