Updated: Feb 9
Nigeria is the most advanced economy in the African continent. It has outpaced South Africa, which has always been considered the number one economy of the continent. And this happenstance is not based on randomness. It was the fruition of several economic policies that prioritize local entrepreneurship over foreign investments. Nigeria has developed in the past a notorious reputation for being a corrupt nation, a nation where property rights aren’t respected. Though, Nigeria today is the most powerful economy in Africa. It is the country that produces the most billionaires, who all live in Nigeria.
Nigeria has a nominal national wealth of $504 billion and an income per capita of $2,326 according to the International Monetary Fund. It is important to emphasize that Nigeria’s income per capita is not the highest in Africa. Seychelles has the highest income per capita with $20,265 per inhabitant. Though, Seychelles has a nominal national wealth of $2.005 billion. Why does Seychelles have a higher income per capita than Nigeria if they produce less than Nigerians? It’s simply a matter of population size. A country with a small population will likely have a higher income per capita than a country with a larger population. If, for example, a country has a national wealth of $50 billion and a population of 20 million, then the income per person would be $2,500. If that same country had less than one million inhabitants, let us say, 750,000 people but still produces $50 billion of total wealth, then each person would have $$66,666. With a very large population such as that of Nigeria, income per capita would be lower since the wealth has to be spread across all inhabitants. Income per capita is an important metric to understand a country’s wealth and economic trajectory, but it is not the only metric to rely on. To understand at a deeper level the wealth of a nation, it is important to look at its economic policies.
Nigeria has become the economic superpower of Africa because, in the early 2000s, President Olusegun Obasanjo (1999-2007) implemented a series of market-oriented policies that would promote local entrepreneurship. President Obasanjo believed that Nigeria can only develop if its economy was led by its “local champions” rather than by multinational corporations. These policies have produced billionaires such as Aliko Dangoté, Abdul Samad Rabiu, and Mike Adenuga. Obasanjo was a Nigerian nationalist. He believed that Nigerians should produce their own goods and services because doing so would give them leverage over price bargaining with foreign countries. Before Obasanjo’s presidency, Nigeria’s GDP growth had been slow since 1987, and only managed 3 percent between 1999 and 2000. Though, under his leadership, the growth rate doubled to 6 percent until he left office, helped in part by higher oil prices. And Nigeria’s foreign reserves rose from $ 2 billion in 1999 to $43 billion upon leaving office in 2007.
President Obasanjo wanted to reduce government expenditures and national debt in order to spur economic growth. To further reduce expenditure, President Obasanjo prioritized the privatization of companies and industries. In July 1999, he formed the National Council on Privatization and sold most government-owned enterprises to private companies and privatized key industries and economic sectors. The privatization of many industries led to an increase in productivity, efficiency, and the creation of wealth in Nigeria. Obasanjo economic policies create opportunities for many Nigerians to boost the national economy by promoting the need for “local champions” as the bedrock of national economic growth.