Economic Development in Economic Development in Nigeria:Nigeria:
A Demographic PerspectiveA Demographic Perspective
Committee on African StudiesCommittee on African StudiesHarvard Africa Seminar, Harvard Africa Seminar, April 13, 2010
David E. Bloom and Salal HumairDepartment of Global Health and Population,
HSPH
Nigeria’s economy has stagnated:No growth in income per capita
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 $
Source: World Development Indicators 2008
Indonesia and Pakistan have seen economic growth
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
Source: World Development Indicators 2008
Nigeria’s economy compared with world regions
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
ca
pit
a,
PP
P (
co
ns
tan
t 2
00
5 i
nt'
l $
)
Nigeria
East Asia & Pacific
Sub-Saharan Africa
World
Source: World Development Indicators 2008
Comparing economic growth rates
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
Source: World Development Indicators 2008
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
Average annual growth rate of GDP per capita, 1975-2005
Source: 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
1.00
1.25
1.50
1.75
2.00
2.25
2.50
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
Ra
tio
of
wo
rkin
g-a
ge
to
no
n-w
ork
ing
-ag
e p
op
ula
tio
n
East Asia & Pacific Sub-Saharan Africa
Source: UN, World Population Prospects 2008
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
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
2
3
4
5
6
7
1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
Ch
ild
ren
pe
r w
om
an
Source: UN, World Population Prospects, 2008
The infant mortality rate is projected to continue falling
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
Source: UN, World Population Prospects, 2008
Life expectancy will continue to rise
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
Source: UN, World Population Prospects, 2008
Crude birth and death rates will continue to fall
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
Source: UN, World Population Prospects, 2008
Population growth rate will decline substantially
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 (%
)
Source: UN, World Population Prospects, 2008
The ratio of working-age to non-working-age people is set to increase
dramatically
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
Source: UN, World Population Prospects, 2008
Growth of the working-age to non-working-age ratio, 1960-2050 (under 3 UN fertility
scenarios)
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
Source: UN, World Population Prospects, 2008
Comparing the growth rates of the working-age and non-working-age population
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
Source: UN, World Population Prospects, 2008
Changing Age Structure, 1950-2050:A longer 3-dimensional view of Nigeria’s trajectory
0
5
10
15
20
25
30
Po
pu
lati
on
(m
illio
ns
)
1950
1975
2000
2025
2050
Age group
Source: UN, World Population Prospects, 2008
Source: UN, World Population Prospects, 2008
1950
Source: UN, World Population Prospects, 2008
1960
Source: UN, World Population Prospects, 2008
1970
Source: UN, World Population Prospects, 2008
1980
Source: UN, World Population Prospects, 2008
1990
Source: UN, World Population Prospects, 2008
2000
Source: UN, World Population Prospects, 2008
2010
Source: UN, World Population Prospects, 2008
2020
Source: UN, World Population Prospects, 2008
2030
Source: UN, World Population Prospects, 2008
2040
Source: UN, World Population Prospects, 2008
2050
Changing Age Structure, 1960-2050:Nigeria compared with East Asia
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
Source: UN, World Population Prospects, 2008
Changing Age Structure, 1960-2050:Nigeria compared with Indonesia and Pakistan
1.0
1.5
2.0
2.5
1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
Rati
o o
f w
ork
ing
-ag
e t
on
on
-wo
rkin
g-a
ge p
op
ula
tio
n
Nigeria Indonesia PakistanSource: 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
0.0
2.5
5.0
7.5
10.0
1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
Pe
rce
nt
% 60+ % 80+
Source: UN, World Population Prospects, 2008
Will demographic heterogeneity
induce economic
inequality and political
instability?
Source: Population and Housing Census, National Population Commission, Nigeria, 1991 and 2006
Ratio, working-age to non-working-age population, by state
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
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
2005 2010 2015 2020 2025 2030 2035
Business-as-usual With DD and increased LE
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 $5,966
Potential impact on per capita income with institutional and health
improvements
Source:Source: Bloom et al. 2010. Nigeria’s demographic dividend. Background paper for the NGN project
Potential impact of the demographic dividend on poverty
Source:Source: Bloom et al. 2010. Nigeria’s demographic dividend. Background paper for the NGN project
Year # lifted out of poverty with
DD and added LE
# lifted out of poverty with improved IQ
& LE2010 - -
2020 5.8 million 5.8 million
2030 31.8 million 34 million
What are the challenges and opportunities in collecting the
demographic dividend?
• Jobs creation• Education• Health – infant/child mortality, maternal
health, unmet need for family planning
Year WA pop Unempl-oyment
Jobs needed Between years
Jobs to be added
2010 85,525,401 20% 52,358,719 2015 97,731,223 15% 63,570,579 2010-15 11,211,860 2020 111,088,850 10% 76,509,768 2015-20 12,939,189 2025 125,325,513 8% 88,233,036 2020-25 11,723,268 2030 140,036,212 7% 99,661,452 2025-30 11,428,415
Nigeria will need lots of jobs
Source: Author calculations.
But jobs will also need to be productive: Nigeria’s economic
lifecycle - individual
Source: Mason et al. 2010. Population and economic progress in Nigeria. Background paper for the NGN project
Education will be key in making jobs productive: economic lifecycle -
aggregate
Source: Mason et al. 2010. Population and economic progress in Nigeria. Background paper for the NGN project
Needs of children
Labor surplus
And results can be achieved with little: Nigeria’s current education
expenditures
Source: Mason et al. 2010. Population and economic progress in Nigeria. Background paper for the NGN project
Nigeria’s education and health spending
Source: Mason et al. 2010. Population and economic progress in Nigeria. Background paper for the NGN project.
