Four sectors namely agriculture, trade, manufacturing and infrastructure could contribute about $800 billion to Nigeria’s current gross domestic product (GDP) of $510 billion by 2030.
This was indicated in a report by the McKinsey Global Institute (MGI), the business and economics arm of world acclaimed McKinsey & Company.
Going by the rebased GDP, the four accounted for $251 billion in 2013. But in the MGI’s report titled “Nigeria’s Renewal: Delivering Inclusive Growth in Africa’s Largest Economy,” which took a bottom-up analysis of the potential GDP contribution from agriculture, trade, manufacturing and infrastructure by 2030, these sectors will be among the most important in driving productivity and contributing to inclusive growth in Nigeria.
“We estimate that together, these four industries could account for $775 billion of GDP by 2030, up from $251 billion in 2013. In our full report, to be released later this year, the McKinsey Global Institute will project the upside potential for the entire Nigerian economy based on the latest set of rebased data,” the report said.
Giving a sector by sector analysis, the MGI report estimated that trade (wholesale and retail) could continue to show strong growth to 2030 (about 7 per cent annually), resulting in a yearly industry contribution of $270 billion by 2030; up from $85 billion in 2013.
“This growth would be driven primarily by rapidly rising household consumption as Nigeria’s average income rises along with continued strong GDP growth. Based on our analysis, household consumption of consumer goods could grow by 7 per cent a year to 2030, which could result in a similar growth rate in wholesale and retail trade,” the MGI report said.
It also indicated that Nigeria could more than double agricultural sector output, from $112 billion per annum in 2013 to $227 billion by 2030, raising the annual growth rate to 4.2 per cent, from 2.6 per cent in recent years.
“Capturing this potential would require a four-pronged approach – boosting yields, shifting more production into high value crops, reducing post-harvest and distribution losses, and increasing scale production. The biggest opportunity in agriculture is improving crop yields, which accounts for 39 per cent of the upside potential.
“Rice yield in Nigeria today are only 71 per cent of South African levels and 36 per cent of Brazil’s. Cassava yields are half Indian levels. We believe yields could reach approximately half their ecological potential (based on soil and climate types, as determined by the UN Food and Agriculture Organisation), rising by around 40 per cent on average and creating overall value of $45 billion per year by 2030,” MGI said.
On the manufacturing sector, the MGI said the sector is at a relatively early stage of development in Nigeria, contributing $35 billion, or about 7 per cent of GDP in Nigeria, adding that it has, however, achieved strong growth recently, with output rising by 13 per cent per year from 2010 to 2013.
“We believe Nigeria is more likely to follow the pattern seen in high-growth developing countries such as Indonesia, Malaysia, and Thailand during their periods of strongest expansion in manufacturing. The contribution of manufacturing to GDP at the start of these countries’ growth periods is much more like that of Nigeria today than those of China or Vietnam in the early 1990s…,” said the MGI report.
It also dwelt on infrastructure as one of the four sectors that could contribute close to $800 billion to Nigeria’s GDP by 2030, adding that while infrastructure is not defined as a single sector in national accounts, “in the analysis, we consider core infrastructure sectors (constitution, transportation and storage, electricity, gas and steam supply, and water supply, sewage and waste management) and real estate”.
The report posited that there was a huge need for investment in infrastructure in the country, adding that based on extensive analysis of available data and interviews with stakeholders in the country, it estimated that “there is a potential for the investment of $871 billion in core infrastructure through 2030 to support an upside GDP growth scenario.”
The bulk of the investment would be in electricity and transportation systems, but there is a significant need in telecommunications and water infrastructure, the report added.
Meanwhile, financial services and communications company, Western Union, says it is still studying whether the recent directive by Nigeria’s apex bank—Central Bank of Nigeria (CBN) that remittances in foreign currencies should be paid to the ultimate beneficiaries in the local currency (Naira), using the prevailing exchange rates.
Western Union’s Vice President (African Region), Mrs. Aida Diarra, who fielded questions from THISDAY on the sidelines of the recent World Economic Forum on Africa, in Abuja, said Nigeria remained one of the two leading African countries in terms of remittances, but noted that her company was yet to establish whether the CBN directive has any impact on remittances or not.
She, however, noted that Nigeria accounted for about $21 billion remittances from the Diaspora in 2013, noting that close to $70 billion remittances are recorded on the African continent annually.