This analysis takes a look at the World Economic Forum (WEF) Global Competitive Index (GCI) report on Nigeria from Year 2009-2010 to Year 2014-2015.
It compares the Rankings and Scores of Nigeria during this time frame with the expectation of establishing a trend in Nigeria’s development and possibly as a measure to determine if Nigeria is becoming more competitive or otherwise, as well as serve as a guide in regard to where the Government can focus developmental effort on.
2. THE GLOBAL COMPETITIVENESS INDEX 2014–2015
Nigeria—now Africa’s largest economy—continues its downward trend and
falls by seven places to 127th this year, largely on the back of weakened public
finances as a result of lower oil exports. Institutions remain weak (129th) with
insufficiently protected property rights, high corruption, and undue influence.
In addition, the security situation remains dire (139th). Nigeria must continue
to upgrade its infrastructure (134th) as well as improve its health and primary
education (143rd).
Furthermore, the country is not harnessing the latest technologies for
productivity enhancements, as demonstrated by its low rates of ICT
penetration. On the upside, Nigeria benefits from its relatively large market
size (33rd), which bears the potential for significant economies of scale; a
relatively efficient labor market (40th) driven by its flexibility (20th); and a solid
financial market (67th) following its gradual recovery from the 2009 crisis.
However, poor availability and affordability of finance in general and the
difficulties in obtaining loans in particular (137th) remain an important
bottleneck to economic growth. Ahead of the 2015 election cycle, it will, thus,
be critical to keep the ongoing reform momentum to diversify the economy
and increase the country’s long-term competitiveness.
3. This analysis takes a look at the World Economic
Forum (WEF) Global Competitive Index (GCI)
report on Nigeria from Year 2009-2010 to Year
2014-2015.
It compares the Rankings and Scores of Nigeria
during this time frame with the expectation of
establishing a trend in Nigeria’s development
and possibly as a measure to determine if
Nigeria is becoming more competitive or
otherwise, as well as serve as a guide in regard
to where the Government can focus
developmental effort on.
4. The World Economic Forum
(WEF) measures Nation’s
competitiveness using 12 Pillars.
These 12 Pillars are divided into 3 Stages of
Development namely:
1)FACTOR-DRIVEN
2)EFFICIENCY-DRIVEN
3)INNOVATION-DRIVEN
This is also referred to as: Basic Requirements,
Efficiency Enhancers, Innovation & Sophistication
5. STAGES OF DEVELOPMENT
FACTOR-DRIVEN
STAGE
EFFICIENCY
-DRIVEN
STAGE
INNOVATION
-DRIVEN
STAGE
Countries compete based on their factor endowments—primarily
unskilled labor and natural resources. Maintaining competitiveness
at this stage of development hinges primarily on well-functioning
public and private institutions (pillar 1), a well-developed
infrastructure (pillar 2), a stable macroeconomic environment (pillar 3),
and a healthy workforce that has received at least a basic
education (pillar 4).
At this stage, countries begin to develop more efficient production
processes and increase product quality because wages have risen
and they cannot increase prices. Competitiveness is increasingly
driven by higher education and training (pillar 5), efficient goods
markets (pillar 6), well-functioning labor markets (pillar 7), developed
financial markets (pillar 8), the ability to harness the benefits of
existing technologies (pillar 9), and a large domestic or foreign market
(pillar 10).
Finally, as countries move into the innovation-driven stage, wages
will have risen by so much that they are able to sustain those
higher wages and the associated standard of living only if their
businesses are able to compete with new and unique products. At
this stage, companies must compete by producing new and
different goods using the most sophisticated production processes
(pillar 11) and by innovating new ones (pillar 12).
6. DEFINITION OF PILLARS
PILLAR 1 - INSTITUTION: The
institutional environment is
determined by the legal and
administrative framework within
which individuals, firms, and
governments interact to generate
wealth.
PILLAR 5 - HIGHER EDUCATION
AND TRAINING: Quality higher education
and training is crucial for economies that
want to move up the value chain beyond
simple production processes and products.
PILLAR 9 - TECHNOLOGICAL
READINESS: In today’s
globalized world, technology is
increasingly essential for firms to
compete and prosper.
PILLAR 2 - INFRASTRUCTURE: Well-developed
infrastructure reduces
the effect of distance between
regions, integrating the national
market and connecting it at low
cost to markets in other countries
and regions.
PILLAR 6 - GOODS MARKET EFFICIENCY:
Countries with efficient goods markets are
well positioned to produce the right mix of
products and services given their particular
supply-and-demand conditions, as well as to
ensure that these goods can be most
effectively traded in the economy.
PILLAR 10 – MARKET SIZE: The
size of the market affects
productivity since large markets
allow firms to exploit economies
of scale.
