Nigeria at a crossroads Getting Nigeria where it belongs December 2019 CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission of McKinsey & Company is strictly prohibited
Nigerians have bold aspirations for their future Source: … McKinsey & Company McKinsey & Company 2 2
7 annually for 50 years 11 Long-term Recent Outperformers To help us think Outperformers achieved achieved GDP per GDP per capita growth capita growth of more about Nigeria’s of more than 3.5% 1 than 5% annually for 20 years future, we will look at “outperformers” Malaysia Belarus Kazakhstan “Emerging countries who have China Azerbaijan Turkmenistan been able to generate growth and Singapore Vietnam Ethiopia raise prosperity, through poverty Hong Kong Myanmar Laos alleviation and the emergence of Thailand Cambodia Uzbekistan a new wave of middle and affluent classes” South Korea India Indonesia 1 3.5% is required by low- and lower middle-income economies to achieve upper middle-income status over a 50-year period. Source: … Source: Outperformers: High-growth emerging economies and the compa- McKinsey & Company 3 nies that propel them, McKinsey Global Institute (Sep. 2018); World Bank
Outperforming emerging economies have lifted >1 billion people out of extreme poverty Attracted almost 70% of ~$900 billion Generated 44% of emerging since 1990 of foreign investment in emerging market consumption growth markets between 2000 and 2016 between 1995 and 2016 Increased household consumption Accounted for 19% or more by about $3.2 trillion between 1995 of global inflows and outflows and 2016 across goods, services, and finance in 2016 Source: … Source: Outperformers: High-growth emerging economies and the McKinsey & Company 4 companies that propel them, McKinsey Global Institute (Sep. 2018)
How do we get Nigeria’s flag on the list of “outperformers” ? McKinsey & Company 5
Nigeria’s economic trajectory over the last 20 years has been transformative Nigeria real GDP, constant 2010, $ billions The last 20 years have been the most prosperous for Nigeria 500 Nominal GDP of $397 billion , the largest economy 450 2000 – 2015: Major telco, in Africa 1 banking, and pension 400 reforms 50-year annual growth 350 (1968-2018), % 4.2 2016 – 2018: Oil price 300 crash and recession 250 20-year annual growth 2018-Today: Growth due to 200 (1998-2018), % non-oil sector 6.5 150 100 50 0 1965 70 75 80 85 90 95 00 05 10 15 2018 1. Different from 2018 value shown in graph ~470 Mn USD; calculated in constant 2010$ Source: … Source: World Bank Group - World Development Indicators McKinsey & Company 6
Growth in Nigeria has historically been comparable to what outperformers have achieved, but a lot more volatile Real GDP growth, 1998-2018, % Nigeria Long-term outperformers 15 11 Recent outperformers 10 10 9 9 9 9 8 8 8 8 8 8 8 8 8 8 8 8 7 7 7 7 7 7 7 7 7 7 7 7 7 7 6 6 6 6 6 6 6 6 6 6 6 6 6 6 5 5 5 5 5 4 4 3 2 1 1 -2 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Average GDP Long-term Recent Nigeria ~397 million outperformers ~2,550 million outperformers ~320 million $ Mn, 2018 McKinsey & Company 7
The economy is diversifying, with a promising role of ICT Share of nominal GDP, % Agriculture Extraction of oil & gas Manufacuring & construction ICT 40 ~20% 35 Still an important contribution of agriculture to GDP 30 25 21% 20 decrease in oil & gas contribution to GDP since 1980 15 10 23% increase in services 5 contribution to GDP 0 1980 1990 2000 2010 2018 Source: IHS Markit McKinsey & Company 8
90 Mn – People in the labour force; +17 Mn since 2014 Young, growing Nigeria has labour force 8.2% – 5-year annual growth of 15-24 year old people in workforce everything it takes to be a leading >120 Mn 1 – Internet users, the highest number per country High adoption economy in Africa and 7 th globally of technology ~173 million 1 – Mobile subscribers in Nigeria, the largest mobile market in Africa and the 8 th largest globally ~34 million 2 hectares of arable land, the largest in Africa Abundant natural resources >5 trillion cubic meters of natural gas reserves 3 , the largest in Africa and the 9 th largest in the world 1 Data as of 2019 2 Data as of 2016 3 Proved natural gas reserves as of 2017 Source: … Source: World Bank, Nigeria Statistics Bureau, McKinsey & Company 9 IHS Markit, CIA.gov
