Business in Algeria vs. Nigeria: Economic Comparison

To support business development and sales managers in assessing which African country to prioritize in their organization’s expansion plan, we developed a tool (kpakpakpa’s Africa Market Potential Index- AMPI) that provides a quick way for managers asses market potential across the African continent.

Our Africa market potential index (AMPI) measures key metrics in critical areas of each country’s economy, social-political landscape, technological adoption, infrastructural developments, and the efficiency of doing business.

kpakpakpa’s AMPI measures the market attractiveness of 48 African countries, across seven pillars. These seven pillars act as key determinants to the short and long-term market potential of each country.

Within each pillar, a set of key indicators have been included with specific weightings to arrive at the overall pillar rank and score. The first two pillars – market size & appeal and macroeconomic resilience – are short-term factors, and account for 40% of the total weighting.

The other five pillars are long-term factors and this account for the remaining 60% of the total weighting.

There are definitely no absolutes in the search for the best market to prioritize in Africa. There will be different answers for different organizations and industries.

You would know best what is necessary to asses opportunity and risk for your organization’s growth plans. Use this tools as a starting point to find the countries that fit properly with your company’s expansion strategy.

We use this tool to perform country comparisons.

Business in Algeria vs. Nigeria

In this article, we do a country-by-country comparison to understand the market potential of doing business in Algeria vs. Nigeria. The market potential across the seven pillars for both countries are:

The market potential in Nigeria and Algeria are quite similar. The market potential of Nigeria slightly edging out Algeria’s market potential.

This is mainly dues to Nigeria’s larger market size and macroeconomic resilience – both of which are short-term pillars.

Algeria fares better than Nigeria in long-term factors such as infrastructural development, technological investments, and social development.

Country Information

Here is some basic information about both countries.

Market Size, Appeal & Resilience

The pillar that gave Nigeria the edge is it’s Market size & appeal.  This is mainly attributed to its national GDP and projected GDP growth in the next two years.

Although Nigeria has a larger-sized economy, Algeria’s economy could be more appealing to certain types of organization based on its higher GDP per capita and GNI per capita – which are measures of how wealth is spread across the population.

Algeria has a less resilient macroeconomic landscape than Nigeria does. This is due to some microeconomic market inefficiencies such as the large chunk of its market consumption that comes from public spending.

With a higher government spending to GDP ratio, the market tends to be less efficient in response to market competition and changes.

Nigeria is also more resilient because it’s more open to trade internationally than Algeria.

Political Landscape & Governance

Good governance takes factors such as national security, safety, rule of law, political participation, and human rights. The Mo Ibrahim Index of African Governance (IIAG) was used to determine the score and rank for this pillar.

Nigeria does only slightly better in governance and political stability.

Social & Human Development

An economy is only as productive as its people, so the level of social and human development is indicative of progress and future productivity. This pillar looks at the general welfare of the society – access to education, basic amenities, and healthcare.

To get the score, we used a normalized score derived from the IIAG score for Human development and cross-referenced that with the Human Development Index (HDI) by the United Nations Development Programme.

This pillar is where Algeria does a lot better than Nigeria.

Investment in Technology, Infrastructure & Logistics

The measure of growth in any economy is how its constituents allocate its resources more efficiently. Adopting new technology is a way of boosting productivity. The level of investment, development, and adoption of new technology is indicative of the productivity level of an economy.

Also, the infrastructure that enables businesses to produce goods and the ease of moving these goods around through efficient logistics channels is a major determinant of success for businesses in any economy.

A weighted average of the IIAG’s Infrastructure score and World Bank’s Logistics Performace Index gives Algeria the clear advantage over Nigeria in term of infrastructural and technological development.

The difference between the two country’s development stage can be brought to light with their respective electricity access.

Resources & Economic Diversification

Economic diversification is generally taken as the process in which a growing range of economic outputs is produced.

Although Algeria’s economy is slightly more diverse than Nigeria’s, both countries are not so different from each other in terms of their lack of economic diversity and dependence on Crude oil – the backbone of both economies.

Business Ease

The business ease pillar is a measure of how easy it is to partake in business activities in each country. Using a weighted average of the World Bank’s ease of doing business score and IIAG’s business environment score as a determinant of this pillar, Nigeria and Algeria are closely-matched in terms of ease of doing business.

Nigeria does slightly better mainly because it is easier to start a business, get business credit, protect minority investors than it is in Algeria.