By: Fred Olayele
It is probably stale news that Africa is now one of the world’s fastest-growing regions with increasing political and socio-economic stability, and a huge, largely untapped economic potential. What is news, I guess, is the fact that Nigeria is now a “MINT” country. More on the MINT status later.
About 500 years ago, the GDP of China and India, combined, accounted for roughly 50 per cent of global GDP, while North America and Western Europe together contributed just 20 per cent. Of course, the industrial revolution soon changed all of that; by the 1950s, North America and Western Europe now had a productive capacity that enabled them account for half of global output. China and India, together, could only contribute a meagre 8 per cent, while their other neighbour, Japan, was even in a better shape. To cut a long story short, the advanced economies were fully in charge again by 1980.
Starting from the early 1980s, the cycle began again. Relatively higher population growth rates in the emerging economies of China and India, combined with other factors, resulted in high economic growth rates that catapulted income per capita levels in these countries. Gradually, they began to lift multitudes out of poverty. Between 1981 and 2010 alone, the extreme-poverty rate in China took a nosedive from 84 per cent to 10 per cent; China succeeded in moving over 680 million people out of misery! As I write this, the economy of China is the world's second largest, and combined with India’s, they account for one-fifth of global production. If recent trade statistics are anything to go by, then another feather has been added to China’s crowded cap; China has overtaken the United States to become the world's largest trading nation (with total trade standing at $4.16 trillion in 2013). So, how does Nigeria stack up?
In his 2001 seminal paper titled, “Building Better Global Economic BRICs”, Jim O’Neill, then Goldman Sachs economist, coined the BRIC acronym to refer to the emerging-market nations of Brazil, Russia, India and China. Between 2001 and 2011, the GDP of China grew by over $5 trillion. Huge, you would say! In international trade and finance, the term BRIC is now synonymous with the shift in global economic power away from the advanced economies towards the developing ones.
In 2005, O’Neill again identified 11 countries (Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey, South Korea, and Vietnam), termed Next 11 (N-11) that could rival the G7 over time, basing his predictions on important criteria like trade openness, investment policies, macroeconomic stability, political maturity; and themes like energy, infrastructure, urbanization, human capital and technology. At the end of 2011, four of the N-11 countries – Mexico, Indonesia, South Korea and Turkey (MIKT) – already accounted for 73 percent of the output of the N-11. At some point in 2009, Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa (CIVETS) were also touted as a group of powerful emerging economies by Robert Ward of the Economist Intelligence Unit; although the CIVETS never really flew.
Recently, O’Neill has again emphasized that a group of four countries (who are also members of the N-11) are expected to be the second generation of emerging market pace-setters, after the BRIC: Mexico, Indonesia, Nigeria and Turkey (MINT). The term MINT was originally coined by a Boston-based asset management firm, Fidelity, but with O’Neill’s endorsement, economists and investment analysts have started examining closely this next wave of countries.
Among other things, big and growing populations with abundant supplies of young workers, proximity to key markets and regional economic superpower potential are some of the motivations. In the case of Nigeria, in particular, the potential to become the economic hub of Africa has been numerously argued. The MINT news could not have come at a better time.
For a long time, a unique selling proposition for anyone wanting to “market” Nigeria to foreign investors is to add that “Nigeria maintains a strategic position in Africa. It is the most populous country on the continent, with a population in excess of 170 million and its economy will overtake South Africa’s by 2020 to become the largest in Africa”. The last segment may not be necessary again; the National Bureau of Statistics in Nigeria plans to complete a rebasing of the country’s GDP soon. By changing the base year for calculating output to 2008 from 1990 to reflect the importance of sectors of the economy (e.g. telecommunications, information technology, financial services and “Nollywood”) that have grown significantly in size and importance, economists predict Nigeria’s GDP could move upwards from its current $290 billion value to $405 billion, compared to South Africa’s $370 billion. There is nothing wrong with that. Most advanced countries overhaul their GDP calculations every five years to reflect changes in output and consumption. The last time Nigeria did that was 24 years ago; this suggests that the GDP framework currently in use underestimates economic activity.
The rebasing exercise, no doubt, will transform Nigeria into Africa’s largest economy. As Africa's largest oil producer, with an average annual GDP growth rate of 7 percent in the last 10 years (compared to 3 per cent for South Africa), coupled with a population in excess of 170 million ( more than three times the size of South Africa's 51 million), great opportunities lie ahead. Yes, great opportunities, but only if the MINT status is well managed. I say it again, if well managed.
For sure, the GDP rebasing will be very appealing to investors looking for high growth and alternative markets. However, there is more to the size of an economy than meets the eye. Size cannot, and will not, always be the single most important factor that determines greatness! To get the crown of the economic powerhouse of Africa, Nigeria has a lot of catching up to do. Talking about business environment, South Africa has better infrastructure, well developed financial markets and a more sophisticated and diversified economy.
There are important lessons Nigeria can learn from the BRIC acronym. It puts foreign investors in a more comfortable position when it comes to investing in countries they have certain stereotypes of or know little about. Now that BRIC is a familiar story, can Nigeria take full advantage of its new MINT status? We need to consolidate our position in the MINT group in order to take full advantage of the many economic opportunities therein.
Now listen, the political class! You’ve got work to do. Whether or not Nigeria succeeds in riding the crest of the economic wave presented by its new MINT status depends on what you do or fail to do. Economic development refers to the growth and development of the economy of a nation or region; it is often commonly measured by the increase in income and job creation over time. The economy of Nigeria is still heavily reliant on oil exports; we derive about 80 percent of government revenue from oil exports. That is unacceptable! Even elementary economics forbids that. Now is the time to diversify the economy into the non-oil sector in order to expand the sources of growth and make it broad based.
Economic growth is largely driven by capital-intensive sectors, so we need to increase our electricity generation capacity in order to enable the manufacturing sector generate the much needed jobs for the teeming population. The ongoing reforms in the agriculture sector are commendable; increasingly, agricultural production requires modernization in order to effectively provide linkages to the manufacturing sector through a robust value chain framework. We also need to invest heavily in modern and reliable infrastructure.
Also listen, now, the media; both local and international. For the local media, now is the time to aggressively report on our MINT status. You do not need to downplay it. For folks in the international media, now is the time to sheath your swords. The same way the Boko Haram insurgency of the last few years took the shine off some of the successes recorded in the land, I expect our new MINT status to dominate the news, going forward. Not only that, the stereotypes of corruption, insecurity and anarchy often portrayed should be checked.
O’Neill says if the MINT countries “get their act together” they could match the double-digit GDP growth recorded by China during the 2003-2008 period. If BRIC could do it, MINT can do it too. Let MINT do it. And MINT will do it.