PILLAR 3 - MACROECONOMIC
ENVIRONMENT: The stability of the
macroeconomic environment is
important for business and,
therefore, is significant for the
overall competitiveness of a country
PILLAR 7 - LABOR MARKET EFFICIENCY: The
efficiency & flexibility of the labor market are
critical for ensuring that workers are
allocated to their most efficient use in the
economy & provided with incentives to give
their best effort in their jobs.
PILLAR 11 - BUSINESS
SOPHISTICATION: Concerns two
elements that are intricately
linked: the quality of a country’s
overall business networks and
the quality of individual firms’
operations and strategies.
PILLAR 4 - HEALTH AND PRIMARY
EDUCATION: A healthy workforce
is vital to a country’s
competitiveness and productivity.
Workers who are ill cannot function
to their potential and will be less
productive.
PILLAR 8 - FINANCIAL MARKET
DEVELOPMENT: An efficient financial sector
allocates the resources saved by a nation’s
citizens, as well as those entering the
economy from abroad, to their most
productive uses.
PILLAR 12 – INNOVATION:
Particularly important for
economies as they approach the
frontiers of knowledge and the
possibility of integrating and
adapting exogenous
technologies tends to disappear.
7. STAGES OF DEVELOPMENT & PILLARS
COMPONENTS PILLARS STAGES
BASIC
REQUIREMENTS
EFFICIENCY
ENHANCERS
INNOVATION &
SOPHISTICATION
FACTOR-DRIVEN
EFFICIENCY-DRIVEN
INNOVATION-DRIVEN
Institutions
Infrastructure
Macroeconomic Environment
Health and Primary Education
Higher Education & Training
Goods Market Efficiency
Labor Market Efficiency
Financial Market Development
Technological Readiness
Market Size
Business Sophistication
Innovation
8. NIGERIA GCI RANKING & SCORE
2009-
2010
2010-
2011
2011-
2012
2012-
2013
2013-
2014
2014-
2015
POPULATION 151.5 154.7 158 163.1 162.5 169.3
GDP (US$ Billion) 214.4 173.4 216 238.9 268.7 286.5
GDP per capital ($) 1,450.5 1,142 1,389 1,490 1,631 1,692
COUNTRY 133 139 142 144 148 144
RANKING 99 127 127 115 120 127
SCORE 3.6 3.4 3.4 3.7 3.6 3.4
Based on the above table; Nigeria was best rated (in terms
of Score) in the year 2012-2013, since then it has been a
downward progression in our ranking and score.
9. BASIC REQUIREMENTS RANKING & SCORE
Basic Requirements, which is also known as the
Factor-Driven Stage of Development comprises of:
a) Institutions
b) Infrastructure
c) Macroeconomic Environment
d) Health and Primary Education
While the Ranking is important, it is dependent on the
number of countries that were considered in the report.
However, an indicator that may better reflect the true
state of Nigeria would be the Scores of each of the four
Pillars above as well as the cumulative score for Basic
Requirements.
10. BASIC REQUIREMENTS RANKING & SCORE
YEAR
2009-2010 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
Rank
Score
Rank
Score
Rank
Score
Rank
Score
Rank
Score
Rank
Score
TOTAL COUNTRY 133 139 142 133 148 144
BASIC REQUIREMENTS 118 3.5 136 3.1 139 3.2 130 3.5 136 3.4 140 3.2
INSTITUTIONS 102 3.3 121 3.2 111 3.0 117 3.3 129 3.1 129 3.0
INFRASTRUCTURE 127 2.3 135 2.0 135 2.0 130 2.3 135 2.3 134 2.1
MACROECONOMIC
20 5.4 97 4.3 121 4.0 39 5.2 46 5.2 76 4.6
ENVIRONMENT
HEALTH & PRIMARY
EDUCATION
132 3.0 137 3.0 140 3.3 142 3.2 146 3.0 143 3.0
Nigeria best score in Basic Requirements is 3.5, which were
achieved in 2009-2010 and 2012-2013. Of the components
that make up the Basic Requirements, Macroeconomic
Environment is the best rated, with 5.4 in 2009-2010 but
currently at 4.6 in 2014-2015.
Institutions, Infrastructure, and Health & Primary Education are
all below average, with Infrastructure being the lowest rank
and requiring the most urgent attention.
WHICH INDICATORS NEED ATTENTION FOR IMPROVEMENT?
