Cementing Connections

How have you intervened in Nigeria’s power sector, and are you investing in the country’s northeast?

In my first meeting with President Buhari, he specifically said he would like us to support the northern regions of Nigeria, and we have done that. The work there has been difficult. Nigeria, of course, has suffered from the drop in oil prices. Things are just now getting better, but the conversation we need to have with Nigeria is investment in human capital. The percentage of GDP that Nigeria spends on healthcare is less than 1%. Despite the fact that there is so much turbulence in the northern part of the country, not to mention the hit taken from the drop in oil prices, Nigeria has to think ahead by investing in its people and in the things that will allow it to thrive. A rapidly growing, private sector-led economy is what the country has to focus on right now. It cannot rely solely on oil prices going back up. It has to think: what are going to be the sources of growth in the future for Nigeria, in what will surely be a more digitalized economy? And this is true for most of Africa. If you look at the numbers in terms of how successfully African countries have invested in human capital versus other regions, there is a real issue. And so, over this next year, not only in Nigeria but in all of Africa, we are going to focus on accelerating investments in people—in human capital—including health, education, and social protection so that Africa can prepare itself for the next phase in economic development. One of the real questions that we all have is regarding our traditional notions of economic growth, which include agriculture, light industry, and heavy industry, and how many countries in Africa will actually experience that. We must ask ourselves whether we need to consider another kind of path to economic growth focused on SMEs and entrepreneurship as they have in other parts of the world. However, better health and education outcomes will be critical no matter what the global economy looks like. Therefore, we support the recovery and peace building in the north and hope that as commodity prices stabilize, oil prices come back up and the economy will grow a bit more; however, we must focus on what the drivers of growth in the future will be and on mobilizing domestic revenues for investments in people.

What kind of support is the World Bank giving to start-ups and young entrepreneurs?

It is difficult for major institutions such as ours to give the relatively small amounts of money that are required for SMEs. That is why we are working with companies like Alibaba in China, which has developed a system where within five seconds it can provide loans to SMEs for up to USD160,000. And it does that solely based on online activity, which for Alibaba is a better measure of credit worthiness than the traditional process called “know your customer” (KYC). We are looking to see if we can utilize some of these methods, these rapid disbursements of capital to SMEs, in Africa. Right now, the answer is not yet, because we do not have enough information on online behavior. Jack Ma, the CEO of Alibaba, recently visited Kenya because it perhaps has the most information on people’s online behavior, as 98% of Kenyans do some form of financial transactions online. Within Africa, we have to be much more creative. We are looking at future drivers of growth, and whether they will be more or less traditional. Then we are looking at innovative ways of moving capital quickly and efficiently to people who are going to start promising businesses.