Consulting firm, McKinsey releases report on the impact of the Internet on Nigeria, other emerging economies

Internet

Global consulting company, McKinsey & Company, recently released a report on the impact of the Internet in Nigeria and eight other countries around the world namely Argentina, Hungary, Malaysia, Mexico, Morocco, Taiwan, Turkey, and Vietnam. Companies such as Pagatech were profiled in the Nigeria section of the report. You can download the report via the McKinsey website here. In the report, the countries profiled are referred to as “aspiring countries” and the following findings were gleaned.

1. The Internet is growing at a tremendous rate in aspiring countries, but with very different growth paths. Internet penetration has grown at 25 percent per year for the past 5 years in the 30 aspiring countries, compared with 5 percent per year in developed countries. Many Internet users in aspiring countries are gaining access to the Internet solely through mobile phones. Mobile subscriptions in aspiring countries have increased from 53 percent of worldwide mobile subscriptions in 2005 to 73 percent in 2010.

2. The impact of the Internet in aspiring countries has been significant, but there is still tremendous potential if these countries reach developed world levels. The Internet contributes an average 1.9 percent of GDP in aspiring countries—$366 billion in 2010. By comparison, the Internet in developed countries contributes an average 3.4 percent of GDP. Today, consumer surplus is between $9 and $26 per user per month in the nine aspiring countries, much lower than the $18 to $28 per user per month we have seen in developed economies.

3. Individuals in aspiring countries have utilized the Internet in significant and dynamic ways. Individuals have often been the first to benefit from the Internet in aspiring countries, mostly through free services such as e-mail, social networks, and search engines. The younger half of the population drives the adoption of online services, and the level of their engagement with certain online activities, such as social networking, often exceeds that of their developed country counterparts.

4. Entrepreneurs in aspiring countries have thrived despite Internet ecosystem constraints. Entrepreneurs in aspiring countries are often effectively social entrepreneurs, as they help to build a robust Internet ecosystem. Entrepreneurs have had to innovate, creating new business models that enable users to overcome local constraints, such as offering payment for online purchases upon physical delivery or using mobile accounts instead of credit cards.

5. There is tremendous potential for enterprises to leverage and gain benefits from the Internet—much more than they do today. Large enterprises were the first to adopt broadband and now are leading the way in adopting more advanced Web technologies. Small and medium-sized enterprises (SMEs) have not yet leveraged information and communication technologies (ICT) and Web technologies as much as large enterprises. Where they do deploy ICT and Web technologies, SMEs have found increased revenue, lower costs, higher productivity, and net job creation.

6. Governments and the public sector are offering better and more accessible public services through the Internet, but still have opportunity to go further. E-government services are still nascent in aspiring countries. They have nonetheless already often allowed governments to improve delivery of services such as health care and education. Aspiring country governments have also often played an active role in driving Internet access and use, from investing in infrastructure in rural areas to creating innovation clusters with a focus on Internet-driven growth. Furthermore, governments, as public policy makers, set regulation, influencing the environment in which Internet ecosystems thrive.

7. Aspiring countries can leverage their distinct characteristics to drive the development of Internet ecosystems. There is more than one way to drive significant economic and social impact from the Internet. Each aspiring country has a unique macroeconomic profile, resulting in different and distinct opportunities to fully capitalize on the Internet’s potential and growth.