What's the fastest-rising power in the global economy? The one set to dominate the 21st century? The place everyone wants to invest? And the market that every chief executive wants to get a foothold in? Until recently, it's been China. But from next year, it could well be Nigeria.
A few people in the financial markets have been pointing to the rapid growth of sub-Saharan Africa for some time, but it is yet to hit the mainstream. Most people still have a view of Africa dominated by what they see on the news: war, famine, and grinding poverty. It needs a catalyst to change people's mind. The most likely candidate? By 2015, and possibly as early as next year, Nigeria will be the fastest-growing major emerging economy.
There is no question that sub-Saharan Africa has dramatically improved its economic performance in recent years. It has a young, fast-growing population, rising educational standards, and many of its countries are undergoing rapid industrialisation a description that, a generation ago, described much of Asia. Overall, the region is growing at 6% a year, according to the World Bank just slightly slower than developed Asia, and faster than any other region in the world.
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Five of the ten fastest-growing economies in the world are in Africa (Sierra Leone is top, with 18.2% growth). Many of its major countries are reaching the take-off point where growth is self-sustaining, as factory workers and an emerging middle-class fuel demand, allowing domestic companies to grow, and attracting big multinationals to move in. No other geographical area has the same potential.
But can Nigeria overtake China not in absolute size, of course, but in relative performance? It certainly can. China is slowing. It may or may not crash, but whatever happens, it won't reclaim the 10%-plus growth it was seeing until recently no major economy can grow at that speed for very long. Even if it continues to do well, it is now more likely to grow at around 5%-6% a year.
But Nigeria is growing at 7%-plus already. And with a population of 168 million, it is a big country with huge potential to grow further. From relative poverty, Nigeria is developing a self-sustaining economy. It helps to have a lot of oil as Nigeria does but unlike the Gulf States or Russia, it is no longer just an energy economy. It has a huge agricultural sector and a growing manufacturing base. It could soon replace South Africa in the G20, according to a recent analysis by South African fund managers Stanlib.
Twenty years ago, South Africa's economy was 7.5 times bigger than Nigeria's, but now it is only 1.4 times larger. In 2010, Nigeria overtook Egypt to become Africa's second-largest economy. On current trends, it will soon be the biggest.
There is no reason to expect a slowdown soon. There may be wobbles in emerging markets, and there may well be political trouble down the line. Very few economies industrialise without strife along the way. But Nigeria still has a huge amount of catching up to do before it starts to run out of steam. Around 40% of the workforce still works the land. As those people switch from the fields to factories, and then to offices, productivity will soar.
In the capital, Lagos, more than 70% of children now finish primary education, but in some of the more remote areas it is still less than 10%. As educational standards rise along with living standards, growth will receive another boost. There is nothing new about this process. Europe and most of Asia have been through it already. The path is well-trodden there is no reason Africa can't do the same.
There is often a moment when the world suddenly notices that a new economic player has emerged. For Japan, it was the Tokyo Olympics in 1964. For South Korea, it was the Olympics of 1998. In the case of China, it might well have been re-claiming ownership of Hong Kong in 1997. After that, just about every chief executive in the world started talking about their China strategy, and every fund manager started marketing China funds. Africa already has the growth story all it needs now is the event that illustrates that it is no longer the economic basket case of the immediate post-colonial years.
It probably isn't going to be the Olympics (although it could be a World Cup). It is far more likely to be Nigeria overtaking China as the most exciting developing market. Taking a place in the G20 would cement that. That could happen faster than most people imagine. The International Monetary Fund is due to re-base Nigeria's GDP by the end of this year. When it did the same thing in Ghana two years ago, it found the economy was 60% larger than it realised underdeveloped economies often have very poor statistics. Anything similar in Nigeria would push it into the top 30 global economies right away.
We are used to hearing people discussing Africa in terms of poverty, disease and aid. Yet the reality in most countries has changed. In the next few years we may start to get used to hearing CEOs pressed on their strategy for the Nigerian market and as we hear that more and more frequently, our view of the continent will be transformed. And investors won't be able to get in fast enough.
Matthew Lynn is a columnist for Bloomberg, and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years.
He has written books on finance and financial topics, including Bust: Greece, The Euro and The Sovereign Debt Crisis and The Long Depression: The Slump of 2008 to 2031. Matthew is also the author of the Death Force series of military thrillers and the founder of Lume Books, an independent publisher.
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