Sub-National Differences Crucial For Evaluating Economic Landscape

BMI View: While Nigeria's huge population and growing economy are likely to increasingly catch the attention of investors and firms in a wide variety of sectors, it is important to note the substantial differences at the sub-national level. Here, BMI looks more closely at the situation in Nigeria's 36 states and six geopolitical zones as it relates to consumer markets, development prospects, and security considerations.

  • Consumer markets are diverse within Nigeria, with wide disparities in income and varying patterns of expenditure, with southern states having more discretionary income, while northern states have larger, more rapidly growing populations.

  • A wide range of development indicators (encompassing education, health, infrastructure, and poverty) suggest that the north continues to lag behind the south, potentially hamstringing the former's ability to catch up economically.

  • Data suggests that lack of economic opportunity could be a contributor of political unrest, with high-profile militant groups being found in areas with particularly high unemployment.

Interest in Sub-Saharan Africa (SSA) has soared in recent years, given the region's rapid economic growth and the desire among firms worldwide to find new markets and investment opportunities. Few SSA countries have drawn as much interest as Nigeria, whose population and GDP each surpasses that of Africa's 30 smallest countries combined. However, similar to the common mistake of treating 'Africa' as a single homogeneous bloc, some observers have failed to distinguish among the substantially different conditions across Nigeria's 36 states and six geopolitical zones. While much has been made of the political, religious and ideological divide of the north and the south, here BMI looks principally at the social and economic differences across the country, with reference to the implications for Nigeria's consumer markets, its prospects for economic development, and long-term security considerations. The figures presented have primarily been estimated by BMI based on data provided by National Bureau of Statistics (NBS), or collected from the US Agency for International Development (USAID) Demographic and Health Surveys (DHS).

While we will look at some specific states such as outliers and high-profile cases, mostly we will compare Nigeria's six geopolitical zones, which are North West, North East, North Central, South West, South South, and South East. Each zone has between five and seven states, and the Federal Capital Territory (FCT) of Abuja is included in the North Central zone. Populations range between 19.5mn (estimated in the South East) and 42.6mn (estimated in the North West).

A Diverse Country On A Diverse Continent
Nigeria - Map of Six Geopolitical Zones And Their Constituent States

Using estimated weightings of state contribution to GDP , based in part on NBS statistics , combined with our own GDP forecasts, we have estimated GDP by state. Nigeria is Africa's largest exporter of crude oil, so it should come as no surprise that the country's GDP is concentrated in the oil-rich southern states. Lagos, the country's economic capital and one of the fastest-growing urban areas on the continent, contributes significantly to GDP through its commercial and financial activities, shipping (Port Lagos is one of the busiest in Africa), and cultural exports including 'Nollywood', the moniker for Nigerian filmmaking. The north is largely dominated by agriculture, although there are significant areas of manufacturing, notably in Kano State, home of the country's second largest city (also called Kano) , and Kogi State (where Dangote has installed one of the largest cement factories in Africa) .

The three northern zones account for nearly 80% of Nigeria's land mass, and 53% of its population, but generate an estimated 35% of total economic output. South West (home of Lagos) and South South (home of some of the richest oil states) alone contribute over half of Nigeria' s total GDP . Based on our projections of population growth since the 2006 national census, we have also calculated population and per capita GDP. Per capita GDP varies from an estimated low of US$546 in Jigawa State to a high of US$6, 493 in Abuja FCT (due largely to extremely high public sector salaries in the capital). Lagos State per capita GDP is just under US$3,000 (although the local government's estimates for GDP are considerably higher than our estimates), while Kano State stands at just over US$1,000.

Southern Strength
Nigeria - Geopolitical Zones' Contribution To Total (GDP, Population, Area)

A Varied Consumer Market

Firms looking to tap into Nigeria's consumer market should take note of these wide disparities in GDP, but should look deeper still. In 2012, the NBS released the 2009/2010 Consumption Report, which reported on household consumption patterns at the sub-national level for that fiscal year. We have combined this data with our own estimates for private consumption to estimate updated figures. While state GDP is correlated with consumption, oil-producing states such as Delta, Rivers, and Abia consume relatively less than their high economic output would initially suggest, since much of the wealth produced in these states is spent elsewhere. Alternatively, large northern states with huge populations but few natural resources like Kano and Kaduna punch above their economic weight in terms of consumption, as illustrated in the accompanying chart.

Oil States Have Highest GDP To Consumption Ratios
Nigeria - Percentage Contribution Of GDP Versus Consumption

Overall, the highest household consumption in the six geopolitical zones comes from the South West and North West, which are estimated at US$49.5bn and US$43.5 bn per year (in 2012) respectively. The South West's position is based on a combination of a large population ( with an estimated 32.9mn people, it is the second lar gest zone in the country) and relatively higher wealth ( per capita GDP is estimated at about US$ 2,300 , compared to an estimated country average of about US$1,750 ).

The North West's second-place position is due more exclusively to its size , as it is the largest zone in Nigeria b y population (at 42.6mn people) while being relatively poor, with per capita GDP at just under US$1,000, the second lowest in the country. As would be expected in a relatively poorer zone, private consumption in the North West tends to be much more weighted towards staple goods, with 73.0% of t otal consumption going to food. Consumption patterns suggest more discretionary spending in the south, particularly in the South West, where food accounts for 53.7% of total consumption.

