Anomalous Relationship between ICT and economic growth in Nigeria
By Y. Z. Ya’u, CITAD
Last week, I took part in discussing a paper entitled Digitalization of the Economy and Economic Growth at the 14th Annual Conference of the Association of Nigeria (ANAN) held at the International Conference Centre at Abuja. The objective of the paper was to explore the relationship between ICTs and economic growth in the context of Nigeria. While there have been detailed studies of this type for several other countries, the paucity of data has not allowed this for Nigeria. This data deficit in itself illustrates the weakness of our digitalization process.
There is a general agreement that ICTs contribute significantly to generating economic growth as several studies have shown positive correlation between ICTs and GDP growth across many countries. This therefore in the Nigerian context can be taken for granted, leaving us to ask the more useful question from both the standpoint of knowledge generation and policy options, which is, under what condition does growth in ICTs leads to growth in the economy? This is important because in the last couple of years, the contribution of ICTs to the national real GDP has been increasing, meaning that there has been growth the ICT sector, however, the economic growth in the country has gone into recession. In this sense, there seems to be an inverse relationship between ICTs and economic growth, a situation that could appear to contradict the global experience. This is why it is important to interrogate this than just merely showing that ICTs could lead to economic growth.
One of the key findings of the paper I referenced above is that over the years, the export of ICT services is 281 times the export of ICT goods. ICT services include software design, ICT consulting, online training, website design and hosting, outsourcing, etc. This finding should be not surprising given that the country lacks the capacity for the production and export of ICT goods in a competitive basis. Instead, the county virtually imports all its ICT goods as we hardly manufacture anything locally. The four local computer assembly firms are dependent on the importation of CKDs that they couple together, but increasingly, even this assembly activity has suffered a setback as locally assembled computers are not able to compete with those imported from Taiwan, Dubai etc. This is made worse by the crash in the national currency in relation to the dollar with which much of our international trade is conducted.
It is this lack of capacity to produce ICT goods that has slowed down the growth of the ICT sector. In fact, affordability of ICT goods is low and with that, the consumption of ICT services would naturally be lower than the potential need for these services. This therefore drags down the growth of the sector and hence its contribution to the economic growth of the country and its overall importance on the profile of our economy.
And this leads me to my second major question about the paper. It seems to state the obvious rather than to deeply investigate what is not on the surface which should be the purpose of research. Viewed from this perspective, a more useful intellectual exercise would have been to compare our export of ICT good services and import of the same. This should then allow us to see whether over the years, is our import of ICT services more or less than our export of services, and thus to decide whether Nigeria is a net importer of ICT services or net exporter? If we are net exporter, it seems we are earning much from the exports, and we would seem to have comparative advantage. If, however in spite of the growth in export of ICT services, we are net importer, then we are more likely to not going to see a positive impact of ICTs to the overall economic profile of the country.
So, a more plausive explanation of the anomalous relationship between ICTs and economic growth in the country would have been given by the propensity of the country to import more ICT services that it is exporting.
My third concern about the paper is that in an attempt to explain why the country has been exporting ICT services than goods, it claimed that the country had massive investment in broadband. Leaving aside the fact that classifying consumption of broadband as export than import is problematic, because we do not generate it but get it from international submarine cable owners as well as satellite companies, based outside of the country, the word massive needs to be understood carefully. I looked at the progress made with respect to broadband penetration in the country and that progress cannot be described as massive because in the five years of the implementation of the first National Broadband Plan, we added less than 10% from the around 35% it was the beginning. If by massive, it could mean that two Broadband Plans have been developed, that is could be correct, if it means that a lot of money might have been spent in the implementation of the plans, that could also be correct but if by massive it is referring to the outcomes of the investment, then it cannot hold water.
The anomality of the relationship between our ICT goods and economic outcomes lies in the nature of the policies and their implementation. While we have a number of policies and plans, including the National Digital Economy Policy and Strategy (NDEPS) 2020 – 2030 and Nigerian National Broadband Plan (NNBP) 2020 – 2025, there is a lack of clarity as to what are the overarching policy strategic goals. One of the plans says the goal is to be among the top 20 economies, but what does that means in reality? Does the reference to being top 20 in terms of size of GDP or in terms of rate of growth of GDP? Or does it refer to the country’s performance in terms of ending poverty or providing jobs to its citizens?
Each of these requires different deployment of ICT in the national space. In general, there are two broad paths to deployment ICTs. One is to consider it as a service sector that would improve other sectors such as education, health etc. In this, the focus is to mainstream ICTs in these sectors to improve access, quality and efficiency and effectiveness. For instance, mainstreaming ICTs in the education sector it would improve access and quality, thus make education more available also and affordable to the citizens. Similarly, when it is applied to healthcare, it can lead to improvement in availability and quality of healthcare services to the citizens. The overall impact of these is to improve the quality of citizenship, manpower, health of citizens, etc, which then contributes in terms of improved productivity, and economic effectiveness.
A second approach is to deploy ICT as a key economic sector of its own. Here, the objective is to use ICT to generate economic activities, create wealth and generate jobs. This would usually lead to growth in economic indicators and translate directly to economic growth. This approach is most useful in a context of huge youth unemployment, but it can also easily improve economic indicators.
While the first approach requires massive deployment of infrastructure, in the second you need highly specialized enclaves where technology and connectivity are of world class. Such enclaves, notably in the form of ICT parks are found in a number of countries. Silicon Valley in the USA is typical example, but it was not specifically planned as such in the conventional sense of ICT parks. Designed ICT parks are more common in countries such as China, India, Malaysia, Taiwan, etc. In African there are few of them.
Because ICT parks are essentially enclaves of creativity and innovation, the deployment of ICT as an economic also requires a robust education sector that will produce the skilled manpower that is needed to engage in creative and innovative endeavors in the ICT Packs.
The strategic objective of Nigeria digital transformation agenda is not too clear. In the same way, its key targets are not clear. There is also no coherence around strategies. For example, academics have been on strike for over six months in our universities. A country that aspires to produce skills manpower to fire its innovative potentials cannot afford such a disruption.
On the other hand, while there are some targets that speak to national coverage of infrastructure, there are no appropriate strategies to ensure that this infrastructure is widely and massively available and affordable for the mainstreaming of ICTs in the various critical sectors of the country as to make the desired improvement in those sectors. For instance, today, very few institutions have the necessary infrastructure to provide online training. In other words, we have no national capacity to deploy online training programmes. We have no capacity for ehealth.
Affordability has remained a sore problem both at the level of services and goods. While at the level of services, factors like lack of stable power supply, insecurity, crash of the value of the national currency are some of the factors responsible for the high cost of services, with respect to goods, we have failed to develop and launch programmes that will domesticate production of needed ICTs goods in the country. We cannot even produce feature handsets in spite of the huge markets for them in the country when Rwanda is producing smart phones.
We have very little of meaningful access as I wrote two weeks ago. There are no ICT parks in the country and no plan to start manufacturing computers, laptops locally. Even the assembly that had been taking place has shrunk as companies are unable to compete. Government has not developed policy to support local industry. Ministries, departments, and agencies still import laptops when Zinox, Beta, Omatek and United could provide our need. In other words, without a Nigeria first policy, local industry cannot flourish and compete.
Ultimately, while at policy level we are quick to celebrate growth in the country of ICTs in the national GDP, we are not doing much to ensure that growth in contribution of ICTs to GDP correlate with a similar growth in the GDP itself. That way, we can banish the anomalous relationship between ICT and economic growth in Nigeria.
