In this interview with Ugo Aliogo, the Managing Partner at Verraki, Niyi Yusuf speaks on what Nigeria must do to improve competitiveness and attract better investments, talents and resources. Excerpts.
What does competitiveness mean within in the Nigerian context and how can it be improved?
From a layman’s perspective, competitiveness means being as good, or even better, especially when there is more than one participant. Competitiveness thus means, I have more strengths relative to my competitor, that is, for an individual perspective. From the perspective of a country, competitiveness is broader. Here, you look at how countries are positioned to compete amongst themselves in the global markets, to attract more of finite resources. The concept of globalization, global markets and competitiveness are intertwined as all countries are trying to position themselves to attract as much capital, talent, investments, and resources. Competitiveness from this perspective will examine how well-positioned your country is, to other countries within your geography, or within a market segment, among other metrics.
How is Nigeria rated, compared to other countries within the global markets as we seek to attract talent, capital investments, and industries into the country?
Ultimately, what attracts outsiders are the capabilities that you have, the type of enabling environment that you provide, that allows your enterprises and your companies to create value and allow your people to prosper. And if you use these lenses: how companies and enterprises create value and how people prosper, you will argue that Nigeria still has a lot to do to improve its competitiveness.
We don’t have a lot of Nigerian companies that are leaders in their markets globally or even on the continent. Also, poverty and illiteracy have increased in the country, and more so in the last decade.
If one uses those two lenses as the parameters for evaluating competitiveness of a country, that is, the prosperity of its citizens or residents, and the value creation of the companies in the countries, and then examine the Global Competitiveness Index of the World Economic Forum (WEF), one will get a better understanding of where Nigeria is relative to other nations. The WEF’s Global Competitiveness Index looks at about 12 pillars of productivity in four broad categories. The first category describes transforming enabling environments, which address the kind of institutions that you have, the infrastructure, technology adoption, stability of the macroeconomics (interest rates, inflation rate, exchange rate) and so on.
The second pillar examines market efficiency and addresses the efficiency of your labor market, the financial systems, products markets and of course, market size. The third category is about human capital; education, skills, talent, health. And the fourth is about the innovation ecosystem, the innovation capabilities and entrepreneurial culture.
In its 2019 report, pre-COVID-19, the World Economic Forum ranked Nigeria 116 out of 141 countries, which means that we are not as competitive, especially when we look at the enabling environment, efficiency of markets, human capital issues and innovation ecosystem.
Now the other dimension of competitiveness, beyond value creation by companies, is about prosperity of the citizens or residents. A key metric to look at is the Human Development Index (HDI) of the UNDP that looks at health, education, food, water supply, etc. Nigeria is ranked 161 out of 189 countries in terms of the HDI. The leading country in Africa is Mauritius at 66. When you juxtapose the two accepted indices; the Global Competitiveness Index of the World Economic Forum and the Human Development Index of the UNDP, you see that Nigeria is ranked poorly. And that really, I think, is the way to see the competitiveness, or non-competitiveness of the country.
So, can this competitiveness be improved?
Of course, yes. The first place to start is to focus on education and health, then food and creating an enabling environment. When you have an educational system that develops human capacity with skills that are fit for purpose, and a healthcare system that provides quality health care that allow people to function optimally, stay healthy and enjoy good wellbeing and lifestyle; food especially consuming enough calorie per head, so they can have strength; and an enabling environment, with the right infrastructure, security and appropriate macroeconomics, you will tremendously improve your competitiveness.
How can technology help in building competitiveness for Nigerian companies?
Technology provides an opportunity for Nigerian companies to improve their competitiveness. When you reflect on how Africans and Nigerians have leapfrogged, in terms of moving from landlines to mobile phones, you will agree we have come a long way. Mobile phone penetration or tele-density in Nigeria is about 100 per cent, which means hundreds of us in any area at a given time will have a cell phone. We see the way mobile payments have caught on in Kenya with M-Pesa. Technology has shown that it’s possible for us to start late and to still leapfrog and to move ahead and be doing wonderful things. Companies can leverage technology to improve competitiveness as we have seen with Safaricom and its M-Pesa in East Africa, which is using technology to drive micropayments and fintechs like Flutterwave in Nigeria that are using technology to drive innovation.
Technology can also be used to drive efficiency, reduce costs, and allow you to grow at scale, and effectively. If you have a technology platform, that platform can be accessed 24/7 from anywhere in the world.
Technology also allows you to be agile and to be resilient so that as a business, you can respond to market dynamics and bounce back from failures faster. So that a crisis in one location will not stop you from operations because the technology is in the cloud and can be accessible and operational from anywhere. For instance, during the COVID-19 lockdown, most staff were able to work remotely; companies were able to provide services virtually to clients, all because of technology.
