Nigeria on track to become Africa’s largest economy

December 10, 2013

Africa, Business, International

Nigeria on track to become Africa’s largest economy

By Kelechi Deca
The Guardian

When the World Economic Forum on Africa 2013 came to a close May this year at Cape Town, South Africa, with the theme “Delivering on Africa’s Promise”, which had three integrated pillars – accelerating economic growth; boosting strategic infrastructure; and unlocking Africa’s talent – the question on the lips of the over 1,000 participants from more than 80 countries that gathered, was no longer “if” Africa will grow, but “how” it will grow. Participants were in agreement that building on recent growth ideally means investing in human capital and promoting economic diversification in Africa. These are the underlying required parameters to make Africa growth more inclusive.

While proudly announcing to the participants that next and 24th World Economic Forum (WEF) on Africa will hold in Abuja, Nigeria, May 7 – 9, 2014, the Coordinating Minister for the Economy and Minister of Finance, Dr Ngozi Okonjo-Iweala enthusiastically promised delegates that they will surely have an exciting Forum in Abuja come 2014. She reiterated that promise at the recent World Press Launch for the summit held at the Transcorp Hilton Hotel, Abuja. Okonjo-Iweala, no doubt believes Nigeria has earned the right to host the world following painful but highly rewarding economic reforms that have helped Nigeria become one of the fastest growing economies in the world.

The choice of Nigeria to host next year’s WEF Africa was in no way a political balancing act by the WEF, neither was it to give West Africa a sense of belonging either. In the last decade, Nigeria has emerged as a strong frontier economy with improved economic and investment conditions and attracting the large FDI as a result. Specifically, the UNCTAD World Investment Report 2013 subtitled: ‘Global value chains: Investment and trade for development, disclosed that Nigeria recorded FDI inflows of $7.03bn in 2012 to beat other African countries. Nigeria emerged Africa’s biggest destination for FDI in 2011, with total inflows of $8.92bn. South Africa was ranked next with total FDI inflows of $5.81bn, while other African countries such as Ghana received $3.22bn; Congo, $2.93bn; and Algeria, $2.57bn, respectively. More importantly, from the government’s perspective is that the direction of the investment aligns with President’s vision of a private sector led inclusive growth. The General Electric’s $1bn investment in service and manufacturing facility in Calabar is a major case in point.

Indeed, the changes in the economy are increasingly visible. There have been improvements in road infrastructure projects while the aviation sector is not left out as virtually all airports are undergoing massive remodeling. For the first time in over 30 years, the North South rail link was reactivated and trains now run from Lagos to Kano. The social sectors are not left out as government is investing in capacity building and infrastructure in both health and education sectors. In the area of job creation, about 1.6 million jobs have been created in the last year, but recognising that, in the light of significant levels of unemployment, more needs to done in this aspect. Nonetheless, virtually all indices on economic growth and a positive investment climate points to the fact that Nigeria is on the right path.

Interestingly, the theme of next year’s Forum is Forging Inclusive Growth, Creating Jobs falls within the Nigerian government’s policy direction as encapsulated by President Goodluck Jonathan’s transformation agenda. It could be recalled that his mantra on Africa’s growth has been that “for Africa to remain relevant, we need to adequately educate our people, as it is through education that we can unlock the potential of our youth to enable Africa to compete globally, and create jobs in the new knowledge economy.”

According to the World Economic Forum (WEF) Africa’s remarkable growth trajectory is projected to remain above five per cent in 2014 with West Africa the fastest growing sub-region, representing the continent’s largest business opportunity. Such momentum, the WEF says, is a welcome and necessary boom to a region whose youthful population offers the prospects of a significant demographic dividend fuelled by growth in consumer industries, manufacturing and business process outsourcing. Nigeria, sub-Saharan Africa’s second-largest economy and most populous nation – with over 160 million inhabitants – already plays a crucial role in advancing the continent’s growth; yet it is also emblematic of the challenges of converting natural wealth into solutions that address persistent social challenges.

