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What World Bank Growth Report Says About African Enterprise

Statistics don't put food on the table. The World Bank named Nigeria as one of the world's fastest-growing economies, but here's how it can grow faster.

24/11/2017 04:58 SAST
Akintunde Akinleye/ Reuters

This month the World Bank announced that Nigeria was among the fastest-improving countries to undertake business globally. After years in the economic wilderness, negotiating an unpredictable oil price and weathering political upheaval, Nigeria seems finally to have attained recognition for the resilience of its economy.

And it is not alone, either. Rwanda, Kenya, Mauritius and Zambia all join Nigeria in the positive trend. The lesson here for entrepreneurs like myself, though, is to recognise that this does not mark the end of a journey, but rather the beginning of one.

First, some context. Africa's economic development is both blessed and burdened by statistics. Indices like the World Bank's Doing Business Report, Financial Development Reportand the Heritage Foundation and The Wall Street Journal's Index of Economic Freedom all offer valuable insights into the relative strengths and weaknesses of economies globally, but they are often so sanitised that they exist in a virtual vacuum.

A Nigerian business leader can no more cash in a positive trend from an international index at the bank than they can use a positive article in The Economist to stabilise the faltering price of Nigeria's currency, the naira. Statistics offer insight, but not food on the table.

Nigeria has countless small projects at one end of the spectrum, and a sound number of monolithic conglomerates at the other. But very few of the former ever become the latter.

Today, the West African regional powerhouse accounts for the single largest population in Africa and maintains its second-biggest economy. Lagos state alone is currently the fifth-largest economic force on the whole continent. We are rich in oil, rich in agriculture, and our people are some of the most entrepreneurial not just in sub-Saharan Africa, but in the whole developing world.

Why should we take heart from the positive results that this month's World Bank report has delivered? One good reason: things are getting better in the right places.

Our government is functional, despite its challenged leadership, and from the oil sector to diversifying exports, our administration seems to be addressing some of the systemic problems that have dogged our progress.

But what does this mean to the man on the street? To the everyday entrepreneur? Are these benefits truly being felt by the people who need them most?

If we believe the reports, it would be easy to think that these emerging markets are some sort of Silicon Valley of Africa, with a risk-hungry venture capitalist on every street corner just looking for the right company to pour seed capital into. This is not the case.

However, the reality is that something equally revolutionary, if not as titillating, is happening within the Nigerian economy.

Nigeria has historically had a problem with scaling businesses. There are countless small projects, but very few ever achieve the growth to turn into the massive conglomerates that dominate the nation's big business sector.

Nigeria's banks have, to date, been too risk-averse when it comes to funding the growth of micro, small and medium enterprises (MSMEs), instead preferring to make smaller, shorter-term loans at very high interest rates.

This might work for businesses in the economic bracket favoured by the microfinance institutions (MFIs), but the model makes little sense for ambitious businesses on the cusp of expansion that need slightly more generous terms to break through into the mainstream.

So, with such a challenging business environment being testified to by real Nigerian entrepreneurs, why should we take heart from the positive results that this month's World Bank report has delivered? One good reason: things are getting better in the right places.

Taking Nigeria's results in their correct context, we recognise that Nigeria still lags well behind Zambia, Rwanda, Mauritius and Kenya in the overall rankings of sub-Saharan Africa. But the encouraging thing is that the trend, at last, is a positive one, and in all the right areas.

Akintunde Akinleye / Reuters
A woman selling plantain along a road counts the Nigerian naira near a currency exchange market in Ikeja district in Lagos, Nigeria August 12, 2017.

Breaking down the findings reveal that one of the most radical policies of the federal government, run through the Central Bank of Nigeria, is the National Collateral Registry. This improves MSMEs' access to credit, giving lenders greater security over the full range of movable assets.

These assets -- such as machinery, livestock or inventory -- can then be used as collateral, thereby granting Nigerian entrepreneurs access to credit to an extent that reflects the true value of their businesses.

The full potential impact of these reforms has yet to be realised, I believe. The desired outcome is not merely about individual successful enterprises, even though in themselves move our nation further along the road to growth.

But it is about advancing the interests of businesses that have typically been a secondary driver of the economy, behind oil and gas. These other businesses -- such as telecoms, fast-moving consumer goods and textiles -- are crucial to a diversified and therefore resilient economy.

Yes, there are areas in which progress is not occurring fast enough. We can and indeed must do more to create an economy in which property rights are absolute, and in which construction permits are seen as a facilitating mechanism, not a laborious hoop through which to jump.

To fully realise our potential, however, we must do more to eradicate the phenomenon that, in terms of both perception and reality, is the enemy of enterprise: corruption. This is Nigeria's true barrier to actualising the prospective wealth of our nation.

The future is brighter than it has ever been for Nigerian indigenous enterprise.

Let us not wait for government to create a corruption-free system; they have failed to do so enough.

Industrialists need to lead by example on this. and show that unilateral transparency, good governance and ethical business dealings can lead to success.

The future is brighter than it has ever been for Nigerian indigenous enterprise. Even those smallest businesses now have the greatest opportunity to play their part in a diversified and growing Nigerian economy.

There are challenges which still lay ahead of us, but I truly believe that by opening up the playing field to these enterprises, healthy competition in a market economy will breed progress in these areas too.