Global investment in Artificial Intelligence (AI) is set to reach an astonishing $632 billion by 2028, according to a recent report by the International Data Corporation (IDC). This marks a significant surge in AI spending, reflecting the technology’s growing influence across diverse sectors. Companies worldwide are increasingly turning to AI to drive innovation, enhance operational efficiency, and provide superior customer experiences. As the global trend intensifies, Nigeria is not left behind. The country’s AI ecosystem is rapidly evolving, buoyed by a dynamic tech landscape, increasing government support, and the recognition of AI’s potential to address Nigeria’s unique social, security, and economic challenges.

Global AI Landscape: A Closer Look

AI’s transformative power is no longer a futuristic concept; it’s a reality reshaping industries on a global scale. From improving employee productivity to optimizing business processes and enhancing customer engagement, AI’s applications are vast and varied. The IDC report highlights that as AI technologies become more sophisticated and accessible, industries are expected to see a rapid increase in AI adoption, which will drive significant advancements in efficiency and innovation.

While Generative AI (GenAI) has garnered much attention recently, the IDC projects that investments in broader AI applications, such as machine learning, deep learning, and natural language processing, will continue to dominate the market. However, GenAI is set to experience rapid growth, with a projected five-year compound annual growth rate (CAGR) of 59.2 percent. This reflects its expanding role in the AI landscape, offering new possibilities in content creation, design, and even code generation.

Nigeria’s Growing AI Ecosystem: Opportunities and Challenges

In the context of this global AI boom, Nigeria’s tech sector is gaining momentum. Often referred to as the “Silicon Savannah,” Nigeria is home to a burgeoning community of startups and tech companies pioneering AI-driven solutions. These innovations are not only transforming local industries but are also attracting significant interest from both domestic and international investors who see AI as a key to unlocking Nigeria’s economic potential.

The National Information Technology Development Agency (NITDA) has been at the forefront of promoting AI development in Nigeria. Kashifu Abdullahi, NITDA’s Director General, underscored the strategic importance of AI, stating, “AI presents a unique opportunity for Nigeria to address critical societal and economic challenges. Our focus is on fostering an environment where AI innovation can flourish, driving sustainable growth and development.”

Despite these advancements, Nigeria’s current AI investment remains modest compared to global powerhouses like the United States and China. Industry experts, however, are optimistic about the future. The country’s rapidly expanding tech sector, supported by a youthful population and increasing internet penetration, sets the stage for significant AI growth in the coming years.

AI’s Impact on Nigeria’s Key Sectors

The potential of AI to revolutionize various sectors in Nigeria cannot be overstated. Agriculture, which remains the backbone of Nigeria’s economy, stands to benefit immensely from AI-driven solutions. Oyindamola Soyinka, a leading data scientist, emphasized AI’s potential in precision agriculture. “By harnessing AI for precision agriculture, we can improve resource management, increase crop yields, and ensure a more secure food supply,” he said. AI can analyze vast amounts of data from various sources—such as soil sensors, weather forecasts, and satellite imagery—to optimize farming practices, reducing waste and increasing efficiency.

In the financial sector, AI is seen as a powerful tool for enhancing financial inclusion. Jide Awe, CEO of Jidaw Systems Limited, noted, “AI has the potential to bridge the financial inclusion gap in Nigeria, enabling more efficient loan processing and empowering small businesses and micro-entrepreneurs. This could have a significant impact on the economy by bringing more people into the financial system.” AI can streamline processes such as credit scoring, fraud detection, and personalized banking services, making financial services more accessible and efficient.

Beyond agriculture and finance, AI has the potential to drive innovation in manufacturing, optimize production processes, and predict equipment failures. Dr. Obi Osondu, a data scientist and AI consultant, highlighted the benefits of AI in manufacturing. “AI can optimize production processes, reduce downtime, and improve overall efficiency by predicting equipment failures before they occur,” he explained. In healthcare, AI-powered diagnostics can enable faster and more accurate diagnoses, while AI-driven logistics can streamline supply chains and transportation networks, enhancing overall efficiency.

