Business Environment: Contrasting Nigeria and Singapore Comparing the Real PerCapita GDP of Singapore and NIgeria Singapore Nigeria Emerging Markets

Business Environment: Contrasting Nigeria and Singapore The two countries gained there independence in the 1960s, and both embarked on their different journeys towards economic development. The sum total of factors that influence the consumer behaviors of individuals and firms such as Income, wealth, inflation rates, interest rates and productivity can be described as the business environment of such country. Business environment comprises of both the allocation of resources and the totality of economic factors. While both countries had independence around the same time, with both having a high percentage of its workforce unemployed and below poverty line at independence. Economic indicators now show a different story.

Comparing the Real PerCapita GDP of Singapore and NIgeria $60,000

Real GDP

$50,000 $40,000 $30,000 $20,000 $10,000

1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

$0

Year Singapore

Nigeria

Emerging Markets

Figure (a) Trend of Real Per GDP of Singapore and Nigeria. The above graph shows the growth in real per capita GDP in Singapore and depicts the situation of inadequate growth in Nigeria. From Independence till now, Singapore has actually moved from the category of low income economy to a high income economy while Nigeria just barely made it to a low middle income economy. A free-market economy has helped the economy of Singapore to better allocate resources and also assisted entrepreneurs to better utilize the factors of production effectively. The 2015 Index of Economic Freedom ranked Singapore has the 2nd freest of the 189 countries ranked. Singapore is ranked high in the characteristics of a free market such as respect for the rule of law, freedom

from corruption, monetary freedom, fiscal freedom, business freedom, labor freedom, investment freedom etc. In contrast Nigeria still runs a highly regulated mixed-economy, with a lot of policy averse to competition. Nigeria is ranked as the 120th freest economy, far below the world average and categorized as a mostly unfree economy. There is a high level of corruption resulting from high government spending and a lip service to the rule of law. Although, as of recent efforts have been taken by the Nigerian government to increase accountability and reduce corruption. Transparency International in its 2014 Corruption Perception Index ranks Nigeria to be 136th out of 175 surveyed country, with a score of fighting corruption of 27/100. Singapore on the other hand is ranked 7th out of 175 and has a score of 84/100 in handling corruption.

Economic Freedom Index 100 90 80 70 60 50 40 30 20 10 0 2011

2012 Singapore

2013 Nigeria

Free Economies

2014

2015

World Average

Figure (b) a chart of Economic Freedom Index by The Heritage Foundation and Wall Street Journal. A chart comparing the market freedom of both Singapore and Nigeria to the other countries ranked as free economies. The World Bank uses a set of Macro-economic indicators, which includes statistics like unemployment rate, GDP and inflations rate, these indicate the well-being of an economy. The World Bank uses the Income level of a countries economy to rank the economy on the basis of

economic growth and development. Singapore is able to maintain growth in its Gross Domestic Product (GDP) with an effective monetary and fiscal policy. Singapore focuses its fiscal policy on economic growth by using by providing a corruption free and stable environment for the success of private competitive entities. Government expenditures in Singapore is focused on shifting the Long run Aggregate supply by focusing on incentives for saving, investment and a tax rate that enables enterprise. With this focus, Singapore was able to have budgetary surplus without incurring foreign debts while also maintaining a high savings and investment drive. With increase in savings and foreign reserves comes a high Foreign Direct Investment (FDI) and a reduction in unemployment rate. Singapore also have an independent monetary policy that helps it to maintain stability in the price level and confidence in the local currency. Over the years Singapore is able to maintain an average inflation rate that is less than 2%. Recently, Nigeria has been able to show growth potential in its income level. Although it is still considered an emerging market. Large size of government and corruption has hindered its fiscal policy. Nigeria’s fiscal policy is in effective and is mostly centered on income distribution and less incentives for investors. Effect of Nigeria’s expenditure on infrastructure is minimal due to corruption. Nigeria has always have a budget deficit, after recent effort to write off foreign debts was successful, fiscal authorities has pushed towards reducing counter-cyclical policies and reducing deficits. Confidence in the local currency is low due to the economies dependent on fluctuating oil prices and monetary policies though contractionary are ineffective due to a high dependence on oil exports. Efforts to diversify the economy and revitalize the manufacturing industry has started to show potentials with an average growth rate of 6-8%. Nigeria’s ability to continue to attract FDI is affected by regulatory constraints and security risks, there have been few new investments in Nigeria’s oil and gas Industry as shown in figure (c) below.

Gov't

Country

Popul

GDP

GD

5

GDP

Unem

Infl

FDI

Public

Expendit

ation

(Billions,

P

Yea

per

ploym

atio

Inflow

Debt (%

ure % of

(Milli

PPP)

Gro r

Capita

ent

n

(Millions) of GDP)

GDP

ons)

wth

GD

(PPP)

(%)

(%)

Rat

P

e

Gro

$12,22

6.6

6.2

64,045.3

66.3

5.9

1.8

20,258.2

12.2

(%) wth Rat e (%) 40.4

Brazil

198.3

$2,423.3

2.3

2.6

1 23.6

Chile

17.6

$334.8

4.2

4.0

$19,06 7

24.8

China

1360.

