Home' Trinidad and Tobago Guardian : April 13th 2014 Contents SBG22 | INTERNATIONAL
SUNDAY BUSINESS GUARDIAN www.guardian.co.tt APRIL 13 • 2014
TIM COCKSWhat matters more: the size of the pie
or how many mouths it has to feed?
It depends whether you re eating pies,
or selling them.
Most of Nigeria s 170 million people live below the poverty
line, so many complained they didn t feel any richer when
the oil producing nation s statistics bureau announced on
Sunday the economy had replaced South Africa as the con-
tinent s biggest.
Nigeria s 2013 GDP was rebased up to an estimated nearly
US$510 billion; a "pie" one and half times the size of South
Africa s, but feeding more than three times as many people.
Nigerian leaders hope the statistical revamp will help them
"sell" Africa s most populous market to investors, including
mall-builders, manufacturers and retailers offering everything
from processed foods and household appliances to luxury cars.
But development economists argue that their attention
should be on improving the health, education and incomes
of ordinary Nigerians, many of whom struggle to feed their
families. In 2013, the Economist Intelligence Unit rated Nigeria
the worst place for a child to be born out of 80 countries sur-
"Really what matters in the end is per capita, how well our
individuals are doing," World Bank chief Africa economist
Francisco Ferreira said after the statistical change in Abuja.
"I don t want to rain on Nigeria s parade ... but what matters
are living standards for everyone."
In GDP per capita terms, Nigeria is looking healthier than
before rebasing: per capita GDP was US$2,688 last year, from
an estimated US$1,437 in 2012. Yet that masks growing inequal-
ity: at around 60 per cent, absolute poverty in Nigeria is stub-
bornly high despite five years of average 7 per cent annual
But are better living standards for all really what matters
to investors looking to cash in on a big economy?
On a per capita basis, Botswana, Mauritius and Seychelles
are among Africa s top five richest states. None has a population
of more than two million, so they are admired but cannot
claim heavyweight status when it comes to competing with
other African countries for the attention of foreign investors.
"Seychelles is the only African country listed under very
high human development . But when did you last hear Seychelles
mentioned during discussions on global political economy?"
commentator Azuka Onwuka wrote in Nigeria s Punch news-
"A high GDP means external ... investors pay more attention.
The U.S. and Europe no longer look down on China and India."
Nigeria s potential is predicated on its large population.
Economist Jim O Neill notably included it in his MINT
group of countries, alongside Mexico, Indonesia and Turkey,
which he thinks will join the BRICs (Brazil, India, Russia,
China) he named as the emerging economies shaping the
world s future.
All have large, swelling populations, with a demographic
bulge around the soon-to-be-most-productive younger gen-
For businesses deciding where to invest next, a consumer
market of 170 million beats the Seychelles 85,000.
"Size matters," Oscar Onyema, chief executive of the Nigeria
Stock Exchange, said. "Size means you will be able to do ...
projects you would not have considered in smaller economies."
For retailers targeting customers at the bottom of the socioe-
conomic pyramid, a national income spread around more
households---lower GDP per capita, in other words---might
actually be a good thing, many economists argue.
If you are selling washing powder or fizzy drinks, better a
large number of consumers on modest incomes than a small
number of wealthy. There is only so much cola most people
For Kenyan industrialist Manu Chandaria, chairman of
Comcraft Group, which sells ironware, including corrugated
roofs and pots and pans, Nigeria has massive potential.
Comcraft is in 18 locations there, despite the fact that its
Nigeria manager has been kidnapped three times by criminal
gangs; a common risk facing businesses in southern Nigeria.
"Nigeria is just colossal," he told the Reuters Africa Summit
in Nairobi. "Everybody needs to eat. Everybody needs shelter
... Anybody that brings in money needs a pot to cook in, they
need a roof; so we are in the right place.".
Inequality is risky
Higher up that pyramid, living standards matter more. In
this regard South Africa, which still has poverty but also a big
middle class and an advanced consumer society, beats Nige-
ria.Africa s top energy producer relies heavily on oil, which
tends to concentrate wealth in an elite at the top of the social
scale - good for luxury goods firms like LVMH and Porsche,
both of which have thriving operations in Nigeria.
But retailers targeting a broader consumer class say Nigeria
still needs better infrastructure and a more diversified economy
to achieve its full potential as a mass market.
"Until the country invests more in infrastructure, invests
more on other activities outside of oil, until that starts to
develop the economy ... I think the potential is not like it is
in South Africa," said Mark Turner, Africa Director for Massmart
Holdings, a unit of US retailer Wal-Mart.
Massmart currently has two stores in Nigeria, with another
opening in the coming weeks - compared with 300 in South
Turner said he could see the company opening as many as
15 stores in Nigeria, if the country could deepen development.
Yet the market attraction of Nigeria s growing middle class
is already there. Shoprite just opened a store in Kano, despite
the threat of an insurgency in the north, and a Massmart
Game store will soon join it there.
But Nigeria s growing inequalities add to "political risks, as
a result of perceived marginalisation," said Razia Khan, chief
Africa economist at Standard Chartered Bank. Unless something
is done to lift the impoverished masses, the risk of social
unrest, already being reaped in a bloody insurgency in the
destitute northeast and oil theft in the south, will grow.
She said: "The pressure on the authorities to create some
sort of social safety net in response will be significant."
Nigeria versus South Africa:
Size matters, but so
A market set up along the
street draws customers in
Nigeria is highlighted in green and South Africa, yellow.
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