BusinessDay 21 Aug 2018

Tuesday 21 August 2018
Nigeria’s population: Asset or liability
Continued from back page
in the world, and yet, for
much of the 19th and 20th
Century, it lagged behind
the West, and even its Asian
neighbours, Japan and South
Korea. Over the thirty-year
period between 1960 and
1990, China’s GDP per capita
grew at an annualized rate
of about 4.3% from about
$90 to $318 despite having
a population of over 1.1 billion
by 1990. In fact, despite
China’s superior population
size, it was slightly poorer
than Nigeria, which had a
GDP per capita of $322 in
1990. Additionally, Nigeria’s
annualized GDP per capita
growth rate, at 4.2%, was very
similar to China’s. In effect,
the Chinese and Nigerian
economies performed very
similarly over the 30-year
period from 1960 to 1990
and both countries were in
a nearly identical position by
the end of that period. Clearly,
China’s large population
was not enough to magically
make it a prosperous nation.
However, by 2016, China’s
GDP per capita had grown to
about $8000 while Nigeria’s
was only a little over $2000
- about a quarter of China’s
(see Figure 1). How did the
gap between two countries
that were at par only 26 years
ago become so large? The
secret behind China’s spectacular
economic growth
over the last quarter century
is in certain economic reforms
that China took beginning
in the late 1970s. After
the death of Mao Zedong
who had ruined China’s
economy with disastrous
policies and his tyrannical
rule, Deng Xiaoping came
to power in 1978 and soon
after, he began to liberalize
and modernize the Chinese
economy.
Among the important
reforms that Deng Xiaoping
undertook were de-collectivizing
the agricultural sector,
allowing private production
by farmers; establishing Special
Economic Zones (SEZs)
such as Shenzhen where new
free-market policies could
be tested; allowing foreign
investment; privatizing some
state owned companies and
removing price controls on
some products. In addition
to liberalizing the Chinese
economy, Deng Xiaoping
also reformed the Chinese
educational system - increasing
the focus on science and
technology research and
sending pupils to study
abroad to develop skills that
China did not have.
Furthermore, these economic
and education reforms
and policies were underpinned
by spectacular
infrastructural development.
According to the National
Bureau of Statistics of China,
railway mileage increased
by about 39,000 km between
1978 and 2010 while highway
mileage more than tripled
over the same period. Additionally,
electricity consumption
increased from 281 kWh
per capita in 1980 to 3927 in
$9,000
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
Figure 1: China’s GDP per capita diverged from Nigeria’s starting in 1990 leading
to a large gulf in wealth between the two countries.
Source: World Bank
GDP Per Capita
China
Nigeria
2014. More recently, in 2001,
China has joined the World
Trade Organization (WTO)
in order to increase its exports
and enable it to fully take part
in the global economy.
China’s extraordinary
growth from a sleeping dragon
to the second biggest
economy in the world holds
lessons for Nigeria - a large
population is only an asset
if proper investments are
made, and the right policies
are implemented. In contrast
to China since 1978, Nigeria
has failed to invest in the
right areas. In comparison to
China’s electric power consumption
per capita growth
of 1298% between 1980 and
2014, Nigeria’s consumption
only grew by 111%. From
Figure 2, the divergence in
real income per capita that
occurred after 1990 is no
surprise - China invested
in increasing its productive
capacity while Nigeria did
not. Instead, Nigeria has
mostly squandered its oil
wealth on expanding the
civil service and on paying
debts, which did not build
the infrastructure they were
purportedly incurred for. The
situation has not improved
in recent years - Nigeria’s
capital expenditure in 2016
was only N173 billion or only
3.9% of the total expenditure
of N4.4 trillion.
Nigeria’s record on human
capital development
is just as bad as its record
on physical capital development.
According to the
NBS’s 2016 Social Statistics
Report, in 2014 the number
of children in primary
school fell to 23.1 million
from 24.19 million in 2013.
We find this incredible, that
in a country with a growing
population of primary-school
aged children, the number of
children in primary school is
dropping. Just as alarming
is that, according UNICEF,
there may be as many as 10.5
million children out of school
in Nigeria.
The story is similar in the
secondary and tertiary stages
of education in Nigeria. The
Social Statistics Report shows
that in 2015 there were only
1.475 million applications
into a Nigerian university, a
tiny fraction of the youth population
in the country. Even
worse, only 401,996 or 27.2%
of these people gained admission
into university. In a
country with a population of
180 million and a median age
of 18.3 years, admitting only
about 400,000 students into
university in a year shows a
criminal underinvestment
in human capital. Worse,
many argue that the quality of
education, skills and learning
acquired in these institutions
is at best suspect, and
at worst, non comparable to
institutions in African countries
such as South Africa
and Egypt. According to the
World Bank, Nigeria’s tertiary
school enrolment in 2011 was
10% of the eligible population.
In Brazil, China, and
India enrolment was 43%,
25% and 22% respectively.
%
60
50
40
30
20
10
0
1981
1983
Gross Capital Formation as a % of GDP
1985
1987
1989
1991
1993
1995
China
1997
1999
2001
Nigeria
BUSINESS DAY 33
INSIGHT/INNOVATION
2003
2005
2007
2009
2011
2013
2015
Figure 2: Gross capital formation (the net increase in physical assets) as a percentage
of GDP in Nigeria and China from 1981 to 2015.
