ABUJA, December 19, 2019 – Nigeria could enable millions of citizens to escape poverty over the next decade through enacting bold reforms designed to boost economic productivity, according to the latest economic analysis.
The Nigeria Economic Update, Jumpstarting Inclusive Growth: Unlocking the Productive Potential of Nigeria’s People and Resource Endowments, says the country’s productivity–how successfully the economy transforms land, labor, capital and other inputs into goods and services–is low compared to peer countries, hindering economic growth, job creation, and living standards. Without robust productivity growth, the report warns that living standards will continue to deteriorate, and the number of people living in poverty will continue to rise, increasing by more than 30 million by 2030.
“Nigeria’s population is expected to grow by as much as 35 million in the next decade, and unless the pace of growth and job creation accelerates, the country will account for a quarter of all people living in extreme poverty worldwide,” said Marco Hernandez, World Bank Lead Economist for Nigeria, and co-author of the report. “Creating new opportunities for this rapidly increasing labor force will require a new economic model based on productivity growth.”
The update analyzes the evolution of productivity in Nigeria and identifies the policies and institutions which can help accelerate Nigeria’s economic expansion and create new job opportunities. Also outlined in the report are four priority areas that would lay the foundation for Nigeria’s transition to a new economic model that more effectively uses its large, young population and abundant natural resources to support sustainable growth and poverty reduction:
- Ensure policy transparency and predictability, which will be critical to reduce investment risk and promote growth outside the extractive industry
- Enhance factor quality by investing in infrastructure, strengthening land tenure security, improving educational outcomes, liberalizing the trade regime and enhancing trade and transport facilitation to help develop value chains and facilitate the efficient reallocation of factors of production, making Nigeria more cost-competitive
- Reduce regulatory discretion to help attract foreign and domestic investment to the non-oil sector, encourage competition, and promote formalization
- Improve access to finance, which could enable new firms to compete with incumbents and allow more productive firms to scale up their operations
The report also recommends building momentum for reforms, which are essential to mitigate risks and promote faster, more inclusive and sustainable growth that improves living standards and reduces poverty. Select reform areas include:
- Leverage trade integration to harness the benefits of the Africa Continental Free Trade Area
- Improve basic education financing to improve human capital outcomes
- Monitor the impact of conflict on the welfare of households to protect poor and vulnerable people
- Leverage digital technologies to diversify the economy and create jobs for young workers.
With reforms in these and other areas, the report notes that Nigeria would be able to strengthen its macroeconomic resilience, promote private sector development, and improve the efficiency of public service delivery.
Recent Economic Developments
Nigeria continues its recovery from the 2016 recession, sustaining an estimated 2% growth rate in 2019, driven by services, particularly telecoms. Agricultural growth increased slightly, but remains affected by insurgency in the Northeast region, and ongoing farmer-herder conflicts. Oil sector growth remained stable, but manufacturing production slowed due to the weaker power supply sector. Overall, the slow pace of recovery in 2019 is attributable to weak consumer demand and lower public and private investment.
The country’s growth outlook is vulnerable to domestic and global risks. It is facing a sharper than expected slowdown in the global economy, as well as geopolitical and trade tensions. Domestically, the predictability of macroeconomic policies, the pace of structural reforms, and the country’s security situation are the main risks. Without structural reforms, growth is projected to remain stable, averaging 2.1% in 2020-2021.