This past June, Nigerian president Muhammadu Buhari announced his decision to let Nigeria’s currency, the naira, float on the free market. The move, interpreted by leading voices in business and academia as too little-too late due to the crashing value of Nigerian crude oil, would prove to reinspire global money managers’ confidence in Nigeria as the world’s most promising frontier market. Or so was the plan.
Just this Wednesday, Nigeria’s National Bureau of Statistics released a damning report confirming what many in the African business community have predicted in the past few months; Nigeria has entered in first recession in over twenty years. In reality, oil dependency and ill-advised currency manipulation has never exactly been a recipe for economic success, especially when considering Nigeria imports nearly 70% of its oil-related infrastructure -- despite being one of the world’s leading crude oil producers.
The expectation of a recession has, in some ways, made Wednesday’s news bearable. As Adeosun’s comments highlighted, there’s no doubt as to the dire straits in which the Nigerian economy finds itself, however, it’s the Nigerian government which has been most at fault for drive diversification of the private sector.
A new tech hub?
Lagos has emerged as the dominant start-up on the continent in recent years, giving rise to nearly 500 VC-backed tech firms since 2013. Just this week, Facebook CEO Mark Zuckerberg made global headlines by making his first ever stop on the continent in Lagos, meeting with leading innovators in order to find out more about the tech ecosystem in Nigeria. In June, the Chan-Zuckerberg initiative made a monster $24 million Series B backing of Lagos tech accelerator Andela, and Lagos has long been one of the key targets of Zuckerberg’s ambitious “Free Basics” initiative to connect millions of Africans to the Internet.
The potential is certainly undeniable.
On Wednesday, president economic advisors Adeyemi Dipeolu made note of the importance of the agricultural sector in revitalizing the Nigerian economy, noting that “There was growth in agricultural and solid mineral sectors…areas in which the government has placed particular priority.” Growth in agriculture not only has the potential to provide work to millions of unskilled Nigerians, but also reduce Nigeria’s massive dependency on food imports (Despite its status as Africa’s second largest producer of tomatoes, Nigeria spends nearly $1 billion a year importing, wait for it, tomato paste.) There is no doubt that with positive and precise government policy, agriculture can power Nigeria’s movement away from dependency on oil.
The other critical mission for Nigerian policymakers is the reversal of the brain drain effect, particularly by appealing to its highly-educated to help out those back home, not by sending money, but by human capital. Led by Western student organizations such as The Releaf Group, there is no doubt that Nigeria’s high-achieving expat corps in the US and UK will be key to its future success.
So yes, while Nigeria might be in dire straits today, with both Secretary Kerry and Mark Zuckerberg among the hundreds of Western business and political leaders making trips to the country to witness the emergence of Lagos firsthand, there is no doubt that Nigeria is poised to make a major impact. But recession is now, and that tells us we have not another second to wait.
Image Credit: Bloomberg News.