Nigeria’s star is rising on the African continent. The country rules African entertainment with Nollywood movies and its musical exports. According to industry analysts, the country’s film industry, Nollywood is worth about $200 million a year in revenues, making it the third-largest movie industry in the world after Hollywood and India’s Bollywood.
Experts predict that it will soon become Africa’s largest economy, overtaking South Africa. ‘If confirmed, the 40 percent upward revision would bring Nigeria’s GDP to about $370 billion, just shy of South Africa’s output ($391 billion forecast for 2012), with the country subsequently becoming the largest economy in Africa within a year or two,” Samir Gadio, an Emerging Markets Strategist at Standard Bank, said concerning the Nigeria’s forthcoming GDP rebasing exercise.
However, Razia Khan, Head of Africa Research at Standard Chartered, says, “Latest IMF data puts Nigeria’s GDP in current USD as $273 billion in 2012. South Africa’s (projected) 2012 GDP in US dollars is estimated at $420 billion. With rebasing, Nigeria’s economy comes closer to catching up. It becomes a $382 billion economy roughly and only 10 percent smaller than South Africa.”
But the country is not doing ”enough” business in Africa, thus, missing an opportunity to capitalize and to benefit from Africa’s fast-growing consumer markets.
According to Nigeria’s Finance Ministry, the country depends on oil exports for more than 80 percent of revenue and 95 percent of export income. However, some argue that other revenue streams are beginning to take shape, with investment in telecoms, e-commerce, and more recently, agriculture being recorded.
The country continues to do more business with countries in Europe, Asia and America, as revealed by the Visa Africa Integration Index, which pegs the depth component of its global integration at 26.1 against 9.6 regionally.
In February this year, British Deputy High Commissioner to Nigeria, Peter Carter said that trade relations between Nigeria and UK will hit $12.2 billion by 2014, with most coming from oil. While in April, Canada and Nigeria agreed to partner and explore various areas – crude oil export, raw materials and jobs exportation – to boost trade volume to about $6 billion.
Meanwhile, trade between Nigeria and China is pegged at over $13 billion annually.
With its Economic Community of West Africa (ECOWAS) neighbour, Ghana, evidence of investment can been seen in the country’s banking sector, with Nigeria’s Zenith Bank, Access Bank, First Bank, GTBank and United Bank for Africa owning stakes or subsidiaries in the country. Nigeria also has its imprints on the Ghanaian entertainment scene, with Nollywood movies and musicians raking in revenue from sales and tours, albeit informally and largely unaccounted for.
The rest is petty retail trading – dogged by the shenanigans of border crossing. “We [both countries] just don’t do business,” says a Ghanaian business journalist.
Although Nigerian businessmen like Alhaji Aliko Dangote, who has cement interests in 13 African countries, and Michael Adenuga, whose telecommunications company, Globacom claims significant market share in Benin Republic and Ghana, have made huge investments on the continent, Nigeria itself has overlooked the benefits of economic integration, as its growing market matures and modernizes, and the movement of goods and services, capital, information and people increases?
The Visa Africa Integration Index rates Nigeria below average in economic integration, with a 40.6 score. “Whilst representing an improvement from a modest base, the country has undergone positive transformation over the past decade.”
However, trade and investments volumes in countries in sub-Saharan Africa, which boast the highest rate of return on investment of any region in the world, still lag.
Further afield in Uganda, Nigerian businesses have made significant investment in the financial sector, including a 51 percent stake in National Insurance Company (NIC) by IGI, a former state enterprise that is listed on the country’s stock exchange. Other investments include a UBA subsidiary and IGI’s 49 percent stake in Global Trust Bank (GTB). Nic itself owns 60 percent of GTB.
There appears to be nothing else outside these financial sector investments, except the famous Nollywood imprint. Shops in Kampala, Uganda’s capital sell Nigerian movies but are is the revenue generated accounted for?
However, Uganda provides a strategic doorway to Eastern Africa, an emerging economic bloc that also includes Kenya, one of Africa’s largest markets.
Elsewhere in Zimbabwe, southern Africa, Nigerians are mostly engaged in small-scale retail and the sale of Nollywood films – some pirated – on the streets. Partly, this may be due to Zimbabwe’s nationalistic outlook, and the distance between the two countries.
South Africa significantly engages Zimbabwe along several channels of trade, drawing from integration policies of the Southern African Development Community (SADC) while Nigeria continues to overlook the benefits it can derive from greater integration with ECOWAS member states.
Recognizing the benefits of greater integration amongst African countries, Chief Strategy Officer of the Ethiopia Commodities Exchange, Abenet Bekele, recently outlined one of the aims of the ECX as sharing research and information with other African countries even as it strives to become “a global commodity market by choice”.
According to a Business Standard report, India’s export service was valued at $146 billion in 2012-2013. To this end, perhaps, Nigeria, which has a relatively huge amount of educated middle-class, needs to borrow from the India’s export services model, providing skilled manpower to other African countries.
Nigeria’s over-concentration on oil has seen other pillars of commerce wane. And it has “struggled to advance industrial complexity,” says Prof. Adrian Saville, Chief Investment Officer, Cannon Asset Managers.
“75.0 percent of Nigeria’s exports in 2010 were made up of crude oil and 4.7 percent of refined petroleum, whilst 18.0 percent of imports in 2010 were made up of refined petroleum and another 1.0 percent were made up of petroleum coke and petroleum jelly,” he furthers.
According to him, “economic complexity is demonstrated by Nigeria increasingly refining and processing crude exports into more complex products – such as refined petroleum or petroleum jelly to replace imports with domestic production and, in a fuller state of economic development, start to sell refined products into export markets.”
However Africa’s largest crude producer has the opportunity to turn its single story deficiency into an advantage by taking its capital and skills to the newly emerging oil producers in Africa.
