This paper looks at the socio-economic structures of a country and how they impact on growth and development. To an extent, any exposition on national socio-economic structures deals with political economy analysis. Development practitioners are increasingly aware of the role of social and political variables in shaping development outcomes. The political dimension of socio-economic structures stems from the influence of political power relations in determining the social and economic distribution patterns in so-called ‘inequality traps’ that constrain economic growth and poverty reduction and increase social tensions. In view of this observation, this paper also considers the political dimension of national socio-economic structures using Nigeria as a case study.

1. National Socio-economic Structures and Its Impact on
Growth and Development: A Case Study of Nigeria
Written By
Mr. Gerald Ogoko

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TABLE OF CONTENTS
Introduction………………………………………………………………………………. 2
Socio-economic structures & economic development in Nigeria……………………….. 2
Regional Disparities in Development……………………………………………………. 3
Population & Economic Growth………………………………………………………… 4
Constraints to Economic Growth & Development………………………………………. 5
Conclusion……………………………………………………………………………….. 7
Recommendations……………………………………………………………………….. 7

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Introduction
This paper looks at the socio-economic structures of a country and how they impact on growth
and development. To an extent, any exposition on national socio-economic structures deals
with political economy analysis. Development practitioners are increasingly aware of the role
of social and political variables in shaping development outcomes. The political dimension of
socio-economic structures stems from the influence of political power relations in determining
the social and economic distribution patterns in so-called ‘inequality traps’ that constrain
economic growth and poverty reduction and increase social tensions. In view of this
observation, this paper also considers the political dimension of national socio-economic
structures using Nigeria as a case study.
The socio-economic structure of a country is the integrated system of production relations that
determines the societal pattern of productive activities. It is essential to note that societies may
possess one or more such structures but in many instances, there tends to be one structure that
is dominant. The dominant structure defines the character of a society and determines which
socio-economic formation that the society belongs to. This implies that the dominant structure
serves as the foundation of society as a whole. The conclusions presented at the end of this
paper synthesize all the discussions done with a view to presenting a definitive position on the
socio-economic structure in Nigeria.
Socio-economic Structures & Economic Development in Nigeria
Development is a multi-dimensional phenomenon. Some of its main dimensions include:
degree of economic growth; level of education; level of health services; level of modernization;
degree of gender equality or status of women; nutrition levels; availability of adequate housing;
access to communication; and distribution of goods and services (World Bank, 2005). In
Nigeria, the progress of socio-economic development across its 36 states is not uniform. For
instance, Lagos State –the commercial or private sector hub of Nigeria- has better socio-
economic development than the other states given its status as a former capital of Nigeria and
its attractiveness as a private sector location. To put things into proper perspective, Lagos State
generates an estimated NGN20bn monthly besides its allocation from the monthly federation
account compared to a state like Gombe that generates a monthly IGR of NGN200mn (Debt
Management Office, 2014). This marked disparity influences socio-economic conditions in
both states hence, the high migration inflows to Lagos which itself presents a challenge to
urban development in Lagos.
A critical factor that explains the revenue dichotomy between Lagos State and Gombe State is
the issue of ‘federal capital territory’ status. Before Abuja became the Federal Capital Territory
(FCT) of Nigeria, Lagos State was once the capital of Nigeria. In Nigeria, states nominated as
the federal capital territory tend to attract considerable investments, especially in infrastructure,
compared to the other states. This is understandable given the brand of the federal system of
government operated in Nigerian where majority of income from natural resources in the states
and value-added- tax (VAT) accrues to the federal government before it is shared in an
inequitable manner to the states. Federal systems by their nature are complex designs because
they involve multiple levels of government. In fact, Omotoso (2012) notes that one of the
challenges stemming from the structure of fiscal federalism in Nigeria is the ongoing
implacable and intractable Niger Delta crisis arising from lop-sidedness in revenue allocation
and sharing in the country. Although the Niger Delta region –with its wealth of crude oil
resources- accounts for about 90% of Nigeria’s foreign exchange revenues, Omotoso (2012)
suggests that the nature of fiscal federalism in Nigeria and the revenue allocation formula is
such that it has failed to address the underdevelopment of the Niger Delta region. This has

