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According to recent figures, things are looking very positive for the people of Nigeria. It recently overtook South Africa to become the continent’s largest economy on a GDP basis. New World Bank figures show that poverty in the country has fallen significantly, dropping from a rate of 62% in 2010 to around 33% in 2014. The Presidential elections were regarded as generally fair and open. The country also remains one of the top three destinations for FDI in Africa. While this is great news for Africa’s most populous country, recent shocks reveal that its path to long-term prosperity is more fragile than some of the economic data would suggest.
Recent fuel shortages nearly brought the Nigerian economy to a standstill. Airlines cancelled flights. Banks closed. The country’s largest mobile phone operator warned of a possible shutdown to its network. Only two days’ supply of fuel were left throughout the country. Although Nigeria averted disaster, this shock revealed the gap between the country’s ambitions for long-term prosperity and its current capability to achieve this goal. How can Nigeria, or any country for that matter, build a framework for achieving long-term prosperity? The answer, by building ‘change readiness’.
Change Readiness
Following a discussion on the implications of the Haiti earthquake at the World Economic Forum at Davos in 2010, KPMG International developed the concept of “change readiness” to better understand why some countries, when faced with substantial shocks, are able to bounce back quickly, while others struggle to cope. Change readiness is defined as the capability of a country – its government, private sector and wider civil society – to anticipate, prepare for, manage and respond to a wide range of change drivers, proactively cultivating the resulting opportunities, and mitigating potential negative impact.
Why is the Change Readiness Index (CRI) different?
The Change Readiness Index (CRI), now in its third iteration, is the only index to explicitly measure change readiness. The index is comprised of a range of indicators structured around three pillars: enterprise, government, and people & civil society. The CRI uses published secondary data and primary data gathered through surveys with independent experts. The data is focused on ‘inputs’ which can be actively managed– such as investments into infrastructure or supportive policy environments.
Using the CRI
The CRI reveals a number of unique insights that can help Nigeria’s leaders create the necessary policy and business environments to support long-term prosperity. It also provides detailed information for potential investors to feed into risk assessments to inform investment decisions and development agencies and NGO’s looking to focus their economic development, social and advocacy programs.
Economic diversification
The oil and gas sector accounts for nearly 35% of Nigeria’s GDP. Dependence on a single commodity is often associated with poor governance, conflict, and an undiversified industrial base. The drop in global oil prices has put tremendous strain on Nigeria’s economy, shrinking government coffers and weakening the country’s currency against the US dollar. In contrast, South Africa, the continent’s second largest economy, has a more diversified economy across multiple sectors including manufacturing, mining, and business services. This is reflected in CRI scores for diversity of exports. Nigeria ranks 121, while South Africa stands at 43. Transforming Nigeria’s economy to one that is less reliant on natural resource extraction is an important step towards sustainable prosperity.
Innovation and entrepreneurship
Innovation and entrepreneurship are important drivers of economic growth. They influence a country’s ability to both develop and adopt new technologies that improve efficiency and create new economic sectors. On several key measures, Nigeria ranks towards the bottom in measures of its ‘innovation system’ and expenditure on research and development. Nigeria ranks 77th on this indicator while South Africa ranks 43rd. The CRI reveals underperformance in these areas, which weakens Nigeria’s ability to develop the STEM (Science, Technology, Engineering, and Mathematics) ecosystem required to create jobs in the high-tech, engineering and biotechnology fields. Fostering innovation will help develop the capacity to onshore high value elements of the economic value chain.
Infrastructure to support economic growth
Nigeria currently does not produce enough power to meet demand and needs to improve electricity production and distribution infrastructure to enable economic and social growth. The CRI highlights the need for significant investment in power and other key infrastructure areas to build on existing programs, such as USAID’s Power Africa program which is already investing heavily in Nigeria’s power and electricity sector.
Inclusive growth
Perhaps Nigeria’s biggest challenge to sustained prosperity is tackling rising income inequality to ensure that all its citizens benefit from economic growth. Although poverty figures are promising, a large share of the population still lives just above the poverty line. The CRI suggests that Nigeria should focus on improving the key drivers to its change readiness if it wants to deliver sustainable prosperity for all its citizens.
The article was originally published in the 2015 Global Action Report, an annual synthesis report produced by the Global Action Platform in collaboration with Diplomatic Courier. Republished with permission.
About the author: Trevor leads KPMG’s International Development Assistance Services Global Center of Excellence. Trevor leads a global team delivering insight and solutions on complex development issues. Trevor has worked extensively in developing countries in Africa, Asia, Eastern Europe and Caribbean and Latin America.
The views presented in this article are the author’s own and do not necessarily represent the views of any other organization.
