What Is Digital Economy?

By Adewole Kehinde

The digital economy is a platform for growth for the entire Nigerian economy. Industries old and new are moving online, and finding new ways to do business. This is true for tech companies but it is equally true for companies working in more traditional industry sectors, too. From health and education, to tourism and manufacturing, to resources and energy and for businesses large and small, companies who are moving into this space are statistically more successful: a UK research reported that small businesses who leverage the Internet report sales growth four times greater than those who don’t.

In Nigeria, the digital economy is a key priority. The country has made some strides to strengthen the country’s digital space. Nigeria’s Economic Recovery and Growth Plan 2017–2020 (ERGP) recognizes the need for a digital-led strategy to make the Nigerian economy more competitive in the 21st century global economy.

In 2015, the Nigeria Communications Commission proposed the transition of the economy into a digital economy through investments in digital infrastructure and more specifically broadband, which is a key driver of digital economy growth. Nigeria’s international connectivity is well developed, and there are new digital platforms available such as the Central Portal for Government Services.

Nigeria is also committed to universal education, including providing digital skills training, and it is home to several high-growth digital companies.

Digital economy is defined as an economy that focuses on digital technologies, i.e. it is based on digital and computing technologies. It essentially covers all business, economic, social, cultural etc. activities that are supported by the web and other digital communication technologies.

There are three main components of this economy, namely,

• e-business
• e-business infrastructure
• e-commerce

In the last 15 years, we have seen the tremendous growth of digital platforms and their influence on our lives. Now consumers are influenced by things they see on social media (Facebook, Twitter, Instagram) and other such popular websites (youtube etc).

So this economy is a way to exploit this opportunity. Now it is integrated into every aspect of the user’s life – healthcare, education, banking, entertainment etc.

Merits of Digital Economy

Digital economy has given rise to many new trends and start-up ideas. Almost all of the biggest companies in the world (Google, Apple, Microsoft, Amazon) are from the digital world. Let us look at some important merits of the digital economy.

1. Promotes Use of the Internet

If you think about it, most of your daily work can today be done on the internet. The massive growth of technology and the internet that began in the USA is now a worldwide network. So there is a dramatic rise in the investment on all things related – hardware, technological research, software, services, digital communication etc. And so this economy has ensured that the internet is here to stay and so are web-based businesses.

2. Rise in E-Commerce

The businesses that adapted and adopted the internet and embraced online business in the last decade have flourished. The digital economy has pushed the e-commerce sector into overdrive. Not just direct selling but buying, distribution, marketing, creating, selling have all become easier due to the digital economy.

3. Digital Goods and Services

Gone are the days of Movie DVD and Music CD’s or records. Now, these goods are available to us digitally. There is no need for any tangible products anymore. Same is true for services like banking, insurance etc. There is no need to visit your bank if you can do every transaction online. So certain goods and services have been completely digitized in this digital economy.

4. Transparency

Most transactions and their payment in the digital economy happen online. Cash transactions are becoming rare. This helps reduce the black money and corruption in the market and make the economy more transparent. In fact, during the demonetization, the government made a push for online transactions to promote the web economy.

Demerits of Digital Economy

1. Loss in Employment

The more we depend on technology, the less we depend on human resources. The advancement of the digital economy may lead to the loss of many jobs. As the processes get more automated, the requirement for human resources reduces. Take the example of online banking itself.

2. Lack of Experts

Digital economy requires complex processes and technologies. To build the platforms and their upkeep require experts and trained professionals. These are not readily available, especially in rural and semi-rural areas.

3. Heavy Investment

Digital economy requires a strong infrastructure, high functioning Internet, strong mobile networks and telecommunication. All of this is a time consuming and investment heavy process. In a developing country like ours, development of the infrastructure and network is a very slow, tedious and costly process.

Adewole Kehinde is the Publisher of Swift Reporters and a Public Affairs Analyst based in Abuja. kennyadewole@gmail.com