Prospects for Economic Growth in Nigeria – a demographic perspective

Prospects for Economic Growth in Nigeria:

A Demographic Perspective

Nigeria: The Next GenerationFirst 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 describingNigeria’s economy and population

Nigeria’s economy has stagnated:No growth in income per capita

Source: World Development Indicators, 2008

0

500

1,000

1,500

2,000

2,500

3,000

3,500

1980 1990 2000 2006

GD

P p

er c

apit

a

PPP, constant 2005 intl $ Exchange-rate, constant 2000 US $

Indonesia and Pakistan have seen economic growth

Source: World Development Indicators, 2008

0

500

1,000

1,500

2,000

2,500

3,000

3,500

1980 1990 2000 2006

GD

P p

er

ca

pit

a,

PP

P (

co

ns

tan

t 2

00

5 i

nt'

l $

)

Nigeria

Indonesia

Pakistan

Nigeria’s economy compared with world regions

Source: World Development Indicators, 2008

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

1980 1990 2000 2006

GD

P p

er

cap

ita

, P

PP

(c

on

sta

nt

20

05 i

nt'

l $)

Nigeria

East Asia & Pacific

Sub-Saharan Africa

World

Comparing economic growth rates

Source: World Development Indicators, 2008

Nigeria 0.0%Indonesia 3.6%Pakistan 2.5%East Asia & Pacific 6.6%Sub-Saharan Africa 0.0%World 1.6%

average annual growth rate of GDP/capita (PPP), 1980 - 2006

Nigeria’s population has grown rapidly

Source: UN, World Population Prospects, 2008

0

50

100

150

200

250

300

1960 1970 1980 1990 2000 2010

Po

pu

lati

on

(m

illi

on

s)

Nigeria’s fertility rate has started to fall

Source: UN, World Population Prospects, 2008

2

3

4

5

6

7

1960 1970 1980 1990 2000 2010

Ch

ild

ren

per

wo

man

The infant mortality rate has fallen, but not steadily

Source: UN, World Population Prospects, 2008

0

50

100

150

200

1960 1970 1980 1990 2000 2010

Dea

ths

per

1,0

00 li

ve b

irth

s

Life expectancy has risen, but not steadily

Source: UN, World Population Prospects, 2008

35

40

45

50

55

60

65

1960 1970 1980 1990 2000 2010

Lif

e ex

pec

tan

cy a

t b

irth

, ye

ars

Crude birth and death rates are falling

Source: UN, World Population Prospects, 2008

0

10

20

30

40

50

1960 1970 1980 1990 2000 2010

Per

1,0

00 p

op

ula

tio

n

Crude birth rate Crude death rate

Population growth has been rapid

Source: UN, World Population Prospects, 2008

1.0

1.5

2.0

2.5

3.0

3.5

1960 1970 1980 1990 2000 2010

Po

pu

lati

on

gro

wth

rat

e (%

)

The ratio of working-age to non-working-age people has been pretty

steady

Source: UN, World Population Prospects, 2008

1.0

1.5

2.0

2.5

1960 1970 1980 1990 2000 2010

Rat

io o

f w

ork

ing

-ag

e to

no

n-w

ork

ing

-ag

e p

op

ula

tio

n

Changing age structure, 1950-2010:A 3-dimensional view

Source: UN, World Population Prospects 2008

0

5

10

15

20

25

30

Po

pu

lati

on

(m

illi

on

s)

0 - 4

10 -

1420

- 24

30 -

3440

- 44

50 -

5460

- 64

70 -

7480

- 84

90 -

9410

0+

1950

1960

1970

1980

1990

2000

2010

Age group

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

-1%

0%

1%

2%

3%

4%

5%

6%

7%

East Asia & Pacific Sub-Saharan Africa

East Asian "miracle"

Sub-Saharan African debacle

Changing age structure, 1960-2005

Source: UN, World Population Prospects

1.00

1.25

1.50

1.75

2.00

2.25

2.50

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Rat

io o

f w

ork

ing

-ag

e to

no

n-w

ork

ing

-ag

e p

op

ula

tio

n

East Asia & Pacific Sub-Saharan Africa

Population growth rate

time

Death rate

Birth rate

The Demographic Transition

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

0

50

100

150

200

250

300

1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Po

pu

lati

on

(m

illi

on

s)

The fertility rate is expected to continue falling

Source: UN, World Population Prospects, 2008

2

3

4

5

6

7

1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Ch

ild

ren

pe

r w

om

an

The infant mortality rate is projected to continue falling

Source: UN, World Population Prospects, 2008

0

50

100

150

200

1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

De

ath

s p

er

1,0

00

liv

e b

irth

s

Life expectancy will continue to rise

Source: UN, World Population Prospects, 2008

35

40

45

50

55

60

65

1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Lif

e e

xp

ec

tan

cy

at

bir

th,

ye

ars

Crude birth and death rates will continue to fall

Source: UN, World Population Prospects, 2008

0

10

20

30

40

50

1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Pe

r 1

,00

0 p

op

ula

tio

n

Crude birth rate Crude death rate

Population growth rate will decline substantially

Source: UN, World Population Prospects, 2008

1.0

1.5

2.0

2.5

3.0

3.5

1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Po

pu

lati

on

gro

wth

rat

e (%

)

The ratio of working-age to non-working-age people is set to increase dramatically

Source: UN, World Population Prospects, 2008

1.0

1.5

2.0

2.5

1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Ra

tio

of

wo

rkin

g-a

ge

to

no

n-w

ork

ing

-ag

e p

op

ula

tio

n

Growth of the working-age to non-working-age ratio, 1960-2050 (under 3 UN fertility

scenarios)

Source: UN, World Population Prospects 2008

1.0

1.5

2.0

2.5

1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Ra

tio

of

wo

rkin

g-a

ge

to

no

n-w

ork

ing

-ag

e p

op

ula

tio

n

Low Medium High

The bottom line: demographic change can lead to

economic growth

0

500

1,000

1,500

2,000

2,500

3,000

1980 1990 2000 2010 2020 2030 2040 2050

GD

P p

er c

apit

a (P

PP

)

Past performance With demographic dividend With no dividend

Comparing the growth rates of the working-age and non-working-age population

Source: UN, World Population Prospects, 2008

Dependent Working-age Dependent Working-agepopulation population population population

Nigeria 2.6% 2.7% 0.7% 2.0%Indonesia 0.9% 2.3% 0.8% 0.4%Pakistan 2.5% 3.0% 1.0% 1.8%East Asia 0.5% 1.9% 0.9% -0.1%Sub-Saharan Africa 2.6% 2.8% 1.1% 2.3%World 1.1% 1.9% 0.8% 0.7%

1970 - 2010 2010 - 2050

Annual average growth rate

Changing age structure, 1960-2050:Nigeria compared with Indonesia and Pakistan

Source: UN, World Population Prospects 2008

1.0

1.5

2.0

2.5

1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Rat

io o

f w

ork

ing

-ag

e to

no

n-w

ork

ing

-ag

e p

op

ula

tio

n

Nigeria Indonesia Pakistan

Changing age structure, 1960-2050:Nigeria compared with East Asia

Source: UN, World Population Prospects 2008

1.0

1.5

2.0

2.5

1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Ra

tio

of

wo

rkin

g-a

ge

to

no

n-w

ork

ing

-ag

e p

op

ula

tio

n

East Asia Nigeria low Nigeria medium Nigeria high

The size of the 60+ population will increase dramatically

Source: UN, World Population Prospects, 2008

0

10

20

30

40

50

60

1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Po

pu

lati

on

(m

illi

on

s)

15-24 60+

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?