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brought untold hardship for the people and induced abject poverty within the region, and this
is responsible for the present unrest in the Niger Delta, i.e. attack of oil installations by the
‘Niger Delta Avengers’, an armed youth militant group.
The situation in the Niger Delta highlights how socio-economic structures in countries impact
socio-economic development. In the case of Nigeria, lack of emphasis on the proper application
of the derivation principle and the current structure of fiscal federalism are largely responsible
for the high rate of poverty and youth unemployment in the Niger Delta especially considering
the environmental impacts of unregulated oil exploration activities on the livelihoods and
health of people within the region. In the Niger Delta scenario lies a political economy
dimension to understanding the impact of socio-economic structures on economic development
and growth. Rent seeking and the myopic need to retain the excessive powers of federal
government has stifled growth and development in less-resourced states across the six
geopolitical regions of Nigeria.
Political economy concepts are increasingly relevant for development research as a result of
the following: (1) the broadly recognised insufficiency of economic models to explain
development outcomes; and (2) an evolving geopolitical environment, which has brought new
concerns to the development space. Sen (1999) posits that a growing trend in contemporary
development research is to define development not only in economic terms but also as
freedoms and capacities that people have to improve their social and economic position. World
Bank (2001) notes that although economic growth is critical to sustained poverty reduction,
institutional and social changes are also required for effective development processes and
inclusive growth. The observations by Sen (1999) and the World Bank (2001) are critical to
understanding the influence of socio-economic structures on economic development and
growth given that factors such as political stability and corruption impact socio-economic
relationships.
Regional Disparities in Development
Although Nigeria has made significant progress in development since gaining independence in
1960 –particularly from the standpoint of a growing entrenchment of the democratic
governance-, little has been achieved in the area of poverty reduction. The level of poverty and
inequality remains very high. The continued decline in the standard of living of Nigerians and
the gradual evaporation of the middle class serve to suggest that Nigerians have not really seen
or benefitted from the expected dividends of democracy. There is equally the problem of the
significant disparities between Northern and Southern Nigeria with regards to the human
development indicators. In areas such as maternal mortality rates, literacy levels, school
enrolment rates, girl child rights and education, the South appears to have fared better than the
North despite considerable investments by the government and donor agencies in Northern
Nigeria. For instance, an estimated 70% of people living in the North live in absolute poverty
and more than half are malnourished. What is even more troubling is that although 60% of
development intervention programs in the health and education sectors are focused on the
North (Federal Ministry of Budget & National Planning, 2014), the region continues to perform
below the national average in majority of the human development indicators. A number of
factors account for the disparities in education between the North and the South. For instance,
Aluede (2011) notes that doubts about education and its benefits and the growing negative view
that education has little value in determining income determination is responsible for poor
education indicators in Northern Nigeria. In a paper written for the Chatham House, Hoffman
(2014:4) makes this observation:

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“The significance and complexity of challenges in Northern Nigeria make determining
priorities for the region extremely challenging. Yet overcoming the North’s
considerable problems relating to development and security are critical to the realization
of a shared and prosperous future for all of Nigeria. Northern Nigeria’s political leaders,
especially the state governors, must move swiftly and strategically to delivery on
repeated promises to invest in infrastructure, education and other social services, as well
as encourage new sources of income for the region. Ultimately, the economy, security,
stability and health of the North and South are intricately interlinked, and persistent
violence and grinding poverty in any part of the country threaten the long-term progress
of the whole”.
Hoffman’s (2014) aforementioned observation highlights how innate socio-economic
structures affect human development. The regional disparities between Northern and Southern
Nigeria can be explained by the following factors namely: the failure of leadership in the North,
limited investments by state governors in education and public health, limited openness to
Western education, distrust of modernization ideologies, and difficulty in attracting requisite
foreign direct investment especially considering external perceptions of the North as a
dangerous and unstable region. These factors characterize the socio-economic structures that
have underdeveloped the North and should form the basis for any interventions aimed at
changing the tide to reflect comparable progress in the South.
Population and Economic Growth
In this section, attention is devoted to examining the impact of population on economic growth.
It is essential to look at this perspective as population is central to understanding the
ramifications of socio-economic development in developing countries such as Nigeria.
Looking at population also offers a meaningful channel for exploring and understanding how
demographic changes impact socio-economic development in different countries. For the
purpose of this paper, continued reference is made to Nigeria when buttressing important
points.
Economists tend to neglect the impact of fundamental demographic changes on economic
growth. Bloom & Canning (2001) are among the few who examine the impact of demographic
transition on economic growth. For them, it is possible that the interaction of economic growth
and population dynamics can result in a poverty trap. Dyson (2010) notes that a decline in
mortality rate can enhance economic growth and hence, result in an increase in living standards.
This is because as people live longer, they are more likely to look at the future with optimism
and as such, more likely to take risk and innovate. This position is supported by the findings of
a study by Bloom & Canning (2001) which suggests that a decline in mortality rates in
developing countries has the tendency to raise educational attainment and savings rates and
thus, increase investment in physical and human capital. This is understandable as healthier
workers are thought to be more productive than less healthier people. Essentially, mortality
decline –which is accompanied by health gains- enhances human productivity. Again, Dyson
(2010) notes that mortality decline is the main source of economic development however,
McKeown (1976) argues that the direction of causality should be reversed, i.e. it is the
improvement in the standard of living that results in lower death rates.
The aforementioned observations can be used to explain the situation in Nigeria. If declines in
mortality rates lead to economic growth, then Nigeria is definitely not on the path to economic
growth given the life expectancy rate in Nigeria, i.e. with an estimated population of 180mn,
Nigeria has a life expectancy of 53 compared to the United States which has a life expectancy

