To say that our future will be driven by technology will be stating the obvious. Nevertheless, it appears Nigeria is under estimating the impact emerging technologies will have on the future trajectory of the Nigerian economy and consequently the quality of life of majority of Nigerians. Technological changes are accelerating such that computers are now slowly contributing meaningfully to “creating” computer programs. The likelihood of a future where computers can program themselves is no longer the stuff of science fiction, but a possibility. In Japan, where the population is shrinking, robots are increasingly being deployed in manufacturing and life-like robots are gradually encroaching into homes, performing tasks for Japan’s large population of old people.
Meanwhile, technology is already having a huge impact on the Nigerian economy via the price of crude oil. Even before covid-19, crude oil demand was plateauing and price settling around the high fifties after the collapse in 2016 to below $30 per barrel. Covid-19 has accelerated the shift with remote working and adoption of electric cars, meaning lower demand for petroleum products for transportation. Furthermore, the announcement by several advanced economies that they plan to transition away from petrol/diesel powered cars to electric vehicles, does not portend a bright future for crude oil.
Nowhere, is the shaky future of oil firms and countries that rely on oil more evident than on the US stock exchanges. For example, an investment of $1,000 in the shares of Exxon Mobil on 1 January 2016 will be valued at only $734 on 6 July 2021, a loss of 26.6% after five and a half years. On the other hand, an investment of the same $1,000 in a technology Exchange Traded Fund (ETF), such as the Vanguard Technology ETF, which invests in a collection of technology firms, will be valued at $3,973, a profit of 297% within the same period. This is despite the fact that the price on 1 January 2016 was actually low on account of drop in crude oil price, which started in 2014. Meaning, Exxon Mobil shares have returned a loss, after over five years holding period, even when starting from a low base in 2016.
The consequences of Nigeria’s over reliance on crude oil for foreign exchange and government revenue and the failure to address the threats emerging technologies are posing to demand for crude oil, are now being acutely felt. Economic growth has slowed to below population growth, government revenues have collapsed and the Naira has depreciated from approximately N160 to $1 in 2014 to N500 to $1 today and high inflation is inflicting considerable pain on many Nigerians.
Apart from the threat technology is posing for Nigeria’s number one export, it is also accelerating rising wealth inequality between Nigeria and more technology savvy countries and amongst Nigerians. Producers of technology, whether hardware or software, are seeing their incomes rising, while passive consumers like Nigeria are becoming more and more reliant on imported technological solutions and services at a level that is significantly negatively affecting the country’s balance of payment. For example, review of Nigeria’s balance of payment in services shows that it has increased from negative $22.9 billion at the end of 2014 when crude oil price peaked, to negative $33.8 billion at the end of 2019. Meaning, Nigeria imported more services to the tune of $33.8 billion in 2019 than it exported services, while that figure was $22.9 billion in 2014. To put it in context, crude oil exports in 2014 was valued at $82.6 billion, while it dropped to $65 billion in 2019. So, while value of Nigeria’s crude oil export was dropping, appetite for imported services, such as, travelling, education, health, software solutions and so on, was expanding.
When covid-19 reared its head last year, the initial talk was that developing a vaccine in less than a year was impossible. The world was proved wrong. Technological advances in DNA sequencing, meant the virus could be quickly sequenced. Furthermore, advances in in RNA technologies meant some biotechnology companies were able to develop vaccines and receive approval for human use all within nine months. Vaccines that used to take ten years or more to be developed and approved, could now be ready in less than a year, thanks to advances in computing and other emerging techniques.
As technology sweeps the world, Nigeria is mainly a consumer. This is not to under appreciate the progress made, by Nigerian financial technology firms and Nigerian banks, in providing excellent digital financial solutions to Nigerians. Indeed, what these firms show is that Nigeria is capable of participating in the wealth creation opportunities technology is providing, if only it can make the required investments at a scale.
