Thursday, March 28, 2013

Nigeria Emerging Economic Power


"Africa has more than one story. When we get to know it well and completely, we surprisingly discover a continent that is big, joyful, generous, enthusiastic and optimistic. It is today the darling of many foreign investors, and the world's superpowers are competing to lay first claim to it, not now as lords as in times past, but with a desire to be first to be regarded Africa's friends. So much has it grown in many facets, economy included, that it portends hope for many peoples.

A one-word Ibo proverb "Nkoli" loosely translates to "tell your own story". Harambee blog sets out to contribute local brush strokes to build the real story about Africa told by Africans themselves.

There is much hope Africa can offer the rest of the world; from its love of life and family, to the heroic examples of people who have withstood great odds with a smile on their lips, and great stories of innovation achieved with limited resources." --Eugene Ohu, a Nigerian freelance journalist

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From his office overlooking the Bank of England and the Shard, Charlie Robertson, one of the leading emerging market economists in the City, shows me his charts and graphs. According to his research, what started as a boom for raw materials will culminate with the complete transformation of the African continent by 2050.


Nigeria’s reinforced foundations

The Nigerian economy will eclipse South Africa, which by then will become just a regional player. I query whether the growth in countries like Nigeria, is built on shaky foundations, and whether corruption will undermine its prospects.

“All I can talk about is what I’ve seen,” says Robertson. He points to Sanusi Lamido Sanusi, Nigeria’s Central Bank Governor since 2009, “who is remarkable. I haven’t heard anyone suggest that he’s in any way corrupt.”

And Sanusi is not alone. “If you go to the central government side, you’ve got Ngozi Okonjo-Iweala who could have been the World Bank chief, if the Americans and Europeans hadn’t stitched up who gets the top job at the IMF and the World Bank…she’s that good.”

There is also the agriculture minister, “who looks great,” the trade and industry minister, the stock exchange chairman. “You seem to have a whole load of people with global and western skills in Africa pushing for change in the right direction.”

However, he concedes that Nigeria’s reputation for corruption is something that cannot be brushed aside. “I’m not na├»ve,” he says. “One of the key things I talk about is corruption and I say, well there’s a lot of corruption. This is normal at this income level, and inevitable, but you have got countries that are making a big difference.”

He points to a chart showing corruption linked to per capita GDP, with scores of 1 to 10 given by Transparency International. “Now the thing about all of these countries that are getting a good score, is that they are all rich…If you are poor, if your per capita GDP is $7000 or less, you are perceived to be corrupt.”

This suggests that the growth of the middle class in many Sub-Saharan African countries will mean an increase of educated people who are starting to question the government, demanding accountability.

“Basically we’re all pretty badly behaved when we’re poor, and as you get richer you begin to demand more transparency and more improvement. It’s not even about democracy versus dictatorship, because a lot of these countries like Qatar and Singapore don’t get great scores on democracy. But they are nonetheless seen to be quite un-corrupt, compared to poor countries,” says Robertson pointing to his chart.

“So my argument is that corruption is a problem and it will continue to be a problem until Sub-Saharan GDP is at $10,000, which we’re not going to get to for another 20 years, before you start to record scores in a three to six range instead of a 2 to 4 range. It’s going to be a very long process I suspect.”

“So my first point is corruption does exist, it is an obstacle. However, you’ve got good people in place to do the right thing. If you look at transparency scores for Nigeria, in 2001 it had a score of 1, today it’s got a score of 2.4. That was the 3rd best improvement of any country since 2001.”

Nevertheless, when it comes to Africa, it is, of course, not all plain sailing. Robertson admits there is a risk of countries going backwards, but he says: “That’s true for almost all the African countries.”


Democracy happens at $6000 GDP

There is an element that Robertson refers to as the democratisation risk. When per capita GDP reaches US$6000 p.a. all countries become democracies other than oil exporters, but before the country reaches that level of GDP there are inherent risks of failure in the system.

To support this theory he points to the fact that every country in the world which had a per capita GDP above $6000 in 2009 is a democracy of sorts, apart from six countries. The exceptions are China, which he predicts will democratise within a decade, Belarus, Cuba and Singapore. Tunisia and Thailand the other two of those six countries are now both democracies. “Tunisia which obviously led the whole Arab revolution, and the reason it led it in my view, was because their per capita GDP was over $6000, the middle class was ready for democracy.”

“Now that’s good, as you get richer, democracy gets stronger, and never ever dies. There is no case in history of a country above $10,000 losing democracy, it’s never happened. But sadly if you’re at $2000 or less of GDP, there’s quite a high chance, in fact, in any given year there’s about an 8 per cent chance of losing democracy,” Robertson explains. Hence the democratisation risk.

“A year ago when I started writing this book an 8 per cent chance, basically told me that one or two of them were likely to fall to a coup in any given year. And they did, Mauritania and Mali, and there should be, statistically, another coup this year in a nice but fragile democracy.”

Read it all here.

 

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