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Nigeria is home to one of the largest populations and economies in all of Africa. That combined with a wealth of natural resources, a good position for global trade across the Atlantic and a surprisingly diverse economic foundation means that a lot of economists find the country incredibly exciting as an economic hub that the rest of the region could grow around. In 2011, a group of economists predicted that Nigeria would be the single fastest growing economy in the world between 2010 and 2050.
And for a while, they were correct, as the country became a major resource service, trade, and even financial hub, acting as a bridge between the region and a collection of international parties. Unfortunately, someone should have told them about economists' ability to predict the future, because since its peak in 2014, Nigeria has actually become one of the fastest, shrinking economies in the world.
The causes of this decline are simultaneously all too familiar, all while being very unique to this country. Corruption and instability are the obvious problems, but what is causing them is a very interesting case study into issues like foreign investment, regional disparities and conflicts happening on the other side of the world.
Then there are the intangible problems that Nigeria genuinely needs to address. The first thing that most people think of when they think of Nigeria is a grammatically incoherent investment opportunity coming to them from a deposed prince. Now obviously this is a bit of a joke at this point, but this kind of stuff matters.
If the country is going to live up to its potential, it's going to need international investment incorporation. If the first thing that people think about when they think of a country is scammers, and the first thing they read about is ongoing conflicts, it doesn't present the image of a safe investment, and this applies to even the most sophisticated of investors. In a cruel twist of irony, it was the unique economic conditions of Nigeria that gave them that infamy in the first place.
So, can Nigeria still become the world's fastest growing economy? What would it need to do to make that possible? And of course, what is currently holding them back? Once we've done all of that, we can put Nigeria on the Economics Explained Leaderboard. Innovation is the future, but most teams struggle to bring ideas to life efficiently. Mirrors' innovation's workspace is designed to change that, helping teams go from concept to outcome faster and more effectively.
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Nigeria and the region it inhabits are still tangibly impacted by many aspects of their long and often tragic history, most notably of course the Atlantic slave trade, which among other things exacerbated tribal grievances that still persist to this day. The economy as it exists today though really got started in the 1950s when they started to push for independence from Britain.
a push that a lot of countries around the world were also going through at the same time. In 1956, during that period of decolonization, Nigeria discovered massive quantities of oil enough that they would conceivably well on their way to becoming the largest producer in Africa. And when the country finally achieved independence in 1960, it really looked like Nigeria could become one of the wealthiest African nations.
There were romanticised predictions that differences could be put aside given the enormous opportunity, making headlines whenever the country seemed to be on the right track, a trend that still seems to surface every time things appear to be stabilising. However, again, this belief plaguing the majority of the continent was predicated on the idea that the country was one cohesive whole that collaborated productively, which could not have been further from the truth.
Eventually, religious and cultural infighting would soon affirm Nigeria's greatest fears, turning into a loose coalition, increasingly paranoid about each other's true intentions, and the country initially tried to partition itself into four ruling regions. However, the North and South constantly expressed concern that the other would make decisions to expand their influence.
By 1966, all of this culminated in a series of bloody conflicts when Nigeria would eventually become a country operating under a single federal entity. This forced homogeneity wouldn't last very long because there wasn't much actually holding it together. As the now-noble prize-winning economist Darren Assamoglu put in our video exploring African poverty, colonialism left only the shell of its institutions, which proved not to be useful for building new economic activities. Instead, they were simply very amenable for a strong man to take them over and use them for extraction.
In Nigeria, politicians enriching themselves with natural resources and cases of election fraud became commonplace. The country found itself facing a brutal civil war and its fifth coup in less than 40 years, with its only consistent development being its increased reliance on petroleum, which accounted for 87% of its exports and 77% of its federal government's revenue by the late 1980s. Often using these difficult times for their advantage, plenty of criminals and syndicates would conduct a variety of scams, taking advantage of any lapse in governance.
They do things like meet with unsuspecting business partners carrying a large sack of dirty bills, promising a cut if they help pay the large sums of money to clean them called wash wash. They also use TELEX, a telecommunications service that provides text-based messaging exchange over the circuits of private lines convincing Western Europeans that they could acquire Nigerian crude for money paid up front.