11. BASIC REQUIREMENTS – URGENT ATTENTION
INDICATOR
2011-
2012
2012-
2013
2013-
2014
2014-
2015
SCORE
Diversion of public funds 2.2 2.2 1.9 1.8
Public trust of politicians 1.9 2.2 2.1 1.8
Irregular payments and bribes 2.9 2.9 2.6 2.5
Wastefulness of government spending 2.3 2.6 2.4 2.2
Reliability of police services 3.0 3.2 2.9 2.6
Quality of railroad infrastructure 1.6 1.9 1.8 1.5
Quality of electricity supply 1.5 1.7 1.8 1.6
Quality of primary education 3.1 3.2 2.9 2.6
QUALITY OF
RAILROAD
INFRASTRUCTURE
QUALITY OF
ELECTRICITY
SUPPLY
PUBLIC
TRUST OF
POLITICIANS
DIVERSION
OF PUBLIC
FUNDS
WASTEFULNESS
OF
GOVERNMENT
SPENDING
IRREGULAR
PAYMENTS
AND BRIBES
QUALITY OF
PRIMARY
EDUCATION
RELIABILITY
OF POLICE
SERVICES
12. EFFICIENCY ENHANCERS RANKING & SCORE
Efficiency Enhancers is also known as the Efficiency-
Driven Stage of Development comprises of:
a) Higher Education and Training
b) Goods Market Efficiency
c) Labor Market Efficiency
d) Financial Market Development
e) Technological Readiness
f) Market Size
Higher
Education
and Training
Goods Market
Efficiency
Labor Market
Efficiency
Financial
Market
Development
Technological
Readiness
Market Size
14. EFFICIENCY ENHANCERS – URGENT ATTENTION
INDICATOR
2011-
2012
2012-
2013
2013-
2014
2014-
2015
SCORE
Quality of the educational system 3.8 3.5 3.1 2.9
Quality of math and science education 3.4 3.6 3.1 2.6
Ease of access to loans 2.1 2.1 1.9 1.6
Venture capital availability 2.2 2.5 2.3 1.9
Broadband Internet subscriptions/100 pop. 0.1 0.1 0 0
Internet bandwidth, kb/s/capita 0 0.4 0.3 0.8
BROADBAND
INTERNET
SUBSCRIPTIONS
/100 POP
INTERNET
BANDWIDTH,
KB/S/CAPITA
EASE OF
ACCESS TO
LOANS
VENTURE
CAPITAL
AVAILABILITY
QUALITY OF
MATH AND
SCIENCE
EDUCATION
QUALITY OF
THE
EDUCATIONAL
SYSTEM
15. INNOVATION & SOPHISTICATION RANKING & SCORE
Innovation & Sophistication is also known as the
Innovation-Driven Stage of Development comprises
of:
a) Business sophistication
b) Innovation
Business
sophistication
Innovation
21. THE MOST PROBLEMATIC FACTORS
FOR DOING BUSINESS IN NIGERIA
INADEQUATE SUPPLY OF INFRASTRUCTURE
ACCESS TO FINANCING
CORRUPTION
POLICY INSTABILITY
INEFFICIENT GOVERNMENT BUREAUCRACY
CRIME AND THEFT
INFLATION
INADEQUATELY EDUCATED WORKFORCE
POOR WORK ETHIC IN NATIONAL LABOR FORCE
GOVERNMENT INSTABILITY/COUPS
FOREIGN CURRENCY REGULATIONS
TAX REGULATIONS
TAX RATES
RESTRICTIVE LABOR REGULATIONS
POOR PUBLIC HEALTH
INSUFFICIENT CAPACITY TO INNOVATE
CRITICAL
HIGH
MEDIUM
22. THE MOST PROBLEMATIC FACTORS
FOR DOING BUSINESS
COUNT PILLAR
Tax regulations 12.4 GOODS MARKET
Tax rates 11.5 EFFICIENCY
Poor public health 6.8 Health and primary education
Inadequately educated workforce 18 Higher education and training
Inadequate supply of infrastructure 129.5 INFRASTRUCTURE
Insufficient capacity to innovate 3.6 INNOVATION
Corruption 104.1
INSTITUTIONS
Policy instability 54.2
Inefficient government bureaucracy 34.2
Crime and theft 25.9
Government instability/coups 15.2
Foreign currency regulations 13.8 MARKET SIZE
Poor work ethic in national labor force 15.7 LABOR MARKET
Restrictive labor regulations 7 EFFICIENCY
Access to financing 126.8 MACROECONOMIC
Inflation 20.9 ENVIRONMENT
23. The institutional environment is
determined by the legal and
administrative framework within which
individuals, firms, and governments
interact to generate wealth. The
importance of a sound and fair
institutional environment has become all
the more apparent during the recent
economic and financial crisis and is
especially crucial for further solidifying the
fragile recovery, given the increasing role
played by the state at the international
level and for the economies of many
countries.
The quality of institutions has a strong
bearing on competitiveness and growth.
It influences investment decisions and the
organization of production and plays a
key role in the ways in which societies
distribute the benefits and bear the costs
of development strategies and policies.
strong institutions,
available talent,
and a high capacity
to innovate hold
the key for the
success of any
economy. These
elements will
continue to be
even more essential
in the future.