It will continue to represent ~20% of the household consumption opportunity in Africa by 2025 Total household consumption, 2005 – 25 %; $ billion, 2015 prices 2005 2015 2025 454 379 237 Share of Africa household consumption 26% 26% 22% % SOURCE: Oxford Economics: IHS; African Development Bank; McKinsey Global Institute analysis McKinsey & Company 10
Nigeria, however, still lags its potential Growth has not been Labour force is Basic infrastructure has Natural resources are sufficient to drive underutilized, and not lagged population and underutilized development competitive economic growth Negative average annual growth in ~6% share of unemployment in $140-160bn additional investments 25% of gas reserves are in GDP per capita over the last 5 required to close infrastructure exploration or under development Nigeria, 2x higher than years 2 outperformers deficit ~90 Mn citizens living in extreme 55% share of 15-35 year-olds ~45% of population without access 4-7X lower yield in critical poverty 3 unemployed/underemployed to electricity agricultural production (e.g maize) than South Africa and the USA ~4X lower average revenue per 54/71 rank of Nigeria in labour 3X time needed to transport goods productivity 2 among emerging large firm in Nigeria vs in-country 4 outperformers ($1K Bn vs ~3,9) countries 1 Worldwide Governance Indicators (2018); 2 -0.6% average annual growth in GDP per capita from 2014 to 2018; 3 Extreme poverty is defined as earning under $1.90 a day; 4 According to a 2015 USAID study 1. Labor productivity defined as dollars produced per hour per employee 2. SOURCE: Oxford Economics: IHS; African Development Bank; McKinsey Global Institute analysis McKinsey & Company 11
Nigeria is now the country with the most poor people in the world Percentage of the population 4% vs 60% living on less than $3.20 a day 3 , % Reduction of people living in poverty (<3,20$/day) in the last 20 years in Nigeria 81 vs outperformers 1995-2005 78 -4% 2006-2015 ~90Mn Number of people in Nigeria living in extreme poverty (<1,90$/day) globally ; overtaking India’s first place globally while India's 43 population is 7 times larger than Nigeria’s -61% “The United Nations’ Sustainable Development 17 Goal (SDG) to end extreme poverty by 2030 is unlikely to be met – no thanks, in large part, to Nigeria.” Quartz, Africa Nigeria Outperformers 1 Estimate of Gini index of inequality in equivalized (square root scale) household disposable (pre-tax, pre-transfer) income, using Luxembourg Income Study data as the standard. 0 is perfect equality and 100 is perfect inequality (i.e., one person has all the income) 2 Pre-tax national income 3 Poverty defined as population living with less than $3.20 per day (in purchasing power parity terms using real 2011 US dollars) SOURCE: World Bank, McKinsey Global Institute McKinsey & Company 12
Nigeria ranks 157 out of 159 countries in the Life expectancy Life expectancy, years Human Development Index in Nigeria today ▪ Job growth has not kept up with population is 18 years less growth: ~20 Mn people are currently 18 than that unemployed and a further ~18 Mn are underemployed with the highest impact on the in an average youth outperformer ▪ Maternal mortality rate worsened between country; and 2013 and 2015 from 560 to 814 deaths for 72 every 100,000 live births human capital 66 54 development in ▪ Low labor productivity due to poor education 46 (~16k $/employee in Nigeria vs 45k$ for general is a outperformers) priority issue ▪ 0,55 Gender Parity Score in Nigeria, below the African score of 0,58 and far from best-in- class countries (0,76 in South Africa) Nigeria Outperformers 3 1 Expected years of schooling - Number of years of schooling that a child of school entrance age can expect to receive if prevailing patterns of age-specific enrolment rates persist throughout the child’s life 2 Excludes India and China. SOURCE: Expected years of schooling (years): UNESCO Institute for Statistics (2018), ICF Macro Demographic and Health McKinsey & Company 13 Surveys, UNICEF Multiple Indicator Cluster Surveys and OECD (2017a). Life expectancy: United Nations Population Division.
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