$13,395.

8

4

84.2

32.7

Egypt

44.7

Germany 80.8

7.7

8.9

$9,844

4.6

2.6

123,911.0

22.4

$553.6

2.1

3.2

$6,579

12.7

6.9

5,553.0

89.2

$3,232.5

0.5

0.7

$40,00

5.3

1.6

26,720.8

78.1

3.3

4.3

76,632.8

0.5

7 18.5

Hong

7.2

$381.9

2.9

2.7

Kong 26.9

India

$52,72 2

1243.

$5,069.2

4.4

6.9

$4,077

3.7

9.5

28,199.4

66.7

$4,698.8

1.5

0.3

$36,89

4.1

0.4

2,303.7

243.2

3.2

2.1

12,305.7

58.2

3 42.0

Japan

127.3

9 29.5

Malaysia 29.6

$525.7

4.7

4.2

$17,74 8

27.1

Mexico

118.4

$1,842.6

1.1

1.8

$15,56

5.0

3.8

38,285.7

46.5

3 28.2

Nigeria

169.3

$479.3

6.3

7.0

$2,831

7.5

8.5

5,609.0

19.4

37.5

Russia

142.9

$2,556.2

1.3

1.0

$17,88

5.8

6.8

79,262.0

13.4

3.1

2.4

63,772.3

103.8

25.3

5.8

8,187.9

45.2

4.1

0.8

3,688.0

41.0

9.9

7.5

12,866.0

35.8

7.5

2.6

37,100.9

90.1

7.5

1.5

187,528.0

104.5

4 14.4

Singapor

5.4

$348.7

4.1

5.2

e 32.6

South

4 53.0

$596.5

1.9

1.9

Africa 20.7

Taiwan

$64,58

$11,25 9

23.4

$929.5

2.1

3.3

$39,76 7

37.6

Turkey

76.5

$1,174.2

4.3

3.8

$15,35 3

48.2

United

64.1

$2,390.9

1.8

-0.1

Kingdo

$37,30 7

m 40.1

United States

316.4

$16,799.

1.9

1.2

7

$53,10 1

Figure (c) shows a set of 2014 Macroeconomic indicators for some selected countries. Source The Heritage Foundation and Wall Street Journal.

Change in Inflation Rate per year 120 100

Inflation Rate %

80 60 40 20 0 -20

Year Singapore

Nigeria

Figure (d) shows a change in inflation rate per year. Source World Bank Data The figure above further shows the instability in the price level of Nigeria compared with Singapore. Economists measure the effectiveness of an economy by the stability of prices, growth in income level (GDP) and low unemployment rate. Nigeria’s economy is therefore less effective with instable price level Inflation of 8.5%, and a relatively high unemployment rate of greater than 7%. With a high percentage of its work force less skilled and working in low productive agricultural sector, Nigeria has about 60% of its population below the poverty line. Nigeria is unable to grow its services sector because of its inadequate infrastructure such as electricity and its low human capital development. In World Bank’s Doing Business 2015 index which measures the ease of doing business has compared with ‘best practices’ in the world, Singapore is ranked 1st while Nigeria is ranked 170th . The ease of doing business tries to measure if Government’s regulatory policies are conducive for business development. While the Regulatory policies in Singapore helps business development, the major hindrance to business development in Nigeria is the difficulty in “getting electricity”, “registering property”, “paying taxes” and “trading across border”.

In Conclusion, to have a business environment that is conducive for growth like that of Singapore’s, Nigeria needs a change in government regulations, improvement in fiscal policy, diversification of its economy, adoption of a market economy and a government investment in infrastructures and human capital development. Reference CENTRAL INTELLIGENCE AGENCY (2015), The World Factbook [Online] Available from www.cia.gov/Library [Accessed: 27/05/2015] DOING BUSINESS 2015 (2015), Doing Business in Nigeria [Online] Available from http://www.doingbusiness.org/data [Accessed: 27/05/2015] THE HERITAGE FOUNDATION AND WALL STREET JOURNAL (2015), 2015 Index of Economic Freedom [Online] Available From http://www.heritage.org/index [Accessed: 27/05/2015] TRANSPARENCY INTERNATIONAL (2015) Transparency international-Nigeria [Online] Available from https://www.transparency.org/country [Accessed: 27/05/2015] MONETARY AUTHORITY OF SINGAPORE (2015) The Singapore Economy [Online] Available from http://www.sgs.gov.sg/en/ [Accessed: 27/05/2015] WORLDBANK (2015) Inflation, GDP deflator (annual %) Available from http://data.worldbank.org/indicator