By Muna Onuzo
MON, OCTOBER 24 2016-Despite the economic headwinds that have bedevilled Africa’s economy for many years – poverty, epileptic power supply, political instability, insurgency, global fall in oil prices, etc; consumer spending in Africa has seen a geometric leap, and it is expected to hit $1.4 Trillion by 2020 according to the Mckinsey Global Institute. Analysts have submitted that the rate of return on foreign investment in Africa is higher than in any other developing region. Over the last decade, six of the world’s 10 fastest-growing economies were African. Sub-Saharan Africa’s economy is set to register another year of solid economic performance, expanding at 4½ percent in 2015. This expansion will however be at the lower end of the range registered in recent years, mainly reflecting the adverse impact of the sharp decline in oil and other commodity prices.
According to the African Development Bank, Africa’s middleclass population is over 300 million people, 34% of Africa’s population; who spend a minimum of $2.20 a day, representing a 100% rise in less than 20 years. The International Finance Corporation (IFC) 2015 study on Africa noted that as both infant mortality and fertility rates decline over the next 20 years in sub-Saharan Africa, the region will become the main source of new entrants into the global labor force. Astonishingly, by 2035, new African entrants into the working age population (ages 15–64) are also expected to exceed those from the rest of the world combined. These changing demographics will have a profound impact on the social and economic fabric of the world at large and Africa in particular. A distressing effect of this development can already be seen in the extraordinarily high prices for apartments in the highbrow areas of Lagos.
Some analysts argue that Africa and indeed Nigeria does not have a middle class, For instance, according to The Economist, “Africans are mainly rich or poor, but not middle class” Even if that were to be true, the fact still remains that Africa has the potential of growing a middle class that will be capable of stimulating the economy if well harnessed; and if current projections hold true, Africa’s middle class will explode over the next 20 years.
The Middle Class In Nigeria
In Nigeria, the middle class accounts for about 23% of the population according to the African Development Bank (AFDB) data, with the majority living in urban centres, particularly Lagos. [This segment of the population is responsible for a huge proportion of the increased spending on consumer goods, therefore improving the state of the economy. This growth can partly be attributed to the growth of the private sector in the areas of banking, telecommunications and services. The purchasing power of the new middle class in Nigeria can be observed at some shopping malls that have recently been opened around the country. The growth in middle class in Nigeria follows the rise in the country’s Gross Domestic Product (GDP), which increased, five times from $46 billion in 2000 to $247 billion in 2011, while GDP per capita has increased to about $1,600. Similarly, the country’s population has increased by about 33% during the same period rising from 119 million to the current estimated 160 million.
The growth of the middleclass in Nigeria has been very significant, going by the increasing consumer spending and foreign direct investment in the areas of telecommunications, ICT, retail business, mining, and energy.
However, with the current gloomy realities that are hurting the Nigerian economy – a weak naira, high interest rates, high inflation rate, a higher unemployment rate, the recession in the manufacturing sector, the prolonged fall in global oil prices, poor standard of education, high cost of doing business in Nigeria, etc; – there are doubts that this growth will be sustained.
This underscores the pertinence of this discourse. The objective of this article is to explore the impact of the middleclass on the Nigerian economy and to see how it can be leveraged to leapfrog the Nigerian economy to become one of the top 10 largest economies in the world.
Growing the Middle Class In Nigeria: A 3-Year Blueprint
Irrespective of the economic downturn, Nigeria has the potential to grow its middleclass as well as the economy, learning from the experiences of the BRIC countries which comprises the following member countries Brazil, Russia, India, China, South Africa that represent the currently recognized major economic emerging nations. China’s middle class is now the biggest in the world, and growing much faster than America’s, according to research carried out by Credit Suisse. There are 109 million Chinese with wealth of between $50,000 and $500,000. Since 2000, twice as many Chinese as Americans have joined the middle class. Credit Suisse measured wealth rather than income to avoid temporary changes caused by unemployment, for example. Chinese are getting richer at an astonishing rate. Wealth per adult has quadrupled to about $22,500 since 2000. The country now accounts for a fifth of the world’s population, while holding about 10% of global wealth. “The wealth of the country’s households could well continue to leapfrog the growth rates of developed economies,” Credit Suisse said. China should also see the number of millionaires soar 74% to 2.3 million by 2020, according to the report. A report by UBS and PricewaterhouseCoopers found that a new billionaire was created almost every week in China in the first quarter of the year. China’s middle class grew by 203 million in 10 years.
Following the strategies below can sustainably grow the Middle Class population in Nigeria over the next 3 years:
Create An Investment-Friendly Business Environment.
Doing Business in Nigeria has been very difficult in the past two decades, according to the World Bank’s 2015 Ease of Doing Business Report. Nigeria only moved one place up this year from 170th to 169th. The Corporate Affairs Commissions (CAC) commitment to register companies within 24 hours has yet to be achieved more than a year after the symbolically important goal was set. The report also revealed that other developing countries in Sub Saharan Africa (SSA) like the Republic of Benin rank higher than Nigeria. These countries have been very proactive in implementing necessary strategic reforms.
Stimulate Micro Small & Medium Enterprises MSME’s Growth.
MSMEs are considered catalysts of growth and innovation globally. Their existence is undisputedly significant and their contribution towards employment generation, GDP growth, entrepreneurship, poverty alleviation, industrial development, and exports are well recognised. In high-income as in some middle-income countries, the sector accounts for more than half of the national output. China and India grew its economy, in part, by supporting Micro Small & Medium Scale Enterprises. Today, MSMEs account for over 70% of China’s GDP. MSMEs are considered the backbone of the Indian economy, contributing 37.54% to GDP in the 2012-13 year. Here in Nigeria, the 2013 National MSMEs Survey shows that there are 37 million businesses in this group, employing over 60 million Nigerians. The report also shows that MSMEs currently account for 48% of Nigeria’s Gross Domestic Product (GDP). The recently launched N2 Billion Graduate Entrepreneurship Fund (GEF) by the Bank of Industry (BOI) is a step in the right direction. However, the government and organised private sector need to do more.
Invest in a Massive Infrastructure Development Programme.
Infrastructure is central to almost every aspect of life in Nigeria. It is a key driver of productivity and growth in a modern economy, a contributor to the health and well being of our citizens, and a critical component of transporting goods and services across the country. It is a method for enabling communication and the sharing of information among the citizens; the means of providing core services such as water, electricity and energy and it is a shaper of how our communities grow and contribute to our collective social fabric. Initiating a massive infrastructure development program will transform our economic landscape while simultaneously creating significant numbers of new jobs. These investments in the construction of roads, railway lines, electricity plants, hospitals, schools and dams will contribute to faster economic growth with an attendant growth in real employment in the country.
Diversification of Nigeria’s Economy.
Although this has been headlined by the Buhari administration at various fora, it is important that the federal government goes to work on it. With the free fall of global oil price, it goes without saying that Nigeria can no longer depend on oil revenue, which currently accounts for 70% of Nigeria’s revenue, to meet its humongous developmental challenges. Internally Generated Revenue (IGR) is an area to consider. Lagos State is the richest state in Nigeria today because of IGR. It is refreshing to know that Lagos State made a whopping N276.16 Billion IGR in 2014. The same template should be introduced and localized in all the states of the federation to grow IGR. Nigeria is too blessed a country to rely on one source of revenue. The government should jettison the rhetoric and get to work on its economic diversification plans.
Improved Political Will.
Going by the much-hyped strong political will and transparency body language of PMB, the future of Nigeria’s economy may be said to look bright. A sudden improvement of the economy will stimulate a speedy implementation of strategic reforms that will lead to long term and sustainable growth of the Nigerian economy. For more impact, the same political will and body language should be replicated in the 36 states of the federation including the Federal Capital Territory (FCT).
Benefits of Growing the Middle Class in Nigeria
1-Increase Foreign Direct Investment. Just as the rise of the middle class in China (whose consumption has been predicted will hit $16 Trillion by 2020 attracted foreign investors like Apple, etc; the growth of Nigeria’s middle class will similarly lure investors and ultimately grow the Nigerian economy.
2-Increased Demand For Luxury Goods. The last 10 years have seen the growth of the luxury market owing to the increased income of a bourgeoning Middleclass. If this trend continues, there will be increased demand for luxury goods to sustain a new quest for improved lifestyles, and an explosion in new home ownership in high brow areas of our major urban centres among other benefits.
3-A more Civilized Society. The middleclass population is known for hard work, a savings and an investment culture, strong moral values, etc. With the rise in the population of this section of the economy, Nigeria will, more likely than not, have a more peaceful and positive value-driven society.
There is no doubt that the consumption power of the middleclass attracts investors to a particular region, state or nation. This has increased the level of investments in Lagos, and a few other parts of the country. But, the government and the organised private sector need to get to work along the lines suggested in this article, in order to sustain and grow the middleclass population in Nigeria.
A billion more middle class population will emerge all over the world by the next decade. This is the time for Nigeria to act, so as to constitute a substantial part of that population.
ABOUT THE AUTHOR: Muna Onuzo is a professional/personal development coach. She helps Small businesses craft their strategy and business communication, equipping them for success. She is a brand strategist, career coach, business etiquette, international protocol and cross cultural consultant who believes that with wisdom, strength, focus and purpose, anyone can break through their personal limits to achieve greatness! She motivates the uninspired and fires up the inspired to live their dream.
She is a keynote speaker at various conferences and summits. She is also the Principal Consultant at Gazzelle Academy, the ultimate business, branding and Skill Acquisition Centre where entrepreneurs are made and businesses break out of their limits.
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