NEWS ANALYSIS: Black China

Another Economic Miracle?

OK, here’s the shocker. Despite the violence and the red tape and the greed, Nigeria’s economic success could match China’s. The country could finally live up to its huge potential. And it has the same route to success as China: the economy. That seems almost unthinkable. But it’s only because the China we know is the China of 2019. Few of us remember the sleepy panda that was China 40 years ago. We’ve now seen five East Asian economic miracles, so it’s easy to position China as part of a trend. It’s hard to imagine an African economic miracle because none of us has ever seen one.

Transforming an economy isn’t easy, but it can be done. When Mao Zedong died in 1976, China was one of the world’s most backward and impoverished nations. Gross domestic product per capita, essentially a measure of average income, was about $200 (adjusted for inflation). Two years later, Deng Xiaoping came to power and deregulated the economy. It exploded. Average annual income is now close to $10,000; 850 million people were lifted out of poverty. The transformation was accomplished with astonishing speed. Uche Orji, a former Wall Street investment banker who’s now CEO of the Nigeria Sovereign Investment Authority, says he first went to China in 1998. When he went back five years later, it was “pleasantly unrecognisable.”

Nigeria’s numbers today are surprisingly close to where China’s were before reform. In 1978, China’s poverty rate was 55 percent, almost identical to the most recent statistics for Nigeria. And adult literacy in China was only 65 percent, comparable to Nigeria’s 62 percent. Today, China’s poverty rate is almost zero, and literacy is at 97 percent.

If a comparison to China seems too ambitious, how about India? Nigeria and India have more than a few similarities: Both are ex-British colonies and have an extraordinary number of ethnic groups (2,000 in India), endemic corruption, religious conflicts and a loyal and highly educated diaspora. Before 1991, India had a heavily regulated socialist economy, with extreme levels of protectionism for domestic industries and notorious levels of red tape and bureaucracy. Facing default, Prime Minister P.V. Narasimha Rao and Finance Minister Manmohan Singh began a reform program of reducing tariffs, opening the economy to competition and foreign investment, and slashing bureaucracy. GDP per capita rocketed from $368 to $2,010. Between 2014 and 2018, India grew faster than China.

As with China and India, much of the case for Nigeria’s potential comes down to one word: size. Large countries have huge advantages over small ones, both in terms of economic efficiency and in their ability to attract investment. It was the potential of China’s huge domestic market, not its usefulness as a source of cheap products, that attracted foreign investment in the 1980s. Nigeria is the “last major open market on earth,” says Randy Buday, DHL Express’ regional director for West and Central Africa.

It has around 200 million people, 10 times that of an average African nation and almost twice that of the second largest, Ethiopia. One out of every seven black people on earth is Nigerian. Nigeria’s population is already larger than Russia’s and in 30 years will pass that of the U.S. According to the U.N., by the end of the century, Nigeria will have 733 million people. It has what Folasope Aiyesimoju, CEO of the conglomerate UAC and formerly with Kohlberg Kravis Roberts in London, calls “demographics to die for.” In other words, a young population. Nigeria is Africa’s largest economy as well, surpassing South Africa. According to Canback Consulting, which focuses on emerging economies, it already has a small but growing middle class.

Of course, like China in 1978 and India in 1990, Nigeria has in place a set of economic policies that stifle innovation and efficiency. The government provides too much control and not enough support, such as infrastructure and basic services. One CEO says off the record, “Businesses pray to not be noticed by the government.” Another describes a “continuous parade of government types coming through my office trying to shake me down.”

Andrew S. Nevin of PwC points out that the public sector in Nigeria is tiny compared with those of most countries. True. But if Nigeria removes the barriers to growth, its economy could explode too.

Secret Weapons

Some pieces of the puzzle are already falling into place. Nigeria has a functioning stock exchange and capital market. Pockets of the country are thriving. Sanusi points to Lagos state, which provides an excellent model for what Nigeria could be. It’s dynamic and things work, in part because the government collects taxes and reinvests them in improving infrastructure and providing services.

The export economy is diversifying. Nevin says Nigeria’s most valuable export is now people, not oil. Around 5 million Nigerians live abroad, mostly in the U.K. and the U.S. The diaspora is highly educated. Almost a third of the Nigerians in America have advanced degrees. This diaspora is also passionately loyal. Nigeria gets more each year from remittances, money sent home by those working abroad, than it does from foreign aid. Nevin estimates that formal and informal remittances could total as much as $40 billion. But the diaspora provides more than just money. It is a real-time link to Western know-how and technology.