The companies that were able to quickly adapt to the changing times using technology were those that not only survived the lockdown, but they also thrived. So, technology is a tool that companies can use to improve their competitiveness, but more importantly, to reignite growth and capture new markets and new customers, with new products and new technology-driven services.
How can Nigeria accelerate its path to reigniting sustainable growth, and what lessons can we learn from other markets?
I will quickly recap the lens I mentioned; the human development indicator which looks at the prosperity of people; and the Global Competitiveness Index, which looks at the value creation of companies and enterprises. There are a few areas to focus on, first is security, as without security, there cannot be peace, and without peace, individuals and companies would be able to function or operate optimally. So, we need to provide security and create a secure environment that fosters enterprise and productivity. A major challenge in Nigeria is limited productivity. We are productive within 14-16 hours and the remaining eight hours of the day is in darkness or with restrictions. To be fully productive, we need to have a 24/7 economy and that requires the right infrastructure, security, electricity, energy, transportation, etc. And then you need education and healthcare, as I mentioned earlier.
There is no reason why we should not have universal health care using the NHIS model, which covers every citizen and resident of the country. Less than 10 percent of Nigeria’s population is covered in the health insurance scheme today and many people still spend so much out of pocket. Making universal health insurance available will help. Education is equally important, albeit meaningful education which is tied to the needs of the business community, to ensure we do not produce graduates or students that will not be useful in the marketplace. I will paraphrase Chief Obafemi Awolowo’s quote ‘Any people that are starved of education, especially the right type of education, will suffer intellectual malnutrition, stagnation, and atrophy’. Education must be tied to the needs of the industry and produce talent that have practical or relevant skills.
Thirdly, we must provide an environment that nurtures innovation and encourages entrepreneurs to start businesses, fail quickly, learn their lessons, and move on to the next idea. Today, our environment is harsh and does not encourage risk and experimentation. Entrepreneurial environments require a high level of risk and experimentation, plus a high level of capital and investment in R&D for innovation to thrive. We need to have markets that are efficient and private sector-driven, where institutional voids are minimized, and rules are followed. And lastly, for macroeconomic stability, interest and inflation rates need to be lower. The FX exchange rate needs to be stable so that the investors bringing money in would know that after a while, they can take that money out and it would not have lost value. Those are a few things that Nigeria can do to create sustainable growth.
You mentioned a few things that we must improve: security, infrastructure, transportation, among others. What roles do government institutions play in improving competitiveness and how can they be better enablers of growth?
Government has a critical role to play in Nigeria, across Africa, and in most markets. The first task for governments is policy formulation, that is, developing the right policies that will help us create an environment that will attract the right solution and investments. Policy formulation to address market efficiency, funding R&D, and enabling growth, instead of just focusing on charging levies and fines. If we examine the Customs function across most climes, they play about three key roles; facilitate trade, secure borders, and generate revenue.
In Nigeria, it seems the Customs has focused more on revenue generation, but it would be great if it can focus on trade facilitation and border protection and security as well. Government agencies should not see private enterprises as opportunities for revenue generation, but as partners in development and seek ways to help them improve those enterprises. Government should focus on providing security and public infrastructure such as electricity, ports, road, warehouses, special economic zones etc. We have started well with the Niger Delta Second Bridge, and the Lagos-Ibadan Expressway, with the rail line from Lagos-Ibadan and Abuja-Kaduna. But we need to have standard gauge rail lines connecting all the state capitals, so goods can be transported across easily.
We need good roads, that are all-year-accessible, from the farms in the rural areas down to the ports or down to the cities. Governments can focus on improving security and public infrastructure. On the Ease of Doing Business index (now discontinued by the World Bank), Nigeria is 131 out of 190 countries. This means we still have a lot to do to make the environment easy for businesses to thrive. So, we must work on improving ease for businesses and run a more efficient and digitalized government using technology to avoid predominant manual processing or physical contacts which breads corruption and more importantly, to avoid digital divide between the private and the public sector. Government can also focus on creating a strong social safety net and unemployment benefits which are important for labour. These are the things that would allow entrepreneurs to take risks.
Lastly, governments can help by promoting areas where we seem to have some comparative advantage, such as fintech, fashion, music and film, and so on. Unfortunately, we cannot have unlimited resources to spread across many areas, so the government needs to focus on areas where we seem to be doing well and support the operators there.
According to the World Economic Forum’s Global Competitiveness Index, Human Capital is a key priority for competitiveness. What steps can stakeholders across the public and private sectors take to improve Human Capital Development in Nigeria?