Actual ($) % of spending
Education, Public 142 7.33Education, Private 922 47.63 Health, public 39 2.01Health, private 833 43.04 Total 1,936 100Total Public 181 9.33Total Private 1,755 90.67Per capita spending (2004 $s)
Nigeria’s human capital investment compared to other countries
Source: Nigeria: The Next GenerationTask Force secretariat, 2010.
Low health spending reflected in low level of maternal health
Source: Nigeria 2008 demographic and health survey: key findings.
Low health spending reflected in high levels of child mortality
Source: Nigeria 2008 demographic and health survey: key findings.
Low health spending reflected in low level of children vaccination coverage
Source: Nigeria 2008 demographic and health survey: key findings.
Low health spending reflected in high level of unmet need for family planning
Source: Unpublished background memo for the NGN project.
Unmet need in the context of current fertility
Source: Nigeria 2008 demographic and health survey: key findings.
Nigeria’s untapped human capital: the diaspora
Source: US Department of Homeland Security, Office of Immigration Statistics, 2008 Yearbook of Immigration Statistics.
1,500
8,800
35,343
67,232
82,583
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
1961 to 1970 1971 to 1980 1981 to 1990 1991 to 2000 2001 to 2008
Per
son
s
Number of persons obtaining legal permanent residents who were born in Nigeria, fiscal years 1961-2008
The Nigerian US diaspora is well-educated
Source: Nigerian-born Population in the United States, unpublished background memo, NGN project
10.0
25.9
20.5
40.3
19.0
24.0
12.2
28.0
9.4
27.8
60.8
49.6
73.6
48.9
54.0
34.9
60.6
24.3
0
10
20
30
40
50
60
70
80
Natives Nigeria Bangladesh India Indonesia Pakistan Brazil South Africa All otherforeign-born
Per
cen
t am
on
g p
op
ula
tio
n 2
5 ye
ars
old
an
d o
ver
Graduate or professional degree Bachelor's degree or higher
And the diaspora is a significant resource
Source: The World Bank. Migration remittances factbook 2008. Updated Nigeria data from personal communication.
(US$ million) 2001 2002 2003 2004 2005 2006 2007 2008 Inward remittance flows 1,167 1,209 1,063 2,273 3,329 5,435 9,221 9,980 Outward remittance flows 1 1 12 21 18 18 103 103
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
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
VARIABLES Geographical
only (OLS)
Geographical and human
only (OLS)
Geo, human
and dem only (OLS)
Geo, human
and dem only (IV)
Column (4) with
ICRG Score (OLS)
Column (4) with
ICRG Score (IV)
Column (5) with
SW Openness
(OLS)
Column (5) with
SW Openness
(IV)
Column (5) with
Trd Openness
(OLS)
Column (5) with
Trd Openness
(IV)
Difference working-age and 2.083*** 1.972*** 1.896*** 1.923*** 1.907*** 1.951*** 1.888*** 1.887*** total population growth (0.602) (0.624) (0.684) (0.620) (0.682) (0.618) (0.674) (0.619) Trade openness
0.00772** 0.00772**
(0.00313) (0.00310)
Sachs Warner openness 0.389 0.391 (0.479) (0.469) ICRG score for quality of institutions
0.108** 0.107** 0.105** 0.104** 0.104** 0.104**
(0.0445) (0.0419) (0.0466) (0.0441) (0.0446) (0.0420)
Log average years of secondary -0.172 -0.429 -0.415 -0.447 -0.450 -0.454 -0.459 -0.450 -0.450 schooling in base year (0.325) (0.334) (0.332) (0.333) (0.332) (0.328) (0.326) (0.332) (0.331) Log life expectancy in base year
8.606*** 5.434** 5.603*** 5.357** 5.317*** 5.146** 5.079** 5.269** 5.271***
(1.926) (2.161) (2.044) (2.154) (1.957) (2.283) (2.081) (2.150) (1.958)
Tropical location -0.699* -0.407 -0.648* -0.635* -0.477 -0.481 -0.533 -0.539 -0.731* -0.731* (0.363) (0.349) (0.344) (0.343) (0.368) (0.361) (0.390) (0.380) (0.392) (0.382) Landlocked 0.332 0.805** 1.008*** 0.998*** 0.725** 0.729** 0.699* 0.705** 0.734** 0.734**
(0.367) (0.386) (0.382) (0.384) (0.358) (0.358) (0.358) (0.358) (0.357) (0.357)
Log working-age population to 14.20*** 12.94*** 16.68*** 16.48*** 12.89*** 12.95*** 12.50*** 12.59*** 12.91*** 12.91*** total population in base year (2.420) (2.259) (2.650) (2.597) (3.437) (3.118) (3.287) (3.018) (3.403) (3.084) Log real GDP per capita in base year -0.902*** -1.844*** -1.617*** -1.630*** -1.828*** -1.825*** -1.852*** -1.846*** -1.897*** -1.897***
(0.280) (0.337) (0.350) (0.342) (0.369) (0.354) (0.370) (0.356) (0.368) (0.353)
Constant 18.85*** -9.351 3.388 -0.490 0.853 -2.463 1.618 -1.619 1.564 -2.027 (3.441) (8.028) (8.945) (8.396) (9.759) (8.752) (10.27) (9.260) (9.762) (8.766) Observations 610 610 610 610 610 610 610 610 610 610 R-squared 0.146 0.198 0.253 0.253 0.274 0.274 0.276 0.276 0.282 0.282 Robust standard errors in parentheses
*** p<0.01, ** p<0.05, * p<0.1
Source: Bloom et al. 2010. Nigeria’s demographic dividend. Background paper for the NGN project