During the American President’s recent visit to Nigeria, he spoke of “taking down the trade barriers” between the two countries and of becoming the economic partner of choice for nations across the African continent. This is not what African countries need. Trade is no longer the key to economic growth. The world needs to focus on mutually beneficial partnerships, fostering sustainable development across the continent, targeting the continent’s inhabitants as its primary consumers – in Nigeria, this requires much higher levels of private-sector investment and economic participation.
Reports such as one published recently by the Business and Sustainable Development Commission, show that sustainable business is an untapped $12 trillion opportunity. Making sustainability the most lucrative business sector there is. Increasingly, it is becoming part of the mainstream investment agenda, with negative yielding assets in the West slowly being swapped for high-potential growth assets in the South. Both policymakers and institutions are realizing that investment into and equitable collaboration with low-income high-growth countries is key to achieving a thriving global economy and reducing inequality in their home countries.
By 2050, Africa will account for 25% of the global population. Within Africa, Nigeria will remain the most populous country and is on course to have the third highest population in the world, with over 300 million people. Nigeria’s economy is still currently heavily dominated by the public sector, but current government policies and presidential directives highlight the country’s commitment to building its private sector. The steps being taken are similar to those taken by Brazil at the start of this century.
Nigeria is blessed with a population which is highly entrepreneurial, predominantly English speaking, eager to learn and has over 100% mobile phone penetration. The private sector is expanding, adding value and providing local solutions for one of the largest and fastest growing markets in the world. Given the market fundamentals of the country, its private sector could rival that of Brazil’s in 10 years, which is good news for the global economy as Nigeria’s success is vital for global growth and stability.
Nigeria will have to decide how to manage trade but prioritize real local sustainable industrialization, just as Western countries did when they were growing their economies, and serving their local markets. The old-world paradigm, promulgated by developed countries pushing for trade agreements that are still largely one-sided and which make local development much harder, is clearly a bad policy for all countries of the world. Nigeria’s rapid population growth represents a huge opportunity to implement and exemplify the new sustainable model of development that the world so desperately needs.
It is now imperative that investment is made from the ground up, into infrastructure, people, facilities and the nascent private sector. In a recent article in the Financial Times, Nick Butler highlights the untapped business opportunities in energy and associated infrastructure development in Africa. As he points out, there is a huge market of 600 million Africans that need reliable power and other services. The first companies to provide these services will secure top and bottom line growth for decades to come. A recent S&P report indicates that investing in infrastructure will generate 2.5% in economic growth in emerging markets such as Nigeria. Butler further argues that the European Bank of Reconstruction and Development should extend its activity to Sub-Saharan Africa, which is exactly the type of investment it needs to secure adequate returns for itself in the future. The Nigerian government, through the Nigeria Sovereign Wealth Authority, will dedicate 50% of its future contributions to infrastructure, which presents opportunities for EBRD and other global institutions to co-invest.
Local investment is also critical. Thanks to reforms such as the Local Content Act of 2010, the outlawing of monopolies and a bias against politically exposed companies, the playing field for real private-sector companies has been leveled in Nigeria. Private-sector companies that have been investing and struggling for decades are now rapidly gaining traction. The private sector must build on this positive momentum and make long-term investments now. It is only by investing through and with the local private sector that international investors can be sure of getting high and sustainable returns.
Originally Published by Forbes, continue reading here.