Nigeria also has a booming arts and entertainment industry, which is a source of both export earnings and pride. Nigeria has produced an astounding number of first-rate novelists, including Nobel Prize winner Wole Soyinka, Chinua Achebe—whose `Things Fall Apart’ has been translated into 57 languages—Biyi Bandele and Chimamanda Ngozi Adichie.

The Nigerian film and television industry, or Nollywood, is reckoned to be the second or third largest in the world, after Hollywood and India’s Bollywood. It produces around 50 movies each week, in every genre. Nigerian movies are shown in homes, movie theaters and video parlors throughout the country, as well as across Africa and the far-flung Nigerian diaspora. They are consumed by all levels of society, from those wealthy enough to have satellite dishes to those who flock to “community viewing centers”—in essence, mini-theaters using flat-screen TVs. TV stations in many African countries buy Nigerian programming. It’s common to encounter Nigerian soaps and sitcoms on TVs in cafés and bars across the continent, even in francophone countries. Vendors walk the streets of Sierra Leone’s Freetown wearing plastic ponchos containing Nigerian DVDs, often pirated.

Most are hastily shot and low-budget—some by what actor and director Ali Nuhu calls “roadside filmmakers.” But Nigeria also has an upmarket segment. The film `Lionheart’ was entered this year for an Oscar for best foreign film, before being disqualified for having too much English dialogue. The irony, of course, is that Nigerians speak English.

The Nigerian arts industry has been so dominant that artists in other African nations have paid it the ultimate compliment: complaining about “Nigeriasion.” Nollywood is important as a source of jobs and export earnings, but even more than that, it is a reminder to Nigerians of what they can do when they set their minds to it.

Entrepreneurs everywhere

But there’s even more in the plus column. Oil, movies and the diaspora are well established. However, the future belongs to companies that aren’t even on the radar yet. Nigeria has a robust and vibrant entrepreneurial ecosystem. Yaba, in Lagos, is Nigeria’s Silicon Valley. It has attracted support from international technopreneurs like Facebook’s Mark Zuckerberg. Nigeria is particularly strong in fintech and telecoms. And the high-tech explosion is not just in Lagos. Amal Hassan has built Outsource Global Technologies into a world-class organisation that provides outsourced call center operations. Her company is located in the North, in Abuja and Kaduna.

There are thousands of startups in Nigeria, and they’re not just producing high-tech products targeted at the upper and middle classes. Some are trying to get traction in that tricky ground between making a profit and taking on big social problems. After finishing her MBA at MIT, Bilikiss Adebiyi-Abiola started WeCyclers, basically a motorbike-based trash collection business that serves the 60 percent of Lagos’ population that lives in slum neighborhoods where people are too poor to pay for trash collection. WeCyclers takes their waste and pays them with money it earns from recycling.

The spirit of small business is everywhere. The informal sector—street vendors, local businesses and tradespeople—is booming as well, particularly in Lagos. Nigerians have a work ethic that makes Scandinavians look like slackers. No one sits in Nigeria. It’s impossible to walk down the street without being approached by someone selling something, from peanuts to windshield wipers to an on-the-spot manicure. In Kaduna, the governor has converted a section of the market into a “recycling program” to provide employment for youth. It’s backbreaking and dangerous work: smashing old alternators to pieces with hammers to pluck out the copper wire inside; bending old, razor-sharp roofing sheet metal to make bread bins; and melting down aluminum cans to recast them into cooking pots. The program has no shortage of applicants, many of whom are less interested in getting the basic skills the program provides than in earning money to pay their school fees so they can move on to better jobs. Nigerians are passionate about education and self-improvement.

That’s all great. But movies, high tech and street retail are not enough to support three-quarters of a billion people. As Aiyesimoju says, “Google’s been a great success, but it hasn’t transformed the American economy” alone. Transformation will require addressing core industries like petroleum, manufacturing and agriculture, making them more efficient and competitive. In the case of petroleum, there’s also the need to streamline the state company that oversees the industry, the Nigerian National Petroleum Corp. In the case of agriculture, it’s moving away from subsistence farming using almost Stone Age tools and techniques toward modern high-yield farming and redeploying those displaced workers in what Tufts University economics professor Margaret McMillan calls the “modern sector.” So far, progress is spotty.