Weak public finance, lower oil exports dim Nigeria’s global competitiveness

Nigeria, now Africa’s largest economy, continued its downward trend and fell by seven places to 127th this year on the latest World Economic Forum (WEF) Global Competitiveness report 2014-2015, largely on the back of weakened public finances as a result of lower oil exports.

According to the report, Nigerian institutions remain weak (129th) with insufficiently protected property rights, high corruption, and undue influence.

In addition, the security situation remains dire, with Nigeria ranking 139th out of 144 countries ranked this year.

“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,” said the WEF report.

“On the upside, Nigeria benefits from its relatively large market size (33rd), which bears the potential for significant economies of scale; a relatively efficient labour market (40th) driven by its flexibility (20th); and a solid financial market (67th) following its gradual recovery from the 2009 crisis,” it further said.

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, according to the report.

Ahead of the 2015 election cycle, the report says it will be critical to keep the ongoing reform momentum to diversify the economy and increase the country’s long-term competitiveness.

This year’s WEF competitiveness report saw mixed progress for Africa as its two biggest economies, Nigeria and South Africa, both fell on the rankings, although Mauritius, the region’s most competitive economy, rose with a six-place improvement.

Nigeria, at 127th out of 144 countries, dropped seven places this year. South Africa also fell to 56th place this year, while Kenya continued its upward trend from last year and moved up by six places to reach 90th place.

Overall, the report finds that the three most problematic factors for doing business in Nigeria are (in descending order) inadequate supply of infrastructure, corruption and access to financing.

The Global Competitiveness Report’s rankings are based on the Global Competitiveness Index (GCI), which was introduced by the World Economic Forum in 2004.

Defining competitiveness as the set of institutions, policies and factors that determine the level of productivity of a country, GCI scores are calculated by drawing together country-level data in 12 categories – the “pillars of competitiveness” – to create a comprehensive picture of a country’s economic performance.

The 12 pillars are institutions; infrastructure; macroeconomic environment; health; primary education, higher education and training; goods market efficiency; labour market efficiency; financial market development; technological readiness; market size; business sophistication; and innovation.

BusinessDay