The Nigerian government is neglecting the Business Process Outsourcing (BPO) industry as a veritable platform for employment creation despite the country’s strong competitive advantage in this area, market observers have said. The BPO outsourcing industry is worth over $300 billion, growing at a Compound Annual Growth Rate (CAGR) of 5 percent, according to United States (US) based research firm, HfS. But Nigeria, Africa’s largest economy by GDP, is lagging behind its counterparts on the continent, in terms of harnessing BPO’s wealth creating potentials. Information Technology (IT) outsourcing or BPO is the practice of subcontracting responsibility for all or part of an IT function to a third party service provider that manages the work. With the largest population in Africa, half of which is below the age of 25, and English Language as Lingua Franca, the nation’s demographics are attractive for BPO recruiters, experts say. According to the Outsourcing Development Initiative of Nigeria (ODIN), Nigeria’s comparative advantage lies in the nation’s flexible labour regulations. “Many developing countries protect their workers by forcing employers to pay high severance payments to dismiss redundant workers. Nigeria’s system is straight forward and allows firms to employ the most efficient level of workers while also providing adequate protection to workers”, said the body in a statement.
From a geographical stand point, Nigeria’s time zone is very much aligned and best suited to servicing much of the European market, a major advantage over outsourcing destinations in Asia. Yet, globally, India is one of the leading IT outsourcing destinations, with about $10.9 billion revenues from offshore BPO and $30 billion from the Information Technology (IT) industry. The country does not only control about six percent of the global BPO industry, it also commands 63 percent share of the offshore outsourcing, which represents those contracted outside a company’s country.
In recent years, the Philippines have made significant headway in the BPO outsourcing industry, having already carved out a dominant position for itself. According to market observer, the country’s lax regulation in the area of outsourcing does not inspire the much needed confidence amongst potential offshore customers and investors. Nigeria is considered as having the potential to be a major BPO hub in West Africa, but government continues to pay lip service to developing BPO outsourcing despite its obvious skill development capabilities.
“Strengthened regulation will indeed go a long way in building confidence among potential offshore clients who may be wary of outsourcing to a newer BPO market like Nigeria”, said Abiodun Adeoye, managing director at Contact Solutions, an indigenous IT/BPO operator.
As Nigeria seeks to diversify its economy from oil, Chris Uwaje, chief executive officer at Connect Technologies is of the view that IT outsourcing, if properly harnessed, could generate $20 billion in annual revenue, whilst creating 10 million jobs. Given BPO’s potential in term of job creation, market observers have said that government will need to consider offering incentives to multinationals that establish operations in Nigeria, following the example of South Africa, which offers a grant for every BPO job created over a three year period.
The World Bank’s 2010 report, ‘Developing an African Offshoring Industry: The Case of Nigeria’, shows that the nation is underutilising its potentials in the area of BPO, and lagging behind South Africa, Egypt and Ghana. Even today, these countries are still considered the leading destination for offshore BPO in Africa, though Egypt is slightly off the radar due to civil unrest. Market observers say these nations, along with emerging player Kenya, have each launched and implemented strategies to promote their BPO offerings. “I am not aware of any multinational using Nigeria to service the region, with most choosing either Kenya or Ghana instead. This is due to the ease of doing business, these governments’ better packaging and promotion of their countries and better perceived physical and intellectual security”, said Niyi Yusuf, country manager at Accenture Nigeria.
Ben Uzor
