Demography and Economic Growth in Nigeria

Economic Development in Nigeria: A Demographic Perspective Committee on African Studies Harvard Africa Seminar, April 13, 2010 David E. Bloom and Salal Humair Department of Global Health and Population, HSPH

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

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

Changing age structure, 1960-2005 Source: UN, World Population Prospects 2008

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

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

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

Changing Age Structure, 1950-2050: A longer 3-dimensional view of Nigeria’s trajectory Source: UN, World Population Prospects, 2008

Source: UN, World Population Prospects, 2008 1950

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

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

Reaping the demographic dividend is not automatic, and may not be permanent
Demography is not destiny – it just creates potential
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
March of the “silver hair” generation
Inequality within Nigeria

The elderly will make up a larger share of the population Source: UN, World Population Prospects, 2008

Will demographic heterogeneity induce economic inequality and political instability?

Ratio, working-age to non-working-age population, by state Source: Population and Housing Census, National Population Commission, Nigeria, 1991 and 2006

Take-home messages so far
Demography can matter for the pace of economic development.
It can matter a lot.
There is potentially a sizeable demographic dividend in Nigeria’s future.

Estimates of the potential size and impact of Nigeria’s demographic dividend
The 2030 economy can be 3 times larger than in 2010, instead of 2 times.
The average Nigerian can enjoy an additional 30% income in 2030.
Over 30 million additional people can be lifted out of poverty
Source: Bloom et al. 2010. Nigeria’s demographic dividend. Background paper for the NGN project

Central questions
How do we know how much demographic dividend Nigeria can expect?
What challenges and opportunities does Nigeria face in trying to collect that dividend?
What are some recommendations for the Nigerian government and civil society?

One major challenge in estimating the demographic dividend Source: Holly Reed, 2010. Capitalizing on Nigeria’s Demographic Dividend. Background paper for the NGN project
Lack of data
Dubious data quality
Access to data difficult for academics outside Nigeria
Few peer reviewed studies on Nigeria compared to similar sized countries like Bangladesh or Indonesia

Demographic data is also a big political issue Source: http://news.bbc.co.uk/2/hi/africa/4512240.stm

How much demographic dividend can Nigeria expect?
Assembled panel data for 1965-2005 from
World Development Indicators, Penn World Tables, Barro and Lee, Freedom House
Estimated cross-country growth models using demographic and other variables
Geographical (tropical location, landlockedness)
Human development (education, health)
Institutional quality (ICRG, SW, Trade openness)
Projected economic growth to 2030
Source: Bloom et al. 2010. Nigeria’s demographic dividend. Background paper for the NGN project

Potential impact of demographic dividend on per capita income Source: Bloom et al. 2010. Nigeria’s demographic dividend. Background paper for the NGN project

Potential impact on per capita income with institutional and health improvements Source: Source: Bloom et al. 2010. Nigeria’s demographic dividend. Background paper for the NGN project Year GDPpC "business-as-usual" GDPpC with DD & added LE GDPpC improved IQ & LE 2010 $2,070 $2,070 $2,070 2015 $2,521 $2,653 $2,664 2020 $3,070 $3,435 $3,461 2025 $3,738 $4,486 $4,535 2030 $4,553 $5,882 $5,966

Potential impact of the demographic dividend on poverty Source: Source: Bloom et al. 2010. Nigeria’s demographic dividend. Background paper for the NGN project Year # lifted out of poverty with DD and added LE # lifted out of poverty with improved IQ & LE 2010 - - 2020 5.8 million 5.8 million 2030 31.8 million 34 million

What are the challenges and opportunities in collecting the demographic dividend?
Jobs creation
Education
Health – infant/child mortality, maternal health, unmet need for family planning

Nigeria will need lots of jobs Source: Author calculations. Year WA pop Unempl-oyment Jobs needed Between years Jobs to be added 2010 85,525,401 20% 52,358,719 2015 97,731,223 15% 63,570,579 2010-15 11,211,860 2020 111,088,850 10% 76,509,768 2015-20 12,939,189 2025 125,325,513 8% 88,233,036 2020-25 11,723,268 2030 140,036,212 7% 99,661,452 2025-30 11,428,415

But jobs will also need to be productive: Nigeria’s economic lifecycle - individual Source: Mason et al. 2010. Population and economic progress in Nigeria. Background paper for the NGN project

Education will be key in making jobs productive: economic lifecycle - aggregate Source: Mason et al. 2010. Population and economic progress in Nigeria. Background paper for the NGN project Needs of children Labor surplus

And results can be achieved with little: Nigeria’s current education expenditures Source: Mason et al. 2010. Population and economic progress in Nigeria. Background paper for the NGN project

Nigeria’s education and health spending Source: Mason et al. 2010. Population and economic progress in Nigeria. Background paper for the NGN project. Actual ($) % of spending Education, Public 142 7.33 Education, Private 922 47.63 Health, public 39 2.01 Health, private 833 43.04 Total 1,936 100 Total Public 181 9.33 Total Private 1,755 90.67 Per capita spending (2004 $s)

Nigeria’s human capital investment compared to other countries Source: Nigeria: The Next Generation Task Force secretariat, 2010.

Low health spending reflected in low level of maternal health Source: Nigeria 2008 demographic and health survey: key findings.

Low health spending reflected in high levels of child mortality Source: Nigeria 2008 demographic and health survey: key findings.

Low health spending reflected in low level of children vaccination coverage Source: Nigeria 2008 demographic and health survey: key findings.

Low health spending reflected in high level of unmet need for family planning Source: Unpublished background memo for the NGN project.

Unmet need in the context of current fertility Source: Nigeria 2008 demographic and health survey: key findings.

Nigeria’s untapped human capital: the diaspora Source: US Department of Homeland Security, Office of Immigration Statistics, 2008 Yearbook of Immigration Statistics. Number of persons obtaining legal permanent residents who were born in Nigeria, fiscal years 1961-2008

The Nigerian US diaspora is well-educated Source: Nigerian-born Population in the United States, unpublished background memo, NGN project

And the diaspora is a significant resource Source: The World Bank. Migration remittances factbook 2008. Updated Nigeria data from personal communication.

Summary of challenges and opportunities in collecting the demographic dividend
Jobs
The number needed …
Low productivity …
Education:
Very low public investment … but quick gains …
Low quality schooling …
Health
Very low public investment … but quick gains …
Lower fertility can lessen pressure on services …

Other challenges and opportunities we have not touched on
Institutional improvements, governance
Infrastructure improvements
Politics, conflict and youth exploitation
Youth attitudes
Regional disparities and cultural differences
Macro-economics and international relations

Take home messages
Nigeria’s demographic dividend opportunity is very significant - and can be crucial to Nigeria’s 2020 vision
The demographic dividend could have a major impact on poverty in Nigeria
Nigeria has several challenges to realizing the dividend, but many of these are also opportunities for quick gains

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:
The development of well-functioning financial markets, as important as it is, may not be as high a priority for Nigeria as elsewhere.
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.

Backup slides

Estimation results Source: Bloom et al. 2010. Nigeria’s demographic dividend. Background paper for the NGN project

Demography and Economic Growth in Nigeria

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