As the foremost gathering on the continent, the 24th World Economic Forum on Africa will bring together over 1000 regional and global leaders to discuss innovative structural reforms and investments that can sustain the continent’s growth while creating jobs and prosperity for all its citizens, and this event will provide these leaders a first hand opportunity to see for themselves the transformation that has taken place in Nigeria. Also it will provide the leverage to compare the Nigeria they see with what they read or hear from some sections of the global media. It is not only a great opportunity for the different sectors of the Nigerian economy such as aviation, hospitality and tourism industry, it will also put Nigeria on the global map for as many people who have never been to this country will have a feel of Nigeria. This is unarguably the largest business cum economic gathering in the global calendar. And the fact that Nigeria is hosting it at this time in its national life says a lot about what this government has achieved so far.

Dr. Okonjo-Iweala further highlighted that the Federal Government to ensure a successful event, has identified macroeconomic stability, successful implementation of the power and agricultural sectors’ reforms, sustained single digit inflation rate and other initiatives being embarked upon by the government to ensure sustainable and inclusive growth of the economy as key reasons why the organisers of the Forum picked Nigeria to host the event. She said: “It is very clear the reason why Nigeria has been chosen to host this conference and the reason is that they find it very captivating the developments that are happening in the Nigerian economy. The whole power sector privatisation is one that has never really been seen anywhere and so they are fascinated by that whole process the way it was done openly and transparently, the investors it has brought in, a lot of foreign companies have invested”.

The minister explained that the event would enable business leaders globally to come to Nigeria and see first-hand what had been achieved under the current administration’s economic scorecard with a view to further enabling them to take investment decisions on the economy. Noting that despite the achievements in key performance areas in the nation’s economy, the challenges inclusivity of its growth and that poverty is tackled frontally through jobs remained daunting and required more efforts to be surmounted.

She also maintained that despite the security issue as a result of the Boko Haram insurgence in some parts of the country, available statistics showed that insecurity was not seriously impacting negatively on FDI inflows into the economy as global investors are well informed about the investment opportunities and what government is doing to ensure safety of investments. It could be recalled that Nigeria has been receiving favourable ratings from global rating agencies including Fitch and Standard & Poors.

Standard & Poor affirmed Nigeria sovereign rating at BB- with a stable outlook. The affirmation came at a time the agency downgraded other sovereigns like the United States due to the current global economic difficulties. The rating agency, while acknowledging the challenges facing the Nigeria, says the economy remains robust with macroeconomic indicators remaining strong. And this is also a reconfirmation of Fitch’s rating which put Nigerian economy in the positive light. On the fiscal side, the rating agencies acknowledged that Nigeria’s GDP growth remained strong in 2013 through 2016 buoyed by non-oil sector growth.

Further sign that investor’s confidence in Nigeria is quite commendable could be gleaned from the 400 per cent over-subscription of the $1 billion Eurobond floated by the Federal Government in two tranches of $500 million each, interestingly about 80 per cent of the subscribers were investors from the United States of America.

The Chief Economic Adviser to the President, Dr. Nwanze Okidegbe while addressing the media at the launch said that the President is very determined to ensure a successful event in view of the foreign direct investment potential for the economy, adding that this is why a high-powered public-private sector composed Steering Committee was constituted to oversee all the processes that would ensure a hitch-free Forum in Nigeria. The Head of Secretariat for the World Economic Forum on Africa (WEF Africa 2014) Mr. Frank Nweke Jr., said that next year’s hosting of the event in Nigeria would be the first by a West African country and that the country will ensure a world class hitch free event. The WEF, he said, attracts participants, including heads of governments and statesmen, chief executive officers of global firms, leading financiers and policy development technocrats from about 80 countries.

The steering committee for the World Economic Forum on Africa, Abuja 2014 is made up of some of the ‘heavyweights’ in the Nigerian private sector such as Alhaji Aliko Dangote, who has also been made a Co-Chair of the summit, Mr. Tony Elumelu, Mr. Wale Tinubu, Mr. Nduka Obaigbena and the Managing Director of First Bank, Mr. Bisi Onasanya, among others.

There is a lot of enthusiasm on Nigeria and Africa in general. In the words of Borge Brende, Managing Director and member of the Managing Board, World Economic Forum: “The era of pessimism is over in Africa; the African lions are growing even faster than the Asian tigers,” he said. “But if this growth is not invested in human capital and diversifying economies, we will lose out on the opportunity,” Brende concluded: “There is a lot of optimism, but also a lot of realism” as Nigeria welcomes the world to heart of Africa.

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