Friday, October 04, 2013 8.28 AM / FDC

Nigeria ranked 120th out of 148 countries on the Global Competitiveness Index (GCI) 2013-2014, representing a five-place drop from 115th position last year. With the ongoing efforts to diversify the economy from oil dependency, the increase in foreign direct investments, and continuous reforms, Nigeria is still ranked low on the GCI.

The GCI was introduced in 2004 as a gauge of how productively a country uses its resources to provide high levels of prosperity to its citizens. The GCI measures the set of institutions, policies, and factors that determine levels of economic prosperity of a country. There are three stages of development: factor-driven, efficiency-driven and innovation-driven. Each stage reflects a growing degree of complexity in the development of the economy. Consider-ing higher income and improvement of labor productivity, the GCI scores are calculated on 12 pillars of competitiveness within each of the three stages. Factor-driven stage: institutions, infrastructure, macroeconomic environment, health, and primary education. Efficiency-driven stage: higher education and training, goods market efficiency, labor market efficiency, financial market development, technological readiness, market size. Innovation-driven: business sophistication and innovation.

Nigeria falls in the factor-driven stage as a function of its low level of economic development. This ranking places Nigeria in the poorest pool of countries amongst nations like Bangladesh, Liberia, Mali, Uganda and Yemen. The top 10 economies share characteristics of innovation and strong institutional frameworks and remain dominated by European and a few Asian countries.

The most competitive of the top 10 countries being: Switzerland – for the fifth year, Finland, Germany, Sweden, the Netherlands, and the United Kingdom. Singapore maintains its place as the second-most competitive economy in the world, and Hong Kong and Japan in 7th and 9th place.

Nigeria’s relatively large market size (32nd out of 148 countries) continues to be a positive and important factor considered in its ranking. Nigeria’s large population is said to be “potential for sig-nificant economies of scale and is an important factor for attracting investments”. Nigeria’s efficient labor market and the steady recovery of the financial market since 2009 were also noted as benefiting factors to the countries ranking.

The index identified the following threats to Nigeria’s competitive-ness ranking: weak institutions (129th) with insufficiently protected property rights; high corruption and a poor security situation (142nd); inadequate infrastructure (135th); and poor health-care and primary education (146th). In addition, a low rate of ICT penetration prevents productivity enhancements within the country.

Within the region, Mauritius ranked the most competitive country, moving up 9 positions to 45th place above South Africa (53rd). The country benefits from strong and transparent public institutions (39th) with clear property rights, strong judicial independence, an efficient government (29th), and well developed infrastructure (50th) amongst other factors.

 Despite relatively strong growth in recent years, Nigeria’s economy remains overly reliant on the oil revenues and remains vulnerable to oil price instability. In order to gain long-term competitiveness, Nigeria must place greater emphasis on drivers of productivity and competitiveness and diversify away from the oil sector.

Source: Proshare