Nigeria was just prosperous and advanced enough to have access to the banking and communications infrastructure to make these scams possible, while still having such widespread poverty that for many it was their only option to support their family. Today, call center scams are common in dozens of countries in the economic south, because communications infrastructure has become far more common.
But this scamming Goldilocks zone was quite unique to Nigeria for a long time, which cemented its unfortunate reputation. This pattern of domestic and foreign deception combined with general mismanagement would become a huge branding issue, one that's only grown in recent decades, but more on that later. What really makes Nigeria's present situation such a tragedy is the remarkable rise and fall it's had over just the last 20 years.
In the early 2000s, modern Nigeria was still using colonial infrastructure to its advantage, averaging a GDP growth rate of 7%. Oil and gas exports still accounted for most of the country's export revenue, keeping them reliant, yet domestic sectors remain fairly consistent and often appeared to thrive.
At this point oil only accounted for 14% of the country's GDP, agricultural output appeared to be steadily growing as well, with about 70% of the Nigerian labour force connected to it in some way. The country was also on paper, becoming a powerhouse in the manufacturing sector. After suffering major losses in the early 1990s, output rapidly recovered from $9.64 billion to $55 billion by 2014,
And perhaps amongst the most important developments that accelerated this growth was that Nigeria was one of the first African countries to have widespread access to the internet, something that they obviously used exclusively for legitimate business activity. The government granted licenses to telecommunications companies in 2001, and by the end of 2003, they already had thousands of active users, which is now almost 100 million.
Of course, this was seen as a major milestone in Nigerian development because access to academic research, government and commercial information, as well as other previously inaccessible details about the world around them, finally provided the public with their potential to interact broadly and make more data-driven decisions, at least in theory. By no exaggeration, if everything ran smoothly, there is a good chance Nigeria could have, or still could, become, the next African economic superpower.
With an increase in commercial agriculture, a number of areas on the path to urbanisation, access to the internet and the potential to produce two million barrels of oil a day, Nigeria's rise made it look less like a petro-state and more like a self-sufficient nation with a valued resource that was on its way to rivaling South Africa. But of course, it hasn't.
At least not yet, because despite all of its advantages, it still hasn't managed to secure ongoing stability. If institutions are hollow and mismanaged, it really doesn't matter what can be grown on the surface, what's found underground, or even how many have access to online information. The landlocked country of Botswana, which doesn't have the same geographic endowments, has been able to reach record lows in corruption and greater levels of stability, resulting in an economy that's not rich by global standards, but is almost five times more productive than the comparatively blessed Nigeria.
an achievement made possible with consistent and reliable standards. Unfortunately, this is exactly the same reason why Nigeria's success story upon further inspection was never actually achieved, and why resources, while having the potential to catalyze growth, unfortunately cause more harm than good depending on the circumstances.
Between 2014 and 2016, inconsistent crude oil prices finally caught up with Nigeria in a big way when prices fell by 44%. Now, of course, this wouldn't be a problem if Nigerian industries lived up to the hype if they'd transcended beyond the oil curse, but spoiler alert, they didn't. In many ways, this dropped just exposed Nigerian industries that were propped up by a strong oil sector. While agriculture had been seen as a growing industry, yields were considerably lower than expected, as precision farming and fertilizer are still generally inaccessible to most farmers.
Moreover, the only cause that could be found for higher crop yields was Nigeria's growing population, which led to an increase in labour and subsequent cultivation. To make that as worth, individual productivity still remains devastatingly low. A trend that has only amplified in urban centres, which goes against the conventional views of industrialisation, but in economies like Nigeria and other undeveloped regions, manufacturing can actually be a very parasitic enterprise.
Compared to many of its neighbours, the country provides very little regulatory oversight with a troublingly large portion of its owners and those in management positions, taking significantly more than the average employee. In fact, during the final three years of unprecedented growth, that would soon prove to be a total destruction from the real issues. Millions of Nigerians, making up over 25% of the population, didn't have access to low wages at all, rather they were unemployed living in complete poverty.
Now, in a lot of undeveloped economies, people who are unemployed or completely outside of the labour force can at least rely on informal subsistence agriculture to meet their bare human needs, but as the country had rapidly urbanised, this was not an option for a lot of people in city centres who didn't have access to the land to cultivate. All this is to say that, although Nigeria was prospering in the realm of GDP for quite some time, this didn't, as is often the case, genuinely represent the life of the average citizen.
And when even headline economic figures started failing, nothing protected the government or its ongoing conflicts from extreme scrutiny. Scrutiny that would just reveal what most Nigerians have become accustomed to, disparity. Although there were early improvements in transit linking Nigerians together, it didn't solve the regional disparity between the north, which is geographically an arid desert devoid of resources, and the south, which is much more lush with much better farmland and a lot of oil.
Now, in most economies, this would normally just encourage people to move from the north to areas with more opportunity, but the country was crudely put together by the British with little regard for the tribal regions the country inhabits. So there are a lot of groups that don't want to leave their homeland even though they wouldn't be leaving the country. To make matters worse, the widespread poverty in the northern regions has made them the primary target of terror groups like Boko Haram, risking havoc and causing further damage to their already crippled industry, which of course ongoing violence and chaos in the country and have pushed many people to flee.
The aforementioned unemployment crises have also stifled the ongoing struggle to suppress them because many of the young men in the North are falsely recruited, with some joining voluntarily, with little to no chance of finding consistent pay elsewhere. The resulting violence is often so horrific that sharing more details would probably get this video removed from YouTube. This, combined with regular old political corruption, means that a lot of investment has been pulled out of the country and taking economic opportunities with them.
The country is well positioned to be the financial capital of Africa, and it could benefit greatly from investment into the continent as a facilitator. But in order to do that, there needs to be a culture of trust, something that has taken a significant hit for all these reasons, and the very fact that scamming is often the only choice left for a lot of people. In both the public and private sectors, Nigeria has had massive scam operations that grew consistently over the last half century.
And with the proliferation of internet cafes, many of its citizens only use the resource to email unsuspecting Westerners with stories involving oil investments or the classic Nigerian print story. A Dutch private investigation firm noted that companies and individuals lost approximately $3.2 billion in 2005 alone. Roughly the same amount as the country received in legitimate foreign direct investment over the same time.
These scams are often referred to as 419 scams after the Nigerian Penal Code that addresses these scams as fraud, which actually brings to light another issue that isn't even Nigeria's fault. Over 70% of the current Nigerian online scams people attribute to the country's corruption are actually coming from the West, so there's sadly very little they can do about that, but they still get the bad rap for it.
Additionally, while online access was framed as a way where all Nigerians were now capable of reaching out for ethical business and educational purposes, rural and undeveloped urban communities struggled with the speed and general access, which has produced a new level of disparity called the digital divide, further widening the gap in literacy rates amongst young people. Of course, all of this means that Nigeria has fallen into an all too familiar trap.
Much of what the government had set out to do to benefit the public has had questionable results, infighting persists without clear objectives, all while non-renewable export dependency put them on a troublingly common economic rollercoaster ride that continues to this very day. And yet, despite all of this, and there is a lot of it, it doesn't mean that the Nigerian dream is out of reach.
Their economy has seen signs of recovery since the 2014 crash and after 25 years of democratic-ish rule, they are in a good position to finally get things right, as long as they focus on what benefits the vast majority of its people. Agriculture is one of the top priorities for Nigeria and it's also one of the industries that is constantly under threat. Changes in climate, poor pricing policies and land tenure have pushed farmers into violent struggles to compete and protect themselves from insurgencies.
While some of these issues are out of Nigeria in hands, there are a number of things the government can do to drastically improve output. Less than 1% of their cultivated land is irrigated and fertilizer is not yet popularised, but much of this can't be resolved without proper investment into training and basic infrastructure. They also have a decent position for trade that could make it a great manufacturer right on the Atlantic, but the problem is that many aren't remotely incentivised to participate in these industries when something like subsistence farming gives them a better chance of putting food on the table, given inconsistent wages.
