CASE STUDIES FROM AFRICA

The Service Sector in Nigeria
Services Sector Performance: Contribution to GDP
The Nigerian services sector has assumed an important role in the last two decades due to
its remarkable development as a significant growth driver. During this period, demand for
services has risen sharply, coinciding with growth in the economy and confirming the
services sector’s high income elasticity, generally, as the consumption of many services such
as education, health, and transportation expand in tandem with rising income per capita.
The growth of Nigeria’s services sector is somewhat insulated from manufacturing and, to a
lesser extent, agricultural activities, which have suffered more in respect of supply
constraints.
In constant factor cost, the services sector contributed about 25% to GDP in 1985/86 on the
eve of the Structural Adjustment Programme (Table 1). This contribution, which reached
26% in 1994, was maintained roughly in 1991, but after a slight decline in 1996 increased to
about 30% in 2001, and assumed an upward trend thereafter, reaching its highest point of
42.4% in 2012. Thus service activities have expanded their influence in the economy over the
last 5 years, accounting for almost 40% of real GDP. This recent contribution of the services
sector is inching close to that of Uganda (40%), but is still at a significant distance from
Korea and Brazil, which reached 60% and 80% respectively in the mid-1990s. Nigeria’s
services sector favourably competes with the agricultural sector as the main growth driver
in recent times.
Table 1: Size of Nigeria’s Services Sector
Year
Total Services Output (N Total GDP (N mill) Share of Services in GDP
mill)
(%)
1985 50190.4 201036.3 24.9
1986 50975.32 205971.4 24.7
1991 69794.6 265379.1 26.3
1996 78536.96 293745.4 26.7
2001 106053.3 356994.3 29.7
2006 192057.1 595821.6 32.2
2012 377416.9 888893 42.4
Source: Central Bank of Nigeria Statistical Bulletin, 2012.
Nigeria’s services output is highly diversified, with certain components serving as input for
some production activities, and others as final demand. Table 2 shows the composition of
the services sector in terms of the share of services value added in GDP. The available data
cover 22 subsectors spanning building and construction, wholesale and retail trade, road
transport, rail transport and pipelines, water transport, air transport, other transport
services, telecommunications, post, electricity, water, hotel and restaurant, financial
institutions, insurance, real estate, business services, public administration, education,
health, private non-profit organisations, other services, and broadcasting.
Of the 22 subsectors, significant contributions to services output occur in only 6 of them. In
order of ranking, these six subsectors are wholesale and retail trade, financial services, road
transport, building and construction, real estate, and electricity. The rest of the services
subsectors—which ordinarily should provide important inputs to the tangible production
sector, particularly manufacturing, oil and gas, and agriculture—do not account for a
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