Digital Economy And It’s Growth Potential

The digital economy is projected to continue growing rapidly, with the global digital economy expected to reach $16.5 trillion by 2028, driven by factors like increasing e-commerce, IoT device adoption, content and E-streaming with digital transformation

Nigeria, one of Africa’s largest economies, is projected to experience a 3.4% economic growth in 2025, according to the African Development Bank (AfDB). This growth, while moderate, compared to previous years, presents significant opportunities across various sectors, particularly for digitally driven businesses.

Economic Context and Digital Transformation

Nigeria’s economic landscape has undergone a remarkable transformation through 2024. The digital economy’s contribution to GDP peaked at an unprecedented 19.78% in Q2 2024, marking a significant increase from its 16.66% peak in 2023. This growth has been driven by a tech-savvy youth population, increasing smartphone penetration, and supportive government policies.

The expansion of digital infrastructure has been particularly noteworthy. By December 2024, 5G networks had expanded to 30 cities, significantly enhancing broadband penetration, which now serves over 134.78 million subscribers. Foreign Direct Investment (FDI) in telecommunications surged due to broadband expansion, supporting this sector’s continued rise.

By the end of 2024, Nigeria had firmly established itself as Africa’s leading startup hub, with digital innovations reshaping everything from financial services to agriculture. However, rising inflation (34.8% in December 2024), naira depreciation (-42.1%), and increased energy costs have created significant challenges for businesses. Supply chain disruptions and high operating costs have also pressured startups, making efficiency-driven digital solutions crucial for survival. Additionally, diaspora remittances nearly doubled from $2.62B in 2023 to $4.22B in 2024, presenting a major opportunity for fintech and investment platforms.

CAUSE AND EFFECT

The digital economy is booming. Annual smartphone shipments have more than doubled since 2010, hitting 1.2 billion in 2023. Internet of things (IoT) devices are projected to surge 2.5 times from 2023 to 39 billion by 2029. New data from 43 countries, representing about three quarters of global GDP, show business e-commerce sales grew nearly 60% from 2016 to 2022, to reach $27 trillion.

It is however important to know that this growth is taking an increasingly heavy toll on the environment.

The digital economy is resource intensive. A two-kilogram computer requires 800 kilograms of raw materials. A smartphone, from production to disposal, requires about 70 kilograms.

While the production phase is the most impactful – generating some 80% of smartphone greenhouse gas (GHG) emissions – environmental harm occurs throughout the lifecycle of devices and ICT infrastructure, including through e-commerce.

If Nigeria is to be a fore palyer in this emergering markets it must think off a way to be able to profit off the digital waste been generated, Digital waste is growing faster than collection rates. Waste from screens and small IT equipment rose 30% between 2010 and 2022, reaching 10.5 million tons. Improper disposal leads to pollution and other health and environmental hazards.

Increasing demand for data transmission, processing and storage for new technologies like blockchain, artificial intelligence (AI), fifth generation (5G) mobile networks and IoT is boosting emissions. For example, the ICT sector emitted an estimated 0.69 to 1.6 gigatons of CO2 equivalents in 2020, corresponding to 1.5% to 3.2% of global GHG emissions.

Addressing these issues requires policy reforms, technological innovations and action from all stakeholders – policy makers, businesses, and consumers

Here’s a more detailed breakdown of the digital economy projections:

Global Growth:

• Forrester’s Forecast:The global digital economy is projected to grow to US$16.5 trillion in 2028 from US$11.8 trillion in 2023, at a 7% compound annual growth rate (CAGR). 
• E-commerce Boom:Business e-commerce sales are projected to continue growing, with a significant increase in online shopping globally. 
• IoT Device Surge:Internet of Things (IoT) devices are projected to surge 2.5 times from 2023 to 39 billion by 2029. 
• Digital Economy Trends:The Digital Economy Trends 2024 report covers six trend themes expected to exert significant influence on the digital economy, including Artificial Intelligence (AI), Trust Economy, Digital Reality, Cybersecurity, Smart Ecosystems, and Green Economy. 
• Digital Economy Contribution to GDP:The digital economy is projected to grow three times faster than the global economy to reach approximately US$24 trillion in 2025, representing 21% of global GDP. 

• Key Trends and Factors:

• Digital Transformation:The shift to digital solutions is accelerating across various sectors, from e-commerce to online education and telemedicine and if the nigeria is to be a leader i the digital space she must act now with its policies. 
• E-commerce Growth:The value of sales across the world’s top 35 e-commerce platforms has boomed in recent years, led by companies like Alibaba, Amazon, JD.com, and Pinduoduo. 
• Connectivity and Skills:Ensuring affordable and reliable connectivity, along with investing in education and training for digital skills, are crucial for a thriving digital economy. 
• AI and Robotics:Advancements in AI and robotics are reshaping skills requirements and highlighting the need for investments in education, training, and lifelong learning initiatives. 
• Digital Economy Policy:Nigeria’s Digital Economy Policy and Strategy program is based on eight pillars, including Developmental Regulation, Digital Literacy and Skills, and Solid Infrastructure.