News / Africa

Energy Production Could Spur Nigerian Economy by 10 Percent

Drew Hinshaw

Nigeria's finance minister says moves to improve electricity production could bring economic growth of 10 percent a year by 2011. Market analysts say that will be a boon for Nigerian light manufacturing and trade-school graduates.

Finance Minister Olusegun Aganga says his projection of Nigeria's future economic growth hinges on the ability of the government to sell off its disastrous electrical grid to private companies.

Generator salesmen and diesel importers profit from the country's rolling blackouts, but Aganga thinks privatizing the grid will reduce Nigeria's infamous blackouts to a memory.

Market analysts say its a credible and exciting projection. For economist David Asserkoff at Extoix investment bank, it is just one more sign that Africa's second-largest economy is speeding up to join India and China in the ranks of the world's super-accelerating economies.

"If the finance minister is able to implement the kind of electricity sector and power sector and natural gas sector reforms that the economy could use, you could easily see growth pumping up past 10 to even 12 percent," said Asserkoff.

Domestic market

Even without energy reforms, Asserkoff says he projects robust seven-percent growth for the economy this year as Nigerian-made goods regain their share of the domestic market.

"The real story of what is going on is essentially taking out a lot of the bottlenecks in the Nigerian economy," he added. "Employment would certainly increase and unemployment would certainly fall. But you would see enormous productivity gains from workers who could just get to work and not have to worry about whether the lights are going to flicker on and off."

Nigeria's success is not just dependent on its ability to keep the power grid humming. Economist Gregory Kronsten at CSL Stockbrokers says the country's enormous banks must boost lending after last year's chaotic banking crisis.

"What Nigerian companies are looking for to take off, is for banks to lend on sound banking principles to sectors that they did not really lend to before," Kronsten said.

Target double-digit growth

Nigeria's current growth, he says, is being fueled by agriculture, retail, and small-scale construction. For the country to achieve double-digit growth, he cautions, borrowers in those sections of the economy will need to find lenders.

"If you are a large company, then you can get a loan. If you are a small business, you have not got much chance. If you are in agriculture, you have got virtually no chance," he added.

Ten-percent economic growth could hardly come at a better moment for Nigeria, says British Council Program Director Ben Fisher. He says the next generation of Nigerian workers will either make or break the country's economic future, depending on the government's capacity to open new trade schools.

"We are about to experience a huge a bulge, with a large number of potential young workers who will be able to enter into the workplace to support their families," Fisher said. "If we look at model such as Indonesia or Pakistan, we have seen a huge amount of economic growth, if the correct policies are in place to enable those people to enter the workplace."

Open borders for trade

That economic boom need not be limited to Nigeria. Asserkoff says the country's neighbors can stimulate regional trade by sharing ports. If they could cut red tape for visas and custom procedures, new commodities would start flowing across the West Africa's borders.

"I assume what you would see is a little bit of agriculture, textiles, everything. The rising tide would lift all the ships. That is the hope. That really is the hope," said Asserkoff.

Africa's biggest oil-exporter is also looking to use its economic might to play a bigger role on the global stage. In a visit to Nigeria last August, U.S. Secretary of State Hillary Clinton said the country could become the second African member of the Group of 20 leading industrialized nations if it successfully tackles corruption.

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