Tech as the Leading Sector in Nigeria's Economy

Throughout time, there has always been that single material that changed the trajectory of a nation’s economy as well as the lives of its people for generations. Gold created and destroyed countries. Agriculture gave the poor something to live for. And in places like Nigeria, oil was heaven’s blessing.

When oil began commercial production in Nigeria in 1958, the economy experienced an astronomic spike in exports, GDP, and annual revenue. Jobs were created, and we became one of the fastest growing economies in the world. For several decades, however, while oil has been the main part of the country’s exports, the economy hasn’t lived up to expectations. As a result, Nigerians are flocking towards something that could provide them with as much revenue and opportunities as oil did back in the 60s, and tech might just be that thing.

In this article, we will dive into the possibility of tech becoming the leading creator of employment, wealth, and revenue, as well as the possibility of tech becoming a top sector in Nigeria’s economy.

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Before the discovery of oil, the Nigerian economy thrived on its extraordinary ability to sustain agriculture. Agriculture accounted for the country’s exports, government revenue, and GDP. But after the Second World War, the world was transforming into a giant machine. A machine that would be powered by the black gold sitting under Nigeria’s carpet.

Oil in Nigeria was first discovered in 1956, but commercial production began in 1958, and by the end of the 20th century, oil accounted for 98% of export earnings, 83% of federal government revenue, and more than 14% of GDP.

For a country with over a hundred million citizens at the time, that was a lot of money. It is no surprise that the economy became relentlessly dependent on oil and gas exports. When the earth delivers a cash cow of that size, you hold on tightly to it.

Nigerians, however, seek to offset the country’s dependence on oil thanks to the stagnation of the economy, lack of employment, and monopoly of opportunities by the elites. The people desperately need another source of revenue and employment to improve their living conditions. This they found by riding the wind of the global economy.

The international economy is more globalized today than it was in the late 1950s and early 1960s. As time passes, it is drawn closer and closer together, owing to the internet, which provides us with new ideas, accessibility, and opportunity. And this is where technology as a sector can show its colors.

Tech is simply a short form of the word "technology." However, Tech as a sector refers to a group of businesses working in the research, development, and distribution of technology-based goods or services. It is a sector much like the health sector, the oil and gas sector, or the education sector. It comprises businesses and services tailored toward the development and distribution of one thing. That one thing being any and everything technology related.

As a sector, tech overcomes the majority of the restraints that other industries encounter. Distance is not an issue. Land is not an issue. Natural resources are not an issue. Most importantly, the entry barrier is extremely low.

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Technology is not limited to a single country or region. It thrives on the full internet globalization of the world's economy by bringing together the best-skilled workers from all over the world to create the most effective products. You don't have to live in the United States to design a product that will sell there. Instead of gathering metal and wood to make a product, the most precious raw material is information.

The best part is that you do not have to pay enormous sums of money in university tuition, nor do you have to spend several years obtaining various certifications before you are prepared for a job. Skills and information can be obtained with minimal effort and for next to nothing.

So what does this mean for a Nigerian?

Simply put, there is an area where Nigerian tenacity can be utilized to improve opportunities for finding work and earning money, and our humble beginnings and low-quality education will not hold us back in this field. Many Nigerians have taken advantage of this over the previous decade.

However, for tech to become the new oil, it has to achieve similar economic feats as oil did in the early years of its commercial production, and in the last decade, tech as a sector may not have generated as much as oil did in its first decade, but in Nigeria, it has achieved rather enough to be compared to the oil sector’s emergent years.

The nature of Nigeria’s economy makes it one of the most successful environments for tech startup companies in Africa. The country is one of Africa’s "big four" startup ecosystems alongside Egypt, Kenya, and South Africa, according to Disrupt Africa’s The Nigerian Start Ecosystem report. Between 2015 and 2022, 383 out of 481 tech startups in the country have raised a combined $ 2 billion—approximately 1 trillion naira—and as of August 2022, 107 Nigerian startups accounted for about a third of the continent’s funded startups in that year. The country’s startups made around $1.2 billion in that same year, which is a lot of money compared to other non-oil sectors.

In an article on tech driving Nigeria’s GDP, Techcabal stated that tech is currently the major driver of Nigeria’s GDP as it contributed 18.44% of the country’s gross domestic product in the second quarter of 2022, as opposed to the 6.55% contributed by oil in the same quarter of the same year.

This means that tech is becoming the most valued service the country has to offer, and Nigerians are offering high-quality tech-based goods and services, as seen by the country's employment rate in the tech industry.

When looking at the startups in Nigeria, you’ll notice that the average startup has 40 employees. If you multiply that figure by the number of startups in the country, you'll find that Nigerian startups employ a total of 19,334 individuals. The figures are astounding when compared to the 65,000 direct jobs created in the oil and gas sector, especially given that the tech sector is still in its early stages.

Is Tech the New Oil?

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Tech holds great promise in Nigeria, not only monetarily but also in terms of increasing the general quality of life. Fintech, medtech, edtech, logistics, and e-commerce are becoming increasingly helpful to society as we become more accustomed to them. These niches also provide support to other sectors of the economy while breaking their constraints.

Logistics, for example, makes transportation more convenient and communication between clients and transporters more efficient. As a result, cross-country trading has become more feasible and effective. Any trader can easily have access to a nationwide distribution network. People are now working to promote trade across the country, while competent professionals apply their skills to develop the technology-based niche.

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A better example of this phenomenon is the fintech niche. To put it simply, fintech is a part of the tech sector that makes computer programs and other technology to support banking and financial services.

Nigerians are accustomed to simple financial services such as seamless bank-to-bank transfers, cashless payments, and so on. Fintech companies work relentlessly to make these services even more convenient while also delivering more financial services. They fix issues such as network and customer service issues while also creating a lot of money and jobs for citizens. Flutterwave alone is worth roughly $3 billion, and they raised $250 million in Series D capital last year. Furthermore, during the cashless fiasco a few months ago, we saw how effective fintech companies like PalmPay and Opay can be.

These tech companies thrive by supporting other industries and creating a dependence from these industries on their products. The same way oil did during industrialization. Engines, cars, and people were all dependent on oil, and as a result, the economy was driven by its production and sales.

Nigeria's economy is still heavily reliant on oil in every aspect imaginable. As a result, tech is not directly replacing it. However, tech is rapidly creating a similar level of reliance. A reliance that will strengthen its economic position.

Finally, while technology may not replace oil as a sector, it has the potential to surpass it as a primary source of income and a major driver of the economy. The sector's potential is obvious, and it should be capitalized on not just by job seekers, but also by the government in order to diversify the economy.

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