Nigeria’s digital economy can nurture Africa’s tech industry
Business Management

Nigeria’s digital economy can nurture Africa’s tech industry

Nigeria is well known for its Nollywood film industry. This has spread across the continent taking up a huge chunk of television space in countries in East Africa while dominating its West African roots.

But Nigeria’s growing mobile and tech space could be the next frontier if policies that are put in place can guide Africa’s most populous country to become a true tech hub.

Nigeria’s mobile landscape is not like any other on the continent. The country, which boasts over 100% penetration (107% by October 2015), is a breeding ground for technology companies from inside and outside Africa.

Statistics from 2014 [PDF] show that Nigeria’s mobile ecosystem contributed US$8.3 billion to the economy. This represented 1.4% of Gross Domestic Product (“GDP”).

The progress is buoyed by the launch of internet and mobile based business solutions, opening opportunities for Nigerian business to move into the digital economy.

One service is Orange Business Services, which according to Orange, aims to enable IT officers to take advantage of the shift to digital economy.

Giorgio Heiman, Vice President, Africa at Orange Business Services said: “There are many growth opportunities in IT, particularly in high-growth markets like Nigeria and across West Africa, but these can only be harnessed if service providers have a local understanding of strategic, political and cultural sensitivities in a region.”

Heiman added: “We act as a trusted advisor to help our customers compete on an equal footing in what is rapidly becoming a global market. This includes competitive, high-quality IT services delivered in all countries in which they operate.”

The opportunities are not only open to multinationals like Orange but to businesses and start-ups alike. Due to its huge population (180 million) Nigeria could be a single open market to jumpstart Africa’s biggest tech companies.

 

 

Digital Inclusion and IT participation

Just like most Sub Saharan African countries, Nigeria’s internet access is accelerated by mobile penetration. Currently over 90% of internet users access it through their mobile phones.

According to a GSMA report [PDF]. Nigeria is on its way to use its digital economy in development, leveraging on the high mobile penetration.

“Mobile subscribers can use mobile services to reduce transportation, communication and transaction costs. Benefits have been especially notable in the agricultural sector, where mobile has enabled improved efficiency of agricultural production and distribution,” the report said.

It added that: “A recent study [by Deloitte, GSMA and Cisco] found that in countries such as Nigeria, a 10% increase in mobile penetration increases Total Factor Productivity, a measure of an economy’s long-term technological dynamism, by 4.2% points in the long run.”

Nigeria could address barriers to mobile investment and affordability in turn helps extend the benefits of digital inclusion.

There is an opportunity for the new government to evaluate the key areas and promote policies to overcome these challenges. “The GSMA has estimated that a 1% increase in mobile penetration could lead to a long run increase in the annual rate of GDP growth of 0.28%,” the digital inclusion report by GSMA [PDF – see page 10] stated.

The country has also tried to increase its participation in international tech space by requiring foreign ICT companies and to engage local ICT companies when setting up in Nigeria.

Multinationals are now expected to maintain at least 50% local content by value either directly or through outsourcing to local manufacturers engaged in any segment of the product value chain, by end of 2015.

“The guidelines require multinational companies (MNC) to register their entities with the Corporate Affairs Commission (CAC) and carry on value adding services that promote local content value creation,” the legislation states.

“The guidelines are intended to help restructure and develop a strong indigenous ICT industry by addressing three core areas as follows: driving indigenous innovation; developing the local ICT industry; and establishing intellectual property regulation and protection standards.”

But the legislation has not come without controversy, eliciting strong sentiments.

In his article on ITNewsAfrica, Nigel Cory a trade policy analyst at the Information Technology and Innovation Foundation criticised the legislation saying that it was bad for the development of ICT in Nigeria.

“These policies and requirements for companies to submit plans on everything from their local content programs to the number of jobs they will create is reminiscent of failed central planning strategies that are out of touch with the modern, globalised nature of technology development and production,” Cory said.

 

Future opportunities

Nigerians have not been left behind in dreaming about the IT future according to the Ericsson’s consumer report in 2015 [PDF]. This includes having connected homes and cars, social discovery and multi-screening and peer-to-peer sharing.

There are opportunities in automating business processes, especially automation that can be accessed through smartphones. Start-ups could benefit greatly in providing these services and making forays into the Internet of Things.

Investment by companies in ICT is expected to be at US$5.3 billion according to IDC’s Forescape report on the country, despite the challenge of infrastructure.

IDC's country manager for West Africa, Bola Adisa said: “While the digital transformation trend signals a positive development for Nigeria's ICT vendors, a number of macroeconomic factors may nevertheless prevent the ICT market from reaching its full potential. Indeed, a challenging economic outlook, high structural unemployment, electricity supply challenges, and volatile currency fluctuations are all impacting ICT market spend.”

Nevertheless, IDC predicts ICT spend in Nigeria will grow 6.5% year on year in 2016, with mobile devices responsible for much of the increase.

The report also indicated that the idea of Smart Cities will drive ICT growth in Nigeria.

“Smart City initiatives, are driving greater adoption of third Platform technologies as well as a deeper paradigm shift on the part of governments, technology users, and vendors. Indeed, the success of Smart City initiatives will play a role in Nigeria's digital transformation journey in 2016,” the report said.

For any IT company that is looking to reap the benefits of a growing continent, one cannot ignore Nigeria’s huge market but also the maturity in its engagement with ICT. The only way is up, once they continually put up legislation that will be deemed favourable by players, while at the same time encouraging small companies to sprout.

Every indication is that Nigeria is on its way to become a true hub for ICT innovation and development in Africa.

 

Also read:

Nigeria: Credit card payments without the internet

German View on Startups: South Africa vs. Nigeria

Nigeria: “A simple tech solution to a complex food problem”

Country Spotlight: Nigeria

Nigeria: Oil, Electricity & IT

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Vincent Matinde

Vincent Matinde is an international IT Journalist highlighting African innovations in the technology scene.

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