SUMMARY OF WORLD ECONOMIC FORUM: GLOBAL COMPETITIVENESS INDEXBackgroundThe World Economic Forum’s: Global Competitiveness Report (GCR), published since 1979, is widely recognised as the world’s most comprehensive data source on cross­country comparison of factors affecting economic competitiveness and growth . The GCR ranks 1

countries based on the Global Competitiveness Index (GCI).The GCI outlines pillars that capture the different elements that drive productivity and impact on a nation's competitiveness. Data compiled to measure the factors within each pillar of the GCI is a combination of hard (quantitative) data from public sources (Education expenditure, Infant mortality rate, Government debt) and an Executive Opinion Survey that provides data on more qualitative issues (Public trust of politicians, Favouritism in decision making of government officials, Efficiency of legal framework) that aren't measured by conventional hard data. The Executive Opinion Survey samples business leaders from all the countries on the index. The GCI has 12 distinct pillars to capture productivity and competitiveness drivers. They are divided into 3 sub index groups that isolate relevant drivers to a country’s stage of development (Figure 1). Each pillar represents an aggregation of the different factors relevant to competitiveness within that specified category.

Figure 1: Global competitiveness index framework.

Factor driven countries are typically characterised by a reliance on factor endowments, primary unskilled labour and natural mineral resources for their competitive advantage. As a country’s economy becomes increasingly complex they transit to the efficiency driven stage. They begin to develop more efficient production processes and increase product quality. Further development will lead to an economy characterised by higher wages and the associated increase in standard of living sustained by development of new and unique products using sophisticated and innovative production methods.

1World Economic Forum, www.weforum.org/gcr

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Table 1: Sub Index weights and income thresholds for stages of development.

Failure to push on to the next level of development is punished by the weight assigned to pillars .2

Nigeria’s Position on the IndexThe table below shows a breakdown of the components of each pillar and Nigeria performance from 2009 to the latest report.12 PILLARS OF COMPETITIVENESS 09/10 10/11 11/12 12/13 13/14

GCI Ranking 110 135 132 118 120

BASIC REQUIREMENTS 131 145 145 134 136

Institution 114 129 116 120 129

Infrastructure 141 143 141 134 135

Macroeconomic Stability 22 103 126 40 46

Health and Primary education 147 146 146 146 146

EFFICIENCY ENHANCERS 86 89 83 80 83

Higher Education and training 126 126 119 116 120

Goods market efficiency 69 93 76 90 93

Labour Efficiency 68 79 73 57 52

Financial Market Sophistication 63 89 90 70 66

Technological readiness 112 111 110 115 108

Market Size 47 32 35 34 32

INNOVATION AND SOPHISTICATION FACTORS

78 88 72 75 82

Business Sophistication 77 81 67 67 75

Innovation 81 104 85 80 100

Table 2: Nigeria’s Global Competitiveness Index Positions 2010­2014Source: Global Competitiveness Reports 2009/2010 ­ 2013/2014

2 The groupings in the profiles are based on IMF data, and use the IMF classifications

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Nigeria fell from 115 of 144 in the 2012/13 GCI to 120/148 in the 2013/14 Index . In real terms this 3

represents approximately a 2 place decline when normalised to account for the increased sample size.Nigeria is classified as a factor driven country in the 2013/14 report due to a reliance on mineral resources and a reported GDP per capita of 1631 USD. Factor driven economies represent 28 of the bottom 50 countries on the 2013/14 index. At the 60th position, India is the highest placed factor driven country on the index. Of the 36 countries, Nigeria is the 15th highest ranked factor driven country on the Index. African countries represent 70 percent of factor driven countries . 4

Nigeria ranks 18 of the the 40 African countries on the 2013/2014 index while South Africa is the highest ranking African economy. Nigeria is the 6th highest ranked oil exporting african country on the 2013/2014 index (see table 3).

Overall GCI 2013/14 Basic Requirements EfficiencyEnhancers

Innovation and Sophistication Factors

Country Rank(Score) Rank(Score) Rank(Score) Rank(Score)

Oil Exporters

Tunisia 83 (4.06) 74 (4.52) 88 (3.81) 79 (3.47)

Algeria 100 (3.79) 92 (4.27) 133 (3.18) 143 (2.63)

Libya 108 (3.73) 93 (4.24) 139 (3.11) 141 (2.71)

Gabon 112 (3.7) 100 (4.18) 124 (3.31) 137 (2.78)

Cameroon 115 (3.68) 117 (3.80) 113 (3.52) 96 (3.35)

Nigeria 120 (3.57) 136 (3.40) 83 (3.90) 82 (3.44)

Angola 142 (3.15) 139 (3.35) 143 (2.91) 148 (2.52)

Chad 148 (2.85) 147 (2.95) 146 (2.72) 144 (2.61)

Table 3 : Oil Exporting African countries on the 2013/14 GCI

In terms of the sub index classification, Nigeria performed worse in the basic requirements ranking (136) than in the Efficiency enhancers or Innovation and Sophistication categories where Nigeria placed in the top 100. Nigeria outperforms most of the oil exporting African countries in the Efficiency Enhancers sub index and the Innovation and Sophistication factors sub index (see table 2). As a factor driven economy the weight assigned to the basic requirements sub index negatively impacted on Nigeria’s ranking on the GCI. In 3 of the 4 basic requirements pillars, Nigeria scores particularly low placing in the bottom 20% of countries on the index.