Source: World Bank
If Nigeria fails to reverse
its current spending trends
and redirect its spending
towards the requisite areas
- education, infrastructure
and health - it will fail to take
advantage of its expected
population boom. The Nigerian
economy will be unable
to provide enough jobs for
the rapidly growing numbers
of young people, which could
lead to an increase in criminal
activities and the number
of people seeking to migrate -
both legally and illegally - out
of Nigeria.
The population bomb
Nigeria’s population
gerians aged 15 to 34 were
either unemployed or underemployed.
Looking at just
those aged 15 to 24, the numbers
are even worse with up
to 67.3% either unemployed
or underemployed. 50% of
people with post-secondary
qualifications in the labour
force are either unemployed
or underemployed (although
this data is for the total labour
force, not just the youth).
The result is an army of
out-of-school, out-of-work
young men and women with
no marketable skills and
few prospects for improving
their situations. This “army”,
growth (quantity), without
corresponding growth in productivity
and income (quality),
will continue to drive
up competition for existing
natural and fiscal resources.
While there is a direct relationship
between population
and food, clothing, and
housing challenges, there
is an inverse relationship
between rising incomes and
those challenges. As incomes
are squeezed, competition for
available resources rises.
Many of the conflicts we
see today, though not caused,
are underpinned by the competition
for resources. In the
context, unemployment is
an indication that Nigeria’s
young population is losing
out. Following recession in
2016, and subsequent slow
recovery, 52.7 percent of Niwith
hopelessness as their
weapon, are responding with
migration, both legally and
illegally, robbery, advance
fee fraud (419), and kidnapping;
by abusing drugs such
as codeine and Tramadol;
or by engaging in militant
activities in order to demand
a larger share of government
revenues. These outcomes
are predictable in the context
of “economics of conflict” that
have been studied by economists
such as Paul Collier of
Oxford University, United
Kingdom, and Karl Warneryd
of Stockholm School of Economics,
Sweden.
Is manufacturing still a
viable path to growth?
Given current global economic
and technology shifts,
Nigeria’s necessary investments
in education and infrastructure,
does not necessarily
confer on it the pattern of
economic growth experienced
in China. China grew at an annualized
rate of 13.6% between
1991 and 2016 by becoming
the world’s manufacturing
centre. Although it has recently
begun moving into more hightech
industries, the foundation
of China’s economic growth
was low-cost manufacturing
for developed economies.
However, as a result of technological
advancements in
robotics, additive manufacturing,
and artificial intelligence,
this path to growth might be
closed soon.
These technologies will
make it easier and cheaper for
developed countries to move
manufacturing back to their
own countries since machines
and software programmes
will take the place of human
beings in the production process.
With less reliance on
human labour in manufacturing,
having lower labour costs
and a larger labour force will
become less of an advantage
for developing countries such
as Nigeria. Even jobs outside
manufacturing are vulnerable
to technological change.
However, despite the
threat presented by these new
technologies, Nigeria’s path to
development will still include
investing in education. After
all, many of these technologies
are in early stages of development
and there is a small
chance that they may end up
not fulfilling the early potential
they have shown. More
likely though, these technologies
will revolutionize manufacturing
not by completely
removing human beings from
the production process but
by complementing them. In
such a world, highly educated
people will work alongside
these machines and the only
way Nigeria can compete is
if its workforce is highly educated.
Furthermore, even if
all manufacturing and even
some service sector jobs become
completely automated,
a creative and highly skilled
workforce will be needed to
design further improvements
to these technologies, and
perhaps create new industries
of the future.
Just as Uber has made it
harder for traditional taxi drivers
to make a living, those who
are able to operate a smartphone
have seen new earnings
opportunities opened
up to them. To readers of
BusinessDay, operating a
smartphone might seem like
a simple task, but for the 10.5
million out of school children
who have never learned
to read, it is an impossible
task, which locks them out of
participating in many simple
activities. To enable Nigerians
to benefit from the economic
opportunities that technology
opens up, all Nigerian
students will need to be taught
basic literacy and numeracy
skills. For Nigerians to be able
to create these technologies,
the number of Nigerians in
higher education needs to be
increased and the quality of
education they receive needs
to be improved.
Towards a bright 2050
In 1990, Nigeria and China
had almost equal GDP per
capitas. Now, there is a gulf
between the two countries,
which is widening every year.
But the rapid progress that
China has made in barely
over a quarter of a century
shows that Nigeria can have
a bright tomorrow if it makes
the right choices today. There
are 32 years between 2018
and 2050, a similar period
to that during which China
transformed its economy
and the lives of its people. If
Nigeria invests in educating
and providing health services
for its people, and building
the infrastructure that they
need to power their homes
and factories or to transport
themselves or their goods
within and outside the country,
then the Nigeria of 2050
will be a rising economic
power and a land of opportunities
for its citizens.
However, if it continues to
spend the same way it has
done in the past - with most
spending going towards the
bloated civil service, the political
class, and their cronies
- then it will squander the
potential of its people, and
turn what should have been
a blessing into a curse.
•Dr. Ogho Okiti is the
former Chief Economist of
Businessday, holds a PhD in
economics and has served
at the Uk Office of National
Statistics and the office of
the Chief economic Adviser
to the President of Nigeria.