For a start, public education is woefully under funded by the states and the curriculum is out of date. Furthermore, the number of out of school children in Nigeria is alarming, in a world that is becoming increasingly unforgiving of lack of basic education or poor-quality basic education. Therefore, states need to increase budgetary allocations to public primary and secondary schools. The goal should be to improve quality of learning by improving the quality of teachers and school facilities. Given revenue constraints, the improvement in facilities can be done in phases over a couple of years. On the other hand, improving quality of teachers can be accomplished more quickly, since recruitment of better teachers and training existing ones can be accomplished faster. Next, the Federal Ministry of education, in collaboration with the states, should revamp the curriculum to make it more in line with the technological future. Covid-19 has shown that even delivery of education will be disrupted significantly by technology. The sooner Nigerian schools prepare for this new reality the better, otherwise, as experienced in 2020, Nigerian children will be left behind.
Apart from basic education, Nigerian universities need to rise above their current level of mediocrity. Public universities are overcrowded and serious scientific research is barely given attention or adequate funding. Consequently, Nigerian scientists and engineers are struggling to make their mark or provide world beating solutions to Nigeria’s problems. Accordingly, a new way of funding public universities needs to be devised if Nigerian public universities are to become more impactful. An option is to increase fees, while providing low-cost loans to students through commercial banks, but guaranteed by the Federal Government.
Investing in education will enable Nigeria reap the benefits of the current demographic boom the country is experiencing. It will enable Nigerians to compete globally for high paying technology jobs that are increasingly being done remotely. This is in addition to contributions that would be made by Nigerians that migrate to other countries. Indeed, Nigeria’s second highest source of foreign exchange is remittances by Nigerians in diaspora. For example, in 2019 Nigeria exported $65 billion of oil and gas and received $23.5 billion in diaspora remittances, while non-oil export of goods came a distant third bringing in $10.5 billion. Therefore, the opportunities for well-educated Nigerians to contribute foreign exchange, while in Nigeria working remotely or in diaspora are significant. Policies that will position Nigeria to exploit these opportunities deserve careful attention by government.
Next, government needs to prepare for a technological future that has oil at the periphery and not at the centre, notwithstanding the passage by the National Assembly of the long-awaited Petroleum Industry Bill. This requires finding other sources of foreign exchange other than oil and gas. This is because foreign exchange is needed to import machines required by manufacturers, equipment needed by telecommunication service providers and to import other technologies. Generally, this is one of the problems developing countries face as they try to climb the technological ladder. That is, they have to import technical know-how in the beginning at least and availability of foreign exchange then becomes a biding constraint to high growth.
Diversifying Nigeria’s exports was promised by Nigerian leaders for decades. Unfortunately, this has not happened. Oil and gas still account for over 90% of Nigeria’s export of goods. This might not be unconnected with Nigeria’s fixation with import substitution of goods, rather than focusing on encouraging private sector manufacturers to export, and an increasingly statist approach. This has not worked and it is time to try something else. Indeed, while Nigerian policy makers have concentrated their attention on imported goods, they have not reckoned with imported services that are now also a big drain on foreign exchange. For example, in 2019, Nigeria imported $62.1 billion worth of goods (including refined petroleum products) and imported $38.7 billion worth of services, a clear indication of the growing significance of imported services. Accordingly, the focus should be on increasing productivity and encouraging exports, with the private sector the main driver. Higher productivity and improvement in quality that exporters will experience, will have greater impact on economic growth. This is because higher productivity implies lower unit costs and thus more funds become available for reinvestment. This creates a positive feedback loop, leading to higher economic growth.
The post oil era is here and technology will continue to shape the future. Nigeria risks being left behind. This need not be the case, as Nigeria has the raw materials, its youthful population, to become a big player in a world driven by emerging technologies. However, this requires an acceptance that crude oil and gas will no longer be able to fuel high economic growth. More importantly, it requires concrete actions to be taken to improve the quality of public education and to diversify Nigeria’s exports.