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Inclusive economic growth is key to prosperity
Abstract Background
September 30, 2015
According to recent figures, things are looking very positive for the people of Nigeria. It recently overtook South Africa to become the continent’s largest economy on a GDP basis. New World Bank figures show that poverty in the country has fallen significantly, dropping from a rate of 62% in 2010 to around 33% in 2014. The Presidential elections were regarded as generally fair and open. The country also remains one of the top three destinations for FDI in Africa. While this is great news for Africa’s most populous country, recent shocks reveal that its path to long-term prosperity is more fragile than some of the economic data would suggest.
Recent fuel shortages nearly brought the Nigerian economy to a standstill. Airlines cancelled flights. Banks closed. The country’s largest mobile phone operator warned of a possible shutdown to its network. Only two days’ supply of fuel were left throughout the country. Although Nigeria averted disaster, this shock revealed the gap between the country’s ambitions for long-term prosperity and its current capability to achieve this goal. How can Nigeria, or any country for that matter, build a framework for achieving long-term prosperity? The answer, by building ‘change readiness’.
Change Readiness
Following a discussion on the implications of the Haiti earthquake at the World Economic Forum at Davos in 2010, KPMG International developed the concept of “change readiness” to better understand why some countries, when faced with substantial shocks, are able to bounce back quickly, while others struggle to cope. Change readiness is defined as the capability of a country – its government, private sector and wider civil society – to anticipate, prepare for, manage and respond to a wide range of change drivers, proactively cultivating the resulting opportunities, and mitigating potential negative impact.
Why is the Change Readiness Index (CRI) different?
The Change Readiness Index (CRI), now in its third iteration, is the only index to explicitly measure change readiness. The index is comprised of a range of indicators structured around three pillars: enterprise, government, and people & civil society. The CRI uses published secondary data and primary data gathered through surveys with independent experts. The data is focused on ‘inputs’ which can be actively managed– such as investments into infrastructure or supportive policy environments.
Using the CRI
The CRI reveals a number of unique insights that can help Nigeria’s leaders create the necessary policy and business environments to support long-term prosperity. It also provides detailed information for potential investors to feed into risk assessments to inform investment decisions and development agencies and NGO’s looking to focus their economic development, social and advocacy programs.
Economic diversification
The oil and gas sector accounts for nearly 35% of Nigeria’s GDP. Dependence on a single commodity is often associated with poor governance, conflict, and an undiversified industrial base. The drop in global oil prices has put tremendous strain on Nigeria’s economy, shrinking government coffers and weakening the country’s currency against the US dollar. In contrast, South Africa, the continent’s second largest economy, has a more diversified economy across multiple sectors including manufacturing, mining, and business services. This is reflected in CRI scores for diversity of exports. Nigeria ranks 121, while South Africa stands at 43. Transforming Nigeria’s economy to one that is less reliant on natural resource extraction is an important step towards sustainable prosperity.
Innovation and entrepreneurship
Innovation and entrepreneurship are important drivers of economic growth. They influence a country’s ability to both develop and adopt new technologies that improve efficiency and create new economic sectors. On several key measures, Nigeria ranks towards the bottom in measures of its ‘innovation system’ and expenditure on research and development. Nigeria ranks 77th on this indicator while South Africa ranks 43rd. The CRI reveals underperformance in these areas, which weakens Nigeria’s ability to develop the STEM (Science, Technology, Engineering, and Mathematics) ecosystem required to create jobs in the high-tech, engineering and biotechnology fields. Fostering innovation will help develop the capacity to onshore high value elements of the economic value chain.
Infrastructure to support economic growth
Nigeria currently does not produce enough power to meet demand and needs to improve electricity production and distribution infrastructure to enable economic and social growth. The CRI highlights the need for significant investment in power and other key infrastructure areas to build on existing programs, such as USAID’s Power Africa program which is already investing heavily in Nigeria’s power and electricity sector.
Inclusive growth
Perhaps Nigeria’s biggest challenge to sustained prosperity is tackling rising income inequality to ensure that all its citizens benefit from economic growth. Although poverty figures are promising, a large share of the population still lives just above the poverty line. The CRI suggests that Nigeria should focus on improving the key drivers to its change readiness if it wants to deliver sustainable prosperity for all its citizens.
The article was originally published in the 2015 Global Action Report, an annual synthesis report produced by the Global Action Platform in collaboration with Diplomatic Courier. Republished with permission.
About the author: Trevor leads KPMG’s International Development Assistance Services Global Center of Excellence. Trevor leads a global team delivering insight and solutions on complex development issues. Trevor has worked extensively in developing countries in Africa, Asia, Eastern Europe and Caribbean and Latin America.
The views presented in this article are the author’s own and do not necessarily represent the views of any other organization.
