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Wednesday, November 6, 2024

Why Has Nigeria Lagged Behind?

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BY Abdulrauf Aliyu 

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As Nigeria celebrated its 64th Independence Day last week, it was a moment to reflect on the nation’s journey since 1960, a path filled with both triumphs and challenges. While Nigeria has grown in population and influence on the African continent, a crucial question remains: why has the country lagged behind in global economic development? As we ponder this question, it is instructive to look at the transformation of another nation, China, which has undergone an extraordinary economic revolution over the past few decades.

The statistics speak volumes. In 1980, Nigeria accounted for 0.5% of global GDP, while China held 2.7%. By 2022, Nigeria’s share had slightly decreased to 0.47%, whereas China’s had surged to 17.7%. The contrast in industrial output is even starker. In 1980, both nations had shares of less than 2% of global industrial production. By 2022, China’s share had ballooned to a remarkable 25%, while Nigeria remained stagnant at less than 1%. These numbers tell a clear story of two nations that started on a somewhat similar footing but followed drastically different paths.

China’s economic rise has been nothing short of astonishing, driven by strategic planning, innovation, and government intervention. As Nobel laureate Joseph Stiglitz has noted, China’s success owes much to its strong institutions and government-led investments in infrastructure and education, creating a foundation for sustained growth. Nigeria, on the other hand, has struggled with governance issues that have stifled its potential. While both countries faced economic challenges in the late 20th century, China implemented reforms that transformed its economy into a global powerhouse, whereas Nigeria remained stuck in a cycle of missed opportunities.

The 1980s were pivotal for Nigeria, as the nation benefitted from an oil boom that could have spurred long-term growth. Instead, this boom led to a dependency on oil revenues, making the economy vulnerable to the volatility of global oil prices. Economist Dambisa Moyo has frequently highlighted the dangers of reliance on a single resource. “Countries that fail to diversify their economies,” she argues, “remain susceptible to market shocks.” Indeed, Nigeria’s failure to leverage its oil wealth for diversification has been a key factor in its stagnant growth, in contrast to China’s relentless pursuit of industrialization and technological advancement.

China’s economic transformation can be largely attributed to its policy of opening up to foreign investment and establishing Special Economic Zones (SEZs) in the 1980s, which became magnets for global capital. This strategy led to an explosion of manufacturing activity and laid the groundwork for China’s position as the “world’s factory.” Economist Paul Krugman, in discussing economic development, has remarked that “policy choices matter as much as geography.” China made the right choices at the right time, aggressively promoting industry and innovation. Nigeria, meanwhile, has struggled with policies that are often inconsistent and poorly implemented, leading to an environment where businesses find it difficult to thrive.

Another critical distinction between Nigeria and China lies in their approach to human capital development. China has placed significant emphasis on education, creating a workforce capable of driving innovation and sustaining economic growth. The World Bank has consistently argued that investing in education and human capital is fundamental to long-term prosperity. In contrast, Nigeria’s educational system continues to face profound challenges, from inadequate infrastructure to a curriculum that is not aligned with the demands of a modern, knowledge-driven economy. While China was training millions of engineers, scientists, and skilled laborers to power its industrial revolution, Nigeria’s education system has been underfunded and unable to prepare its youth for the competitive global market.

The result is an economy that, despite its vast potential, is unable to fully tap into the talent of its young population. The Nigerian government’s failure to invest in education is one of the primary reasons why the country has struggled to compete globally. As Chinese economist Justin Yifu Lin has pointed out, “A country’s ability to innovate and maintain growth is closely tied to its investment in human capital.” China’s focus on creating a highly educated and skilled workforce has been crucial to its rise as a global economic leader. Nigeria, on the other hand, is still grappling with high levels of youth unemployment and underemployment.

China’s ability to foster innovation has also been a key driver of its economic success. The country has heavily invested in research and development (R&D), enabling it to become a leader in technology, from telecommunications to green energy. Economist Mariana Mazzucato has emphasized that “governments play a critical role in driving innovation,” particularly by funding basic research and creating an environment where the private sector can thrive. China has mastered this formula, whereas Nigeria has yet to fully harness the power of innovation to drive economic growth. While Nigeria’s tech ecosystem shows promise, it remains largely fragmented and lacks the infrastructure and support needed to scale up and compete on the global stage.

The differences between the political systems in China and Nigeria also shed light on their divergent economic outcomes. China’s centralized, authoritarian system has allowed for swift decision-making and long-term planning, albeit at the expense of democratic freedoms. Nigeria, as a democracy, faces different challenges, including the need to balance competing interests and ensure political stability. However, Nigeria’s governance has often been plagued by inefficiency, corruption, and short-term thinking. The frequent changes in leadership and policy direction have created an environment of uncertainty, which discourages investment and hampers economic growth.

Political economist Francis Fukuyama has long argued that state capacity and good governance are critical to development. In his view, “a strong, capable state that can implement policies efficiently is a key ingredient for sustained growth.” While China has built such a state, Nigeria’s state capacity remains weak, making it difficult to implement effective policies and drive economic development. Corruption has further eroded public trust and diverted resources away from critical areas such as education, healthcare, and infrastructure, all of which are essential for economic progress.

Yet, despite these challenges, Nigeria is not without hope. The country’s youthful population, vast natural resources, and entrepreneurial spirit provide a foundation for future growth. But the lessons from China’s rise are clear: without structural reforms, strategic planning, and a focus on innovation, Nigeria will continue to lag behind in the global economic race.

To begin with, Nigeria must prioritize economic diversification. As long as the nation remains dependent on oil, it will remain vulnerable to external shocks and miss out on the opportunities offered by other sectors such as agriculture, manufacturing, and technology. Diversification requires not just government policy but also the creation of a business-friendly environment where entrepreneurs and investors can thrive. Clear regulations, efficient infrastructure, and stable energy supply are all essential components of a vibrant economy.

Secondly, investment in education and human capital development must be a top priority. Nigeria has a large and growing youth population, which could be an asset if properly harnessed. The government must overhaul the educational system to ensure that it is aligned with the needs of the economy, focusing on STEM (science, technology, engineering, and mathematics) education and vocational training. By doing so, Nigeria can build a workforce capable of driving innovation and supporting industrialization.

Additionally, Nigeria must embrace technology and innovation as key drivers of economic growth. The tech sector in Nigeria, often referred to as “Silicon Lagoon,” has shown great promise, with startups in fintech, e-commerce, and other sectors making headlines. However, to fully realize its potential, the government must provide support through policies that encourage investment in R&D and create a regulatory environment that fosters innovation.

Finally, governance reforms are critical. Nigeria must address the issues of corruption, inefficiency, and lack of accountability that have plagued its public institutions. Building strong, transparent institutions that can implement policies effectively will be key to unlocking the country’s economic potential.

As Nigeria looks ahead, the lessons from China’s remarkable transformation offer a clear path forward. The road to economic prosperity is not easy, but with the right policies, investments, and reforms, Nigeria can begin to fulfill its potential as a global economic powerhouse. The celebration of 64 years of independence serves as both a reminder of the progress made and a call to action for the changes that are still needed. With the right leadership and a shared vision for the future, Nigeria’s best days may yet lie ahead.

 

Abdulrauf aliyu
An economist and public policy analyst
Can be reached on aliyuabdulrauf@gmail.com

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