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of 80 (CIA World Fact Book, 2015). Again, the death rate for Nigeria is 13 per 1000 (CIA
World Fact Book, 2015). Going by this statistic and the observations by Bloom & Canning
(2001) and Dyson (2010), it is clear to note that the demographic structure of Nigeria does not
support economic growth and development. This observation supports the earlier position
taken in this paper; that ordinary Nigerians have yet to benefit from the expected dividends of
democracy. As a result of this, many have questioned the suitability of democratic governance
to the demands of the multi-ethnic nature of Nigerian society.
What is also worrying about the Nigerian situation is the rise in its population in the face of
declining public service delivery. With a population growth rate of 3% (CIA World Fact Book),
public service delivery has witnessed a decline across different sectors including education,
health, housing etc. Another issue compounding this problem stems from the structure of
Nigeria’s population. Nigeria has a significant youth population –about 62% of Nigeria’s
population is aged between 0 and 35 years- and an unemployment rate of about 26% (CIA
World Fact Book, 2015). The high rate of youth unemployment presents a challenge to
economic growth and development in Nigeria. The effects of high youth unemployment
include: civil unrest (i.e. as demonstrated by the high level of youth restiveness in the Niger
Delta region); insecurity as people turn to crime to survive; lack of productivity; brain drain
etc. These effects are likely to discourage foreign and local investment and further compound
the government’s inability to deliver the dividends of democratic governance to the Nigerians.
What is clear from these observations is that population and demographics can impact
economic growth either positively or negatively. In Nigeria’s case, the impact is negative. At
this point, it is essential to identify and examine the constraints to economic growth and
development.
Constraints to Economic Growth & Development
This section of the paper looks at the constraints to economic growth and development in
developing countries. The main constraints or limitations discussed in this section include: (1)
technological adoption; (2) efficient allocation of resources; and (3) political economy (i.e.
policy dimension). There are many other constraints to economic growth in developing
countries however, the writer is of the opinion that these three constraints are central to the
myriad of challenges stifling socio-economic development in Nigeria.
Technological Adoption
The perspective of developing countries forms the basis for discussing the constraints to
economic growth and development. The endogenous growth theories offer a useful way of
understanding the constraints to economic growth and development. These theories champion
technological progress and factor productivity. Consequently, growth research has a stronghold
on technological innovations and high-technology research and development. However,
domestic high-technology industries and sectors are non-existent in developing countries like
Nigeria. The lack of domestic high-technology industries in Nigeria has inhibited its growth.
As a resource-based economy, decades of dependence on crude oil exports have resulted in
neglect for the potential of technology in bringing about economic transformation and bringing
about improved standards of living. The industrial revolution was largely driven by technology
and most developing countries –especially about developing countries in Africa- are yet to
participate in its benefits. Globalization is largely driven by technology and as long as
developing countries fail to take advantage of the coming digital revolution, they will continue
to depend on aid and support from developed countries (World Economic Forum, 2015).

