Editor’s Note: John Defterios is CNN’s Emerging Markets Editor and anchor of Global Exchange, CNN’s prime time business show focused on the emerging and BRIC markets. Follow John on Twitter for more insights.
Story highlights
Nigeria has a nice recipe for growth, CNN's John Defterios writes
But he says the country remains vulnerable to violence and corruption
The rule of law rank high on the foreign investor check list, he says
This should be the day Nigeria steps into the spotlight and basks in the glow of hosting the World Economic Forum in Africa.
It is the first time the West African country has hosted the VIP event since the Geneva-based WEF came to the continent nearly a quarter century ago – but the spotlight has shifted.
Focus is now on the Nigeria’s list of problems in the North: kidnappings, terrorist attacks and killings.
The country has been a terrific economic growth story for the past few years, humming along at around 7%. It is at the heart of what many define as an African Renaissance.
After decades of loans from international lenders such as the World Bank, high debt and little development, Africa is coming alive.
That is why Nigerian President Goodluck Jonathan and his highly regarded economic team were eager to bring global CEOs to their turf.
But Nigeria does have a couple of obvious economic black-eyes, most notably an inability to close the wealth gap between the North and South, which in turn has given fuel to the Boko Haram movement and, by extension, radical Islam.
These groups take issue with what they see as the negative influences of globalization. The WEF is seen as standing at the forefront of a policy discussion and networking linked to more, not less, globalization.
The best indicator for the wealth gap is per capita income. Let’s start in the financial capital of Lagos and work our way North.
In Lagos, it is pegged at just over $2,900, according to a survey by Renaissance Capital. In the political capital of Abuja, where the economic forum is taking place, it rises to $4,000.
But if one heads North to Borno – the birthplace of Boko Haram – per capita income is just $1,631. There is an overemphasis on farming, very little in the way of an industrial base and the financial situation is even worse in surrounding states.
In Borno, alarmingly, 60% of the population lives in extreme poverty, according to the Nigeria Security Tracker.
Poverty and violence often go hand-in-hand, and that is the case here. Nearly a third of all violent deaths in the country over the past two years have taken place in this region.
One cannot overlook the effort by the terrorist group to ramp up the heat ahead of this high-profile business forum.
But at the same time one cannot ignore the lack of progress in fighting off the violence and persistent corruption.
This government’s track record of unleashing pent-up demand is solid. After re-basing its economy in early April to take in services growth, Nigeria zoomed ahead of South Africa as the continent’s biggest economy.
Nigeria and South Africa are both plagued with high unemployment, but the former’s GDP now stands at over a half trillion dollars while the latter’s is at $325 billion. South Africa also struggles with less than a third of Nigeria’s growth.
South Africa’s President Jacob Zuma goes to the polls making the case that his country can serve as a springboard into the faster growing economies of West and East Africa, due to its lead in financial and trade services.
Nigerian private sector banks and telecom providers have a different view.
Nigeria has all the ingredients for growth: 170 million people, a low debt level and low budget deficit with the blessing of sizable proven oil reserves. At 37 billion barrels, the country is ranked second on the continent behind Libya.
It is a nice recipe for growth, but the rule of law and rooting out corruption rank high on the foreign investor check list. That is where Nigeria remains vulnerable.
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