Nigeria: Super-Size me: high potential, low achievements

6/22/2017 - Report
ic_blogtagNigeriaCountry Risk

Country Report

Big is beautiful…or not

Nigeria is a land of opportunity locked in a poor governance trap inhibiting gravitational growth drivers. The country’s main strength is its size and increasing urbanization. 

A Euler Hermes index covering 54 African economies shows Nigeria has the best Consumption Potential, driven by urban population growth and good internet access. Moreover, urbanization could support Nigeria’s effort to capitalize on its infrastructure potential as the gap between basic and full access is among the widest in the continent.

However, bad governance stifles growth potential. The World Bank’s Doing Business 2017 survey ranks Nigeria 169 out of 190 countries. The outcome is poor confidence in the economy. Currently, 75% of corporate transactions are paid in cash (0-day DSOs). If these transactions earn a 30-days payment term, it would free up about USD 11bn of cash (about 3% of GDP) and act as a big stimulus. 

The cost of poor governance is also sizable in terms of investment. The investment ratio is 12% of GDP, a clear sign the country doesn’t build its capital stock. Sustainable investment ratios (30% of GDP) allocated to closing the infrastructure gap would add USD 70bn to Nigeria’s GDP.