Nigeria As An Emerging Market: Prospects And Challenges

Nigeria is indeed an emerging market, considering its abounding natural and human resources. Nigeria has the potential to move eight places up the GDP rankings to 14th by 2050, but it will only realise this potential if it can diversify its economy away from oil and strengthen its institutions and infrastructure.

Growth in many emerging markets will be supported by relatively fast-growing populations, boosting domestic demand and the size of the workforce. This will need, however, to be complemented with investments in education and improvement in macroeconomic fundamentals to ensure there are sufficient jobs for the growing number of young people in these countries.”

Nigeria will average around two per cent annual growth to 2020, with growth then picking up speed in the decades following to average almost 4.5 per cent p.a. between 2041 and 2050. Along with South Africa, Nigeria is one of the few to see a marked acceleration of annual average growth over the next few decades, as opposed to moderation.

However, to support long-term sustainable growth, Nigeria needs to develop a broader-based economy, diversifying its exports to ensure its growth is not dampened by global price or demand shocks. Alongside this, Nigeria should develop its institutions and infrastructure, supporting long-term productivity growth.”

The world economy could double in size by 2042 China has already overtaken the US to be the largest economy based on GDP in PPP terms, and could be the largest valued at market exchange rates before 2030.

India could overtake the US by 2050 to go into 2nd place and Indonesia could move into 4th place by 2050, overtaking advanced economies like Japan and Germany.

By 2050, six of the seven largest economies in the world could be emerging markets. Nigeria has the potential to raise the global GDP rankings, but only if it can diversify its economy and improve governance standards and infrastructure.

Vietnam could be the world’s fastest-growing large economy over the period to 2050, rising to 20th in the global GDP rankings by that date. UK could grow faster than the EU27 average in the long run if it can remain open to trade, investment and talented people after Brexit.

Speaking on this development, Dr Andrew S. Nevin PwC Nigeria’s Chief Economist; “we will continue to see the shift in global economic power away from established advanced economies towards emerging economies in Asia and elsewhere. The E7 could comprise almost 50 per cent of world GDP by 2050, while the G7’s share declines to only just over 20 per cent”.

According to him, “when looking at GDP measured at market exchange rates (MER), there is not quite such a radical shift in global economic power, but China still emerges as the largest economy in the world before 2030 and India is still clearly the third largest in the world by 2050.”

For him, “the spotlight will certainly be on the newer emerging markets as they take centre stage. By 2050, Indonesia and Mexico are projected to be larger than Japan, Germany, the UK or France, while Turkey could overtake Italy. In terms of growth, Vietnam, India and Bangladesh could be the fastest-growing economies over the period to 2050, averaging growth of around five per cent per year, which also shows how growth breaks down between population and GDP per capita.”

Continuing, he said; “Nigeria is a low-taxed economy compared to its peers with the tax-to-GDP ratio estimated at just eight, the second-lowest in Africa and the fourth lowest in the world. If these could be increased to the Sub-Saharan African economies’ average of 18 per cent of GDP, Nigeria could potentially raise its tax revenues to around $104 billion. Higher tax revenues would reduce government borrowing and encourage financial institutions to offer funds at lower interest rates, thereby boosting the real economy.”

He pointed out that, “economic diversification: Nigeria’s potential advantages for future growth include a large consumer market, a strategic geographic location as a hub for Africa, and a young and entrepreneurial population. The first step in harnessing this opportunity requires deliberate efforts to improve value-adding activity in the non-oil economy, particularly in agriculture and the services sectors.”