Human capital development is about the education and health systems. Spending on health systems to improve the quality of health care and life expectancy, whether in the public or private sector. Universal health coverage will help to reduce infant and maternal mortalities. For education, today we have free education for the basic levels, from primary school to JSS 3, but we still have over 10 million children out of school. How do we increase enrolment in basic schools, so that fewer young Nigerians will be out of school? That is the question we need to focus on and ensure that our education is fit for purpose, includes technology and a curriculum that is relevant to the marketplace.
ICT adoption and digital skill-up remain germane conditions for competitiveness. Do you think Nigeria has what it takes to lead technology in Africa, especially as 5G beckons?
I believe that Nigeria has what it takes to lead technology in Africa, but it depends on the resources you are looking at. I believe that our best resources are our people, and less of crude oil or gas, or other natural resources. If we understand that our people are our best assets, then we must maximise the talents and resources that we have by putting them to good use, as there is nothing we can’t achieve with the right capabilities. Take a look at the leading countries of the world, for example, the United States, and you will see that they are a magnet for migration, for immigrants from different countries and continents. And because they can attract talents, the USA is a hotbed of innovation, creativity, and productivity. Given its 200million plus population, inherent diversity of over 232 tribes, a youthful, vibrant, and tech-savvy population and English as the official language (English is a dominant global language) and with the right environment to attract and retain talent in the country, Nigeria can become a hotbed for innovation, especially if majority of our 200m population can become very productive.
Look at what Nigerians have done in the entertainment space, where young musicians with very little or no government support have become global icons. Look at what Nigerians are now doing in the fintech space. Between January and November 2021, Nigeria has attracted about 1.4 billion dollars of investment in start-ups and has become a leading destination in Africa for investment in start-ups, coming ahead of South Africa, Egypt, and Kenya. At $1.4 billion, Nigeria’s FDI is roughly equal to the total investment into South Africa and Egypt combined.
If Nigeria has the required ingredients, can she lead technology in Africa?
It depends on many factors, such as our ability to optimise our talents and put them to productive use. And part of doing that is starting from our educational system and making sure our curriculum reflects the needs of the market and is dynamic and fit-for-purpose. Also, our teachers must have the skills and the knowledge that is relevant for today’s world. If our teachers don’t have the skills relevant for today’s world, they will be unable to teach our students and will perpetuate the same poor knowledge and culture. So, investment in Science,Technology, Engineering, Agriculture and Mathematics (STEAM) education, and investment in curriculum upgrades to reflect the needs of the market, re-skilling of our teachers, investment in Research and Development (R&D) and technology adoption in ICT, and building the right ecosystems are the things we should do.
If we do those things, then nothing can stop us from leading the continent in technology. Out of Africa’s seven unicorns that have attained billion-dollar valuations, three are from Nigeria: Jumia, Flutterwave, Interswitch and we expect two more in the coming months. With minimal support and investment, we have attained so much; imagine what is possible when we invest intentionally and significantly. So, in summary, we have what it takes to lead Africa in 5G technology.
AFCFTA has become the new buzzword, with expectations of a free trade agreement that would create a 1.3 billion people market in Africa, which is estimated to become the world’s largest or second-largest market, depending on who you ask. How can Nigerian businesses prepare to take advantage of the opportunities arising from this new pan-African trade agreement?
The AFCFTA provides an opportunity for Africa to create a united Africa and an African market that’s open and available to all. A market of 1.3 billion people is bigger and better than a market of 200 million people. So, what our entrepreneurs and businesses need to do, is to think global, and ensure you develop products and services for global markets. It could be something as basic as packaging, which must now reflect a global market in terms of the choice of colors, the choice of images, or even the languages used.
Secondly, build partnerships, especially in key markets. You want to join a Chamber of Commerce and Industry, for instance, to benefit from networking with other partners in the country and on the continent. It is important to build partnerships that will allow you to play in key markets.
Thirdly, is to build the right skills and capabilities that will allow you to thrive because you will now compete with companies in the 54 countries on the continent. You must build skills and capabilities that are world-class and will allow you to thrive and continue to beat competition anywhere. And lastly, you must focus on the five forces of growth: customers, people, capital, technology, and entrepreneurship.
The forces of growth for most businesses start with customers; how do you attract the right customers? How do you serve them well and excite them? For People, how do you attract talent? How do you engage talents and keep them motivated? How do you develop them to have the right levels of productivity and to deliver excellent work? How do you attract the right amount of capital for business? For technology, how do you deploy technology to enable your business to thrive at the front office, middle office and back office? And lastly, it’s about the spirit of entrepreneurship, the culture in your office. So how do you build a culture that allows people to experiment, a culture that allows staff to take initiative? How do you build a culture that is focused on customers?
When you have all these, you begin to build a resilient business that will be able to think big, start small and scale fast as more opportunities are available. They can respond quickly to business issues and take advantage of opportunities in the marketplace.