Western Zones Lead In Consumption
Nigeria - Estimated 2012 Consumption By Geopolitical Zones, Food & Non Food, US$bn

In terms of the market for higher-valued, non-staple consumer goods, the s outh's advantage is further illustrated by the USAID DHS question posed over the course of three surveys conducted from 1999 to 2008, of whether respondents own a television. While the figure rose significantly across the whole country over this period (with 39.3% of all respondents responding in the affirmative in the 2008 survey , compared to only 25.6% in 199 9), there remains a substantial, widening disparity across geopolitical zones. In 2008 t he southern average was 52.1%, compared to the northern average of 22.6% , increasing from 1999 averages of 33.8% and 15.7% respectively . In 2008, the latest completed survey, television ownership varied from only 14.9% of respondents in the North East, to 59.2% in the South West . While we expect the situation to improve gradually in the northern zones, BMI expects growth in consumer-facing industries such as retail and most services to remain strongest in the south.

Disposable Income A Southern Comfort
Nigeria - Percentage of Households With A Television By Geopolitical Zone

The Development Divide

Part of the reason for the south's continued outperformance is its 'head start' in terms of social and economic development, as the north has long lacked the physical and social infrastructure and human capital which it needs in order to catch up. The government of Nigeria has often acknowledged this, placing a high priority on developing the northern states and pledging increasing funding to help turn the tide. Nevertheless, at present there remain wide gaps on almost every front, including the Millennium Development Goals Indicators set by the United Nations as global benchmarks for poverty alleviation and economic development.

According to USAID and NBS data, the three northern zones underperform the three southern zones in critical categories of education (measured in the chart below by adult literacy), health (measured by infant mortality), infrastructure (measured in access to electricity) and overall poverty (as defined by the NBS).

Socioeconomic Development Disparities
Nigeria - Selected Development Indicators By Geopolitical Zone

It should be noted that while the southern states fare better than their northern counterparts, there remains significant room for improvement all round. Nigeria's lack of adequate power infrastructure, to give one example, has plagued Nigerian manufacturing and other sectors for years, hamstringing effective diversification strategies even in the southern states. The fact that even in the best-performing geopolitical zone, the South East, nearly 30% of households reported not having access to electricity in the 2008 DHS survey, illustrates the scope of the nationwide challenge. Similarly, although much of Nigeria's wealth is found in the south, more than half of the population there remains poor according to NBS criteria .

Security And Economy Inextricably Linked

The variation in economic opportunity across Nigeria, along with the variety of demographic profiles found in different regions , sheds some light on long-term security in the country. Below is a chart showing the average unemployment in the six geopolitical zones f rom 2007 to 2010 according to the NBS. We believe all the rates, which range between 12.2% and 26.2%, are likely underestimates, and we estimate that total unemployment in Nigeria is around 24%.

However, they offer a reasonable guideline as to the relative joblessness across the country, and BMI believes it unlikely to be a coincidence that the two geopolitical zones with the highest unemployment rates also happen to be the two zones with the most prevalent cases of persistent unrest. The zones of the South South (with unemployment of 26.2%) and the North East (with 21.7%) include the home bases of the militant groups Movement for the Emancipation of the Niger Delta and Boko Haram, respectively. Effectively pacifying these violent movements will require more than law enforcement (although this is also crucial); it will necessitate successfully addressing joblessness and disaffe ction among Nigerians, particularly the country's huge young population entering the workforce. With fertility rates around seven children per woman in the North West and North East (and averaging 5.7 children in the country as a whole), this difficult challenge will stretch long into the future, but may well be the lin chpin of Nigerian stability, economic growth and sustainable development.

Unemployment Fuelling Unrest?
Nigeria - Average Unemployment By Geopolitical Zone, 2007-2010
Populations, GDP, And GDP Per Capita At The State & Zone Level
Zone State Population, mn GDP, US$bn GDP per capita, US$
Source: BMI, National Bureau of Statistics
North Central Abuja 1.7 10.8 6493.9
Benue 5.0 6.5 1286.3
Kogi 3.9 4.4 1116.5
Kwara 2.8 3.6 1294.4
Nasarawa 2.2 2.9 1288.6
Niger 4.7 5.7 1209.7
Plateau 3.8 4.9 1281.2
North Central Total 24.2 38.8 1603.4
North East Adamawa 3.8 4.3 1148.9
Bauchi 5.5 4.5 807.4
Borno 4.9 4.9 988.9
Gombe 2.8 2.4 842.9
Taraba 2.7 3.2 1179.9
Yobe 2.8 1.9 690.5
North East Total 22.5 21.2 939.6
North West Jigawa 5.2 2.8 546.1
Kaduna 7.3 9.8 1347.4
Kano 11.2 11.7 1050.8
Katsina 6.9 5.7 827.4
Kebbi 3.9 3.1 805.3
Sokoto 4.4 4.6 1037.2
Zamfara 3.9 3.9 1002.3
North West Total 42.6 41.6 975.8
South East Abia 3.4 17.7 5235.0
Anambra 5.0 6.4 1290.5
Ebonyi 2.6 2.6 1000.3
Enugu 3.9 4.2 1072.3
Imo 4.7 13.4 2884.3
South East Total 19.5 44.3 2274.8
South South Akwa Ibom 4.6 10.6 2283.6
Bayelsa 2.0 4.1 2028.2
Cross River 3.4 8.8 2569.1
Delta 4.9 15.8 3246.4
Edo 3.8 11.2 2930.7
Rivers 6.2 19.9 3231.0
South South Total 25.0 70.5 2823.9
South West Ekiti 2.8 2.7 946.5
Lagos 10.8 31.9 2945.6
Ogun 4.5 9.9 2224.8
Ondo 4.1 8.0 1937.9
Osun 4.1 6.9 1698.3
Oyo 6.6 15.2 2302.5
South West Total 32.9 74.5 2266.1
Country Total 166.6 290.8 1745.2
This article is tagged to:
Sector: Country Risk
Geography: Nigeria, Nigeria

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