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The current administration of Nigeria has indicated that it seeks to diversify its economy to
reduce its dependence on crude oil exports. It remains to be seen how this will be achieved
given that Nigeria lacks the technological base to drive the diversification process, especially
in the agricultural sector, i.e. added value to agricultural commodities through improved
processing. This is the reason why Dollar & Kraay (2004) note that due to the lack of domestic
high-technology sectors in developing countries, the priority of research has moved from
generating technology to accessing foreign technology especially technology from highly
industrialized OECD countries. Despite this nee focus, there is also the concern regarding the
capacity of developing countries to absorb the accessed foreign technology. Based on the
technological dimension, lack of a technological base represents a major constraint to economic
growth and development in Nigeria. In the absence of the required technology, the
diversification of the Nigerian economy is likely to remain a distant dream.
Efficiency in the Allocation of Resources
Another constraint to economic growth and development in Nigeria is the lack of competition
caused by monopolistic market structures, high protection against foreign competitors, and
state domination of some sectors. Weak economic institutions further compound the problem
of poor resource allocation and utilization in Nigeria. Weak institutions have been a drag on
Nigeria’s economic progress (Utomi, 2015). Nigerian public institutions lack the capacity to
institute and properly implement projects and programs that can improve the business
environment in Nigeria. In addition to poor prioritization of government projects and programs
(i.e. often times than not, government projects tend to be driven by self-interest or political
party agenda as opposed to focus on interventions that promote widespread benefits to
Nigerians), there is equally the lack of sustainability in government projects and programs as a
change in leadership can spell the end of an ongoing development project irrespective of its
perceived progress and benefits. The implication of this is the monumental waste of public
financial resources and time.
Political Economy and Economic Growth
The nature of political and economic structures can either be an enabler or constraint to
economic growth and development in any country. In Nigeria, bureaucratic organizations –
particularly government ministries, departments, and agencies- remain the bane of economic
growth and progress in Nigeria (Utomi, 2015). Again, Acemoglu et al., (2006) highlights a
number of factors that characterize weak political and economic structures: (1) allows the rich
to use patronage; (2) creates more rents for bureaucrats than an efficient state would, i.e. rent-
seeking; and (3) creates its own constituency and tends to persist over time. These factors
hamper economic structures. Nigeria is characterized by significant rent-seeking where
longstanding personal relationships determine what people get or what they can access as
opposed to merit. With rent-seeking, no value is added and this deepens the problem of poverty
and inequality in Nigeria. Strengthening public institutions is one of the ways of improving the
operating environment for businesses in Nigeria. Again, poor policies also worsen the problem
of poor economic growth in Nigeria. Gbosi (2007) notes that lack of integration of
macroeconomic plans and the absence of harmonization and coordination of fiscal policies
have been the bane of economic growth and development in Nigeria. Having identified the
constraints to economic development, the next section concludes this paper and presents
recommendations for addressing the constraints identified.
Conclusions
This paper looked at national socio-economic structures and their impact on economic growth
and development in developing countries. In discussing these issues, Nigeria formed the case

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study. The socio-economic structure of a country is the integrated system of production
relations that determines the societal pattern of productive activities. It is essential to note that
societies may possess one or more such structures but in many instances, there tends to be one
structure that is dominant. The dominant structure defines the character of a society and
determines which socio-economic formation that the society belongs to. This implies that the
dominant structure serves as the foundation of society as a whole.
In Nigeria, the structure and nature of fiscal federalism affects standards of living and the
operational environment for doing business. The brand of the federal system of government
operated in Nigerian is such that majority of income from natural resources in the states and
value-added- tax (VAT) accrues to the federal government before it is shared in an inequitable
manner to the states. One of the challenges stemming from the structure of fiscal federalism in
Nigeria is the ongoing implacable and intractable Niger Delta crisis arising from lop-sidedness
in revenue allocation and sharing in the country. Although the Niger Delta region –with its
wealth of crude oil resources- accounts for about 90% of Nigeria’s foreign exchange revenues,
the nature of fiscal federalism in Nigeria and the revenue allocation formula is such that it has
failed to address the underdevelopment of the Niger Delta region. This has brought untold
hardship for the people and induced abject poverty within the region, and this is responsible
for the present unrest in the Niger Delta. The Niger Delta is not alone in this situation; the fiscal
federal structure is partly responsible for regional disparities in human development indicators
between Northern and Southern Nigeria.
Another issue discussed in this paper concerned identifying the major constraints to economic
growth and development. With respect to Nigeria, three main constraints were discussed given
their centrality to the challenges affecting socio-economic development in Nigeria: level of
technological adoption; level of efficiency in resource allocation; and political and economic
structures.
Recommendations
This section highlights some of the key recommendations on how to address the three
constraints identified and discussed in the previous section. Given that Nigeria lacks the
technological base to take advantage of the fourth industrial revolution (i.e. digital revolution),
there is need for Nigeria to devote considerable efforts towards accessing foreign technology.
Accessing foreign technology is critical to diversifying the Nigerian economy through
agriculture. Again, attempts to access and use foreign technology to drive economic growth
can only succeed if Nigeria has the human capacity to exploit such technologies. Investing in
technical and vocational education can address any attendant capacity challenges.
Institutions and policies interact in complex ways so strengthening public institutions is critical
to improving public service delivery and improving standards of living. Some of the ways of
strengthening public institutions in Nigeria include: establishing performance benchmarking
mechanisms to keep track of performance; investing in staff capacity development schemes;
and strengthening engagement with the citizenry especially during policy formulation or
design.
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