If they could convince foreign investors and their own people that they could make this a sustainable industry though, they have more than enough manpower to get the job done. The country has a huge population now exceeding 220 million and most of them regardless of their background would much rather live in a stable, safe and well-fed environment than the horrors they've seen in recent decades.
If Nigeria were to focus more heavily on infrastructure, safe work environments and precision farming, there's no reason why a few basic improvements couldn't put a significant dent in their fight against mass poverty. And while the fluctuation in oil prices has proven that Nigeria is still technically a petro state, there's no reason they can't use this to get back up while restoring their global reputation. They have the potential to produce 2 million barrels of this liquid gold every day, it's just that they lack sufficient systems to fully take advantage of the resource.
One of the primary concerns for Nigeria is that, even though they have a lot of this non-renewable resource, this is quite possibly one of the most mismanaged oil industries in the world, which is saying something, with some past government leaders citing it as their biggest failure. The government possesses four refineries, but they're absolutely ancient, often unable to refine petroleum products because they run out of parts, or materials were stolen overnight making the processes extremely hazardous or outright impossible.
Nigerian leadership has tried to fix this by asking for outside help from companies like Shell, but the response is usually negative because, like every other Nigerian industry, from agriculture to manufacturing to internet accessibility, most investors have started to give up on the country due to constant corruption. After the crash, consequent investigations and ongoing struggles, a massive amount of foreign investment left Nigeria. Its potential just wasn't enough for companies to stick around.
Recovery has occurred, yet without assistance it's been slow. Insurgency still occur and divide can be felt everywhere. And this is really the warning the Nigerian tragedy represents, what comes out of acquiring a bad reputation. Plenty talk about the oil and resource curse, location and everything else under the sun when it comes to a failing economy. However, without trust, everything else becomes noise. The people of Nigeria and the world around them ultimately make decisions based on social credit.
Numbers might look great, but if farms have been burnt, people lack access to education, and every investment and infrastructure is under threat, none of it matters, especially if these cases are cyclical and haven't been resolved in over 50 years. In truth, the story of Nigeria isn't the story of a petro state, a story of poverty or a story of crime, at least not exclusively. It's a lesson for all countries that branding is everything, the rest will follow.
Okay, now it's time to put Nigeria on the Economics Explained Leaderboard. Starting as always with size, the country has a GDP of US$363 billion, which currently makes it the fourth largest economy in Africa, behind South Africa, Egypt and Algeria. This comes after its rapid contractions since 2014, when, at its peak, it was actually the largest economy in Africa. Now that still makes it the 56th largest economy in the world overall, so it gets a 6 out of 10.
GDP per capita is obviously quite poor since that shrinking output has been spread out over a very large population of more than 220 million people. On a per capita level, it has an output of just 1,621 US dollars, approximately an 8th of the global average, and that too is tragically rapidly declining. But now it gets a 2 out of 10.
Stability and confidence is practically non-existent. Between corruption, regional conflicts, poor resource management, and its legendary reputation, it gets a 2 out of 10. Keeping in mind that anything lower means it's fighting in an all-out civil war. Growth has also been poor. Over the last decade, the country has lost almost half of its GDP in one of the most severe protracted declines in the 21st century.
0 out of 10. Industry is obviously lacking, but it still does have potential. A large and low-cost labor force and abundance of natural resources, all in a region that is desperate for a commercial hub, is a golden opportunity that is there for the taking. But until they do, it can only get a 2 out of 10. Altogether, that gives Nigeria an average score of 2.4 out of 10, putting it all the way down here on the leaderboard, demonstrating decisively the power of a bad brand image.
Now to see what we mean in reverse, go and watch our video on Switzerland, a landlocked country devoid of resources which was surrounded by the world's largest conflicts on all sides, and yet has become one of the world's richest places, simply because it has an impeccable brand image. You should be able to click to that video on your screen now. Thanks for watching, mate. Bye.
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