A closer look at Nigeria’s GCR summary between the 2009/10 report and the 2013/14 report

3 Global Competitiveness Reports 2012/13 and 2013/144 Global Competitiveness Report 2013/1014

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reveals a number of recurring themes ;5

Nigeria’s strength lies in its relatively large market size which provides companies with opportunities for economies of scale and sophisticated businesses by regional standards. Poor performances in the 2010/11 and the 2011/12 reports aside, Macroeconomic stability remains Nigeria's best performing pillar in the basic requirements sub­sector. Nigeria consistently performed poorly on the infrastructure metric. This is due to concerns about the protection of property rights, ethics and corruption, undue influence, and government inefficiencies. This means Nigeria is unable to harness latest technologies for productivity enhancements, as demonstrated by low rates of ICT penetration(telephone).Over the period in question, Nigeria has ranked in the bottom 20 percent of the sample from the 2010/11 index to the 2013/14 index. There are intrinsic links amongst the GCI pillars and their component factors.The Higher education and training pillar is indirectly affected by the Health and primary education pillar. This interconnectivity is sometimes captured by the individual factors that make up each pillar and how their weight is distributed. The fixed telephone lines metric is equally weighted between the infrastructure pillar and the Technological readiness pillar. See appendix 1 for a detailed outline of the indicators that make up the 12 pillars.Appendix 2 provides a breakdown of indicators where Nigeria performed particularly poorly i.e. worse than our global rank in that respective year. Nigeria’s position is also benchmarked against the 100th position as we aim to improve 20 places in the next year. In real terms, Nigeria has made gains in the Wastefulness of Government spending, Public trust of Politicians and the Quality of overall metrics.There are a number of factors, measured by hard data, where Nigeria has fallen in real terms on the GCI rankings and the score attained; Diversion of public funds, Favouritism in decision making of Government officials and the Primary education enrolment metric.Nigeria’s Life expectancy measure, from the World Health Organization's (WHO) data, has improved over the period. The Global trend in the life expectancy measure has seen a steady rise over the years . Nigeria has risen only one place in absolute terms on the life expectancy 6

index implying that other countries are improving at a faster rate. The Business cost of terrorism metric is particularly noteworthy given the current climate in the country. Over the period in question Nigeria has dropped into the bottom 10 countries on the index for Business cost of Terrorism. In the absence of up to date data, the GCI utilises the most recently available credible data. Higher quality data will capture improvements and declines more accurately.Looking at the difference in score between Nigeria and the country positioned at 100 of 148 in appendix 2, Wastefulness of Government spending, Public trust of politicians and Quality of overall infrastructure appear to be more within reach than the metrics for Business cost of terrorism and the Quality of electricity supply.

5 Global Competitiveness Report 2008/09 ­ 2013/146 World Health Organisation: Global Health Observatory. http://www.who.int/gho/mortality_burden_disease/life_tables/en/

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Appendix 1The Global Competitiveness Index in Detail: Nigeria 2013/20147

7 Values are on a 1­to­7 scale unless otherwise annotated with an asterisk (*)

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Appendix 2Select number of Nigeria's worst performing factors from the GCI 2013/2014 8 9 10

Pillars 2013/14(Score) 2009/10 (Score) 100th Country (Score) Difference

Institutions

Diversion of Public funds 143 (1.9) 132 (2.3) Guyana (2.7) 0.8

Business cost of Terrorism 142 (2.9) 112 (4.9) Senegal (5.0) 2.1

Favouritism in decision making ofGovernment officials 141 (2.2) 135 (2.3) Kuwait (2.8) 0.6

Business cost of Crime and Violence 136 (2.9) 126 (3.4) Nicaragua (4.1) 1.2

Organised Crime 136 (3.4) 134 (3.8) Tunisia (4.5) 0.9

Irregular payments and bribes 135 (2.6) N/A Liberia (3.4) 0.8

Reliability of Police services 131 (2.9) 131 (2.9) Timor ­ Leste (3.7) 0.8

Ethical behavior of firms 131 (3.2) 116 (3.5) Lesotho (3.7) 0.6

Wastefulness of Government spending 124 (2.4) 134 (2.3) Libya (2.8) 0.4

Public trust of Politicians 121 (2.9) 142 (1.6) Poland (2.4) 0.3

Intellectual property protection 121 (2.8) 98 (3.1) Cameroon (3.2) 0.4

Infrastructure

Fixed telephone lines/ 100 Population* 145 (0.3) 130 (0.9) South Africa (7.9) 7.6

Quality of overall Infrastructure 129 (3.0) 140 (2.4) Cape Verde (3.6) 0.6

Quality of Roads 127 (2.7) 124 (112) Zimbabwe (3.3) 0.6

Quality of Electricity 141 (1.8) 146 (1.5) Kenya (3.8) 2.0

Mobile telephone subscriptions/100 pop* 124 (67.7) N/A Sri Lanka (95.8)

Health and Primary Education

Primary Education Enrollment* 144 (57.6) 140 (63.8) Burundi (89.7) 32.1

Malaria Cases/ 100000 Population* 143 (31118) 145 (42787.5) Bhutan (102.5) 31015.5

Infant Mortality, Death / 1000 live births* 139 (78) 141 (99) Algeria (25.6) 52.4

Life Expectancy (Years)* 137 (51.9) 138 (49) Moldova (69.2) 17.3

HIV Prevalence % of Adult population* 133 (3.7) 132 (3.1) Panama (0.8) 2.9

Business impact of Malaria 127 (3.6) 129 (4.1) South Africa (5.2) 1.6

Higher Education and Training

Secondary education enrollment gross %* 126 (44) 132 (31.9) Honduras (74.0) 30

8 Global Competitiveness report 2013/2014 and 2009/20109 Using the 2013/14 rank(120) as a benchmark10 Score values are on a 1­to­7 scale unless otherwise annotated with an asterisk (*)

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