Prospects for Economic Growth in Nigeria – a demographic perspective

Prospects for Economic Growth in Nigeria: A Demographic Perspective Nigeria: The Next Generation First Meeting of the Task Force Abuja, Nigeria December 4-5, 2009

Structure of the presentation
Salient facts describing Nigeria’s economy and population
The demographic dividend: theory and evidence
Is there a demographic dividend in Nigeria’s future?

Salient facts describing
Nigeria’s economy and population

Nigeria’s economy has stagnated: No growth in income per capita Source: World Development Indicators, 2008

Indonesia and Pakistan have seen economic growth Source: World Development Indicators, 2008

Nigeria’s economy compared with world regions Source: World Development Indicators, 2008

Comparing economic growth rates Source: World Development Indicators, 2008 average annual growth rate of GDP/capita (PPP), 1980 - 2006

Nigeria’s population has grown rapidly Source: UN, World Population Prospects, 2008

Nigeria’s fertility rate has started to fall Source: UN, World Population Prospects, 2008

The infant mortality rate has fallen, but not steadily Source: UN, World Population Prospects, 2008

Life expectancy has risen, but not steadily Source: UN, World Population Prospects, 2008

Crude birth and death rates are falling Source: UN, World Population Prospects, 2008

Population growth has been rapid Source: UN, World Population Prospects, 2008

The ratio of working-age to non-working-age people has been pretty steady Source: UN, World Population Prospects, 2008

Changing age structure, 1950-2010: A 3-dimensional view Source: UN, World Population Prospects 2008

Education level varies by population group
Educational attainment remains quite low:
37% of the population has no formal schooling
47% is illiterate
Over 50% of Muslims and traditionalists have no formal schooling.
50% of Christians have secondary or higher education.
Rural residents and those in the North have lower educational attainment.

Employment
Unemployment is well above 20%, except for those over age 35.
Unemployment doesn’t vary much by rural/urban residence.
It is highest among those with a secondary education (48%).
This group seems likely to be underemployed.
Women’s labor force participation lags far behind men’s.

Marriage, first birth, and contraception
Age at first marriage and first birth are higher
in the South
in urban areas
among those with higher levels of education, and
among Christians
Those who only use traditional or folkloric contraceptive methods have much higher fertility.
There is significant unmet need for contraception.

Fertility varies by population group
Fertility rates are higher:
in the North
in rural areas
among those with less education
among the poor, and
among Muslims and traditionalists

What we’ve seen so far
Economics:
Low level of income
High inequality
Little or no economic growth
Demographics:
Rapid population growth
High fertility
Large population of young people

The demographic dividend:
Theory and evidence

Average annual growth rate of GDP per capita, 1975-2005 Source: World Bank, World Development Indicators 2008

Changing age structure, 1960-2005 Source: UN, World Population Prospects

The Demographic Transition Population growth rate time Death rate Birth rate

Population age structure is a robust and powerful predictor of economic growth
Demographics
One third (about 2 percentage points) of the growth of income per capita in East Asia during 1965-90 is attributable to the independent influence of changes in age structure. Income

Reaping the demographic dividend is not automatic, and may not be permanent
Demography is not destiny – it just creates potential
for economic growth and poverty reduction
and also, for social, political, and economic instability
March of the Silver-Haired Generation

Complementary policies
Need to catalyze demographic transition
Need to accelerate demographic transition – esp. fertility decline
Need compatible policies in other areas
education
health
labor market
trade
governance
macroeconomic management
Need good relationships with other countries

Is there a demographic dividend in
Nigeria’s future?

Nigeria’s population is set to soar Source: UN, World Population Prospects, 2008

The fertility rate is expected to continue falling Source: UN, World Population Prospects, 2008

The infant mortality rate is projected to continue falling Source: UN, World Population Prospects, 2008

Life expectancy will continue to rise Source: UN, World Population Prospects, 2008

Crude birth and death rates will continue to fall Source: UN, World Population Prospects, 2008

Population growth rate will decline substantially Source: UN, World Population Prospects, 2008

The ratio of working-age to non-working-age people is set to increase dramatically Source: UN, World Population Prospects, 2008

Growth of the working-age to non-working-age ratio, 1960-2050 ( under 3 UN fertility scenarios) Source: UN, World Population Prospects 2008

The bottom line: demographic change can lead to economic growth

Comparing the growth rates of the working-age and non-working-age population Source: UN, World Population Prospects, 2008

Changing age structure, 1960-2050: Nigeria compared with Indonesia and Pakistan Source: UN, World Population Prospects 2008

Changing age structure, 1960-2050: Nigeria compared with East Asia Source: UN, World Population Prospects 2008

The size of the 60+ population will increase dramatically Source: UN, World Population Prospects, 2008

Reaping the demographic dividend: cautionary points regarding Nigeria
Not all of the general points about the factors needed to realize the demographic dividend necessarily apply to Nigeria.
In particular:
Trade policy is important, but it may be more important to focus on diversification of the economy away from dependence on oil exports.
Minimum wage laws and unions may affect only a small portion of Nigeria’s labor market.

Take-home messages
Demography matters.
Demography matters a lot.
There is potentially a sizeable demographic dividend in Nigeria’s future.
But, will Nigeria collect this dividend?

Prospects for Economic Growth in Nigeria – a demographic perspective

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