Global Investment Trends and Nigeria’s Position

Globally, spending on Generative AI is expected to reach $202 billion by 2028, accounting for 32 percent of total AI spending. The software sector will be the largest beneficiary, with more than half of the AI market’s spending dedicated to software solutions. According to the IDC, two-thirds of all software spending will go towards AI-enabled applications and platforms, with the remainder allocated to AI application development, deployment, and AI system infrastructure software.

The financial services industry is expected to lead the way in AI adoption, with banking institutions heavily investing in AI to enhance fraud detection, risk management, and customer service. “Banking will be the primary driver of AI spending in the financial services sector, which is expected to account for over 20 percent of all AI investments,” the IDC reported. This is followed closely by the software, information services, and retail sectors, which together will contribute roughly 45 percent of all AI spending over the next five years.

For Nigeria, this global investment trend presents both opportunities and challenges. While the country is well-positioned to benefit from the AI boom, several obstacles must be overcome to fully harness AI’s potential. These include addressing the digital divide, improving the quality of education and training in AI, and ensuring that AI development is inclusive and responsible.

Ensuring Responsible AI Development

As AI continues to evolve, it is crucial to ensure that its development and deployment are responsible and ethical. This involves addressing potential biases in AI algorithms and ensuring that AI systems are transparent and accountable. Jide Awe emphasized the importance of a balanced approach, saying, “To fully harness the power of AI, we must prioritize ethical AI development and address any biases that may arise. This requires ongoing government investment in AI research and development, as well as strong public-private partnerships to foster an inclusive and sustainable AI ecosystem.”

Moreover, there is a need for regulatory frameworks that can keep pace with AI’s rapid advancements. These frameworks should focus on protecting users’ data privacy, ensuring the security of AI systems, and promoting transparency in AI decision-making processes. By establishing clear guidelines and standards, Nigeria can create a conducive environment for AI innovation while safeguarding the rights and interests of its citizens.

The Role of Government and Public-Private Partnerships

The Nigerian government, through agencies like NITDA, has a crucial role to play in shaping the country’s AI landscape. This includes not only investing in AI research and development but also creating policies that encourage innovation and entrepreneurship. Public-private partnerships are also essential in driving AI adoption and scaling AI solutions across various sectors.

For instance, collaborations between tech companies, educational institutions, and government agencies can help bridge the skills gap in AI. By providing training and resources, these partnerships can equip the next generation of AI professionals with the knowledge and expertise needed to drive AI innovation in Nigeria.

Nigeria’s Potential as an AI Leader

As global AI investment continues to grow, Nigeria is poised to play a significant role in this technological revolution. With strategic investments, a focus on responsible AI development, and a thriving tech ecosystem, Nigeria has the potential to become a leader in AI innovation, driving economic growth and positioning itself as a key player on the global stage.

The recent statistics from the National Bureau of Statistics (NBS) also underscore the importance of the Information and Communications Technology (ICT) sector in Nigeria’s economy. The sector’s contribution to the real Gross Domestic Product (GDP) reached 19.78 percent in the second quarter of 2024, slightly surpassing the 19.54 percent recorded in the same period last year. The telecommunications industry, a major component of the ICT sector, emerged as the third-largest contributor to the real GDP in Q2 2024.

These developments highlight the potential of Nigeria’s tech sector, including AI, to drive economic growth and development. As the country continues to invest in AI and other emerging technologies, it is well-positioned to capitalize on the opportunities presented by the global AI boom.

In conclusion, while there are challenges to be addressed, the future of AI in Nigeria looks promising. With the right investments, policies, and partnerships, Nigeria can leverage AI to tackle its most pressing challenges and unlock new opportunities for growth and development. As the global AI landscape continues to evolve, Nigeria’s role in this space will be one to watch.

Photo source: Google

By: Montel Kamau

Serrari Financial Analyst

28th August, 2024