February 2020 Nigeria’s Digital Economy: A Diagnostic Report and Recommendations for Future Growth Have you ever wondered how a country that boasts the largest For each of the five pillars, the report highlights the importance mobile market in Sub-Saharan Africa still ranks only 143rd of of each pillar for Nigeria, presents diagnostic findings as well 1761 countries in a recent ICT Development Index? Or, how as recommendations and targets for achieving Nigeria’s digital a country with a household broadband penetration rate of economy goals (see Figure 1). Some highlights from the report only 0.04% can still manage to score an impressive rank of 2nd include: place in Africa in terms of e-commerce?2 These surprising and conflicting features of Nigeria’s digital economy are indicative of • Digital Infrastructure: Developing digital infrastructure is not only their immense potential in the digital sphere, but also one of Nigeria’s biggest priorities. Broadband connectivity is the significant amount of progress that remains to fully reap the essential to enabling digital transformation, and regulatory benefits of a national digital transformation. efforts are key to accelerating connectivity in rural and underserved areas. Some of these regulatory changes Nigeria currently boasts the largest mobile market in Sub- include enabling effective infrastructure sharing, facilitating Saharan Africa, a thriving e-commerce sector, and has made market mechanisms to promote efficient spectrum tremendous strides towards getting citizens digitally connected allocation, strengthening coordination between agencies over the past decade. However, there are still millions of governing ICT, reducing excise duties on digital devices, Nigerians and businesses that remain excluded from the digital and introducing grants or zero-interest loans for devices economy, which if left unresolved will significantly exacerbate purchased by marginalized segments of the population. social inequality between digital haves and have-nots, and further marginalize these segments of the population. • Digital Platforms: While Nigeria already boasts a healthy e-commerce environment and the government recently created a central portal to improve the delivery and quality The Five Pillars of a Digital Economy of public services, there is still significant potential for improving the provision of digital public and private sector As part of the Digital Economy for Africa (DE4A) initiative, platforms. Recommendations include improving the legal the World Bank (WB) has developed a series of diagnostic framework and streamlining coordination between different reports to provide a comprehensive review of progress made entities responsible for developing Nigeria’s ICT sector, towards digital economic development, beginning with Nigeria upgrading skills of public sector employees, providing – Africa’s largest economy and most populous country. To better support to ICT hubs that can deliver digital solutions and understand these opportunities and challenges, the report used a create jobs, and clarifying the tax regime around digital five-pillar approach that includes assessments of Nigeria’s digital platforms to support the private sector. infrastructure, digital platforms, digital financial services, digital entrepreneurship, and digital skills – key foundational elements • Digital Financial Services: Whereas in other African of a digital economy. markets, financial inclusion would mostly be driven by 1 ITU ICT Development Index (2017). 2 UNCTAD B2C E-Commerce Index, Focus on Africa (2018). WORLDBANK.ORG/DIGITALDEVELOPMENT Digital Financial Services (DFS), in Nigeria the huge framework for private equity investment, exploring avenues potential of DFS still remains untapped. In order to reap to de-risk and scale up early-stage funding for digital the benefits from a DFS ecosystem, the report recommends entrepreneurs, assessing firm-level barriers to adoption Nigeria create an enabling regulatory framework for DFS, of digital technologies, developing and monitoring an including implementation of the guidelines for licensing evaluation framework for assessing local innovation hubs, and regulation of payment service banks, revision of agent and fostering collaborations between digital entrepreneurs, network regulations and development of binding guidelines innovation hubs, investors, the private sector, academia, and under the financial consumer protection framework. Other government. important steps which are expected to give critical impulses for the development of DFS include the digitization of • Digital Skills: The report recommends Nigeria explore all government payments, enhancements of the credit innovative ways of including digital skills in the educational infrastructure and infrastructure for cross border payments curriculum, improve teacher training programs around and collaboration of key stakeholders in fostering digital digital skillsets, implement post-school curriculum reform, and financial literacy to support responsible uptake and improve awareness of the virtual economy, including usage of DFS. microwork and e-lancing initiatives, create a centralized digital database of skills programs to track digital training • Digital Entrepreneurship: Given its large, young, and provisions, and focus on avoiding any gender gaps in digital entrepreneurial population, digital entrepreneurship skills training. has the potential to become an engine of economic transformation in Nigeria, help diversify the economy If you want to find out more about specific actionable steps for beyond oil and gas, and set the country on a new growth how Nigeria can leverage the opportunities of advancing its trajectory. Recommendations include policy reforms to digital dividends, you will gain plenty of insight from reading the encourage digital entrepreneurship: updating the legal full diagnostic report3 on Nigeria’s digital economy. Figure 1 - Digital transformation targets across the pillars DIGITAL DIGITAL DIGITAL DIGITAL DIGITAL INFRASTRUCTURE PLATFORMS FINANCIAL SERVICES ENTREPRENEURSHIP SKILLS Universal internet Doubling online Universal access to Tripling the All 15 year old network coverage services. Index rating digital financial number of new students with basic for all governments services digitally enabled digital skills Affordable internet for businesses created compentencies all at less than 2% of All individuals are Africa-wide payments annually GNI per capita able to prove their infrastructure 100,000 graduates identity digitally platforms in place Financing for in advanced digital Interim milestone: Venture Capital to skills programs doubling broadband At least 50% of the reach 25% of GDP annually connectivity by 2021 population regularly uses the internet to access government or commercial services 3 The full report is available here: http://documents.worldbank.org/curated/en/387871574812599817/pdf/Nigeria-Digital-Economy-Diagnostic-Report.pdf The report was prepared with support from The Digital Development Partnership (DDP), The International Finance Corporation’s Creating Markets Access Window, The Bill and Melinda Gates Foundation and The Governance Partnership Facility. The report was led by a team from The World Bank Group. WITH SUPPORT FROM: