Business in Ghana vs. Nigeria: 2019 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 Ghana vs. Nigeria

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

The market potential for business in Nigeria slightly edges out Ghana’s market potential.

This is mainly dues to Nigeria’s larger market size.

What it does not have in market size, Ghana makes up for in long-term indicators. Better governance, higher social development, and business ease are segments in which Ghana significantly outperforms Nigeria.

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.  At 8.5 % growth in 2018, Ghana’s economy is among the fastest growing economies in the world.

Regardless, the sheer size of the market is significantly smaller than Nigeria’s economy.

Ghana and Nigeria have similar macroeconomic landscapes. Although Ghana has a lower unemployment rate than Nigeria does, the country has more exposure to external debt that increases its vulnerability to global market dynamics.

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.

Ghana performs significantly better than Nigeria in terms of good governance.

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.

Ghana also outperforms Nigeria in this indicator.

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 the score for this pillar.

Although Ghana and Nigeria have a similar economic complexity index (which is an indicator of the complexity of products developed in the country), Ghana gets the slight edge over Nigeria when graded over the entire infrastructural development in each country – particularly in regards to electricity access.

Resources & Economic Diversification

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

Although Ghana’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.

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, Ghana is easier to do business in than Nigeria.