Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
African Lions Author Workshop 2015: Nigeria
1. Olu Ajakaiye, Afeikhena Jerome, and Funke Alaba
Brookings/Development Policy Research Unit
African Lions Authors Draft Workshop, 5 June 2015, Arusha, Tanzania
2. • Preamble
• The Context
• Growth Traps/Challenges
• Opportunities
• Population and WAP
• Demographic Dividend
• Structure of Employment
• Employment Elasticities
• Public Sector Employment
• Role of Social Protection
Outline
3. Preamble
• After almost two decades of stagnation
and decline, the African continent is now
witnessing a positive turnaround despite
a number of challenges.
• In the wake of the global financial crisis
after 2008, the region has largely
continued to grow despite the downturn
in the developed world.
• The Economist indicates that over the
last ten years to 2010, six of the world’s
ten fastest-growing economies were in
sub-Saharan Africa. Angola was indeed
the highest growing country in the world,
while Nigeria and Ethiopia were 4th and
5th respectively.
• Structural transformation and
diversification is also beginning to take
hold as demonstrated by McMillan et al.
(2013).
The Economist, 6th January 2011
4. • Most of the inquiry into what’s driving Africa’s growth has however been at the aggregate
level, lumping the 54 African countries together (for example, McKinsey & Co. 2010).
• There is still inadequate knowledge about the growth process in individual African countries.
A detailed country-level appreciation of the economic, social, and political opportunities and
constraints that operate within these individual high-growth or economically dominant
countries is missing from the knowledge base (Kimenyi, 2014).
• As underscored by the concept note for this project, determining what these individual
country-level drivers and constraints are on growth and development is imperative. So also is
a clear, nuanced understanding of the growth opportunities and/or traps that undoubtedly
lurk in the medium to long-run for many African economies.
Preamble
5. • This paper appraises the case of Nigeria, which by all reckoning is one of the star
performers, despite a multiplicity of challenges prominent among which are serious
infrastructural deficits and security challenges, especially in the north-eastern part of the
country.
• In line with the orientation of the project, the Nigerian case study intends to:
• deepen our understanding of the social, economic and political economy
attributes that define the character of Nigeria’s non-inclusive growth experience;
• identify the potential limits and constraints to the growth/ employment
experience;
• Specifically, it examines the ten key research issues listed for country case studies.
Preamble
6. The Context
• With a population of about 177 million people in 2014, Nigeria is Africa’s most populous
country and the sixth most populous nation in the world.
• After decades of military rule since 1999, the country has successfully sustained the path of
democracy, and since then has enjoyed consistent and strong growth under technocratic
oversight.
7. The Context
• Real GDP growth has been strong, averaging 7.6 per cent
over the last decade, underpinned by favorable
improvements in the non-oil sector.
• The rebasing of Nigeria’s GDP in April 2014 to better
reflect the structure of the economy, saw it surge pass
South Africa to become Africa’s largest economy with a
revised GDP of $454 billion in 2012 and $510 billion in
2013 (compared with $259 billion and $270 billion
previously reported).
• The rebased data using updated prices and improved
methodology, also reveals a more diversified economy
than previously thought, with important sources of
growth coming from manufacturing (especially food and
beverages and previously undocumented services
including the entertainment industry). Source: McKinsay and Co 2014
8. • Growth has not been accompanied by significant diversification although Manuf. contributions increased
steadily from 6.6% in 2010 to 7.9% in 2013 much lower than the 25% target set in Vision 20:2020
• Growth has not translated into significant social and human development contrary to the postulates in the
development literature. The 2010 Nigeria Poverty Profile Report (NBS) estimated the poverty incidence at
69 percent in 2010, up from 54.4 percent in 2004 using the Harmonized National Living Standard Survey
(HNLSS) of 2009/2010. (Ajakaiye, et. al. 2013).
• A recent assessment by the World Bank using the NBS General Household Surveys (GHS) for 2010/2011
and 2012/2013 estimated the national poverty rate at 35.2 percent and 33.1 percent respectively. The
new GHS analysis also indicates that in rural areas, growth is slower, poverty is higher, and poverty
reduction is slower. It also suggests the persistence of significant inequality – Gini index increased from
43% in 2004 to 49% in 2010.
• Progress towards the fulfilment of many of the Millennium Development Goals continues to be a
challenge as the country ranked 151 out of 187 countries in the 2014 HDI. Governance also continues to
be challenging, as decades of economic mismanagement, instability, and corruption have adversely
affected the quality of investment in human development and infrastructure.
Growth Traps/ Challenges
9. • The country also faces security challenges as Boko Haram terrorists have become more active
and the incidence of kidnapping, abduction, pipeline vandalism, oil theft and the operation of
illegal refineries have become more worrisome.
• The absence of critical infrastructure including power, technology and transport has also
stifled the intermediation of productive forces and the country’s participation in the global
production networks and value chains.
• Nigeria held its Presidential elections on 28th March, 2015 further consolidating its
democratic process. For the first time, an opposition party candidate transitioned to power
through peaceful, democratic elections and Nigeria’s new President Muhammadu Buhari was
sworn into office on May 29, 2015. The challenges for the new administration include the
diversification of the economy, blockage of fiscal leakages, prioritization of government
expenditures to boost investment in critical infrastructure and job creation.
Growth Traps/ Challenges
10. • Large reserves of human and natural resources, a large domestic market, a decade of strong
economic growth, evolving democracy, and macroeconomic stability.
• ICT holds a strong potential for contributing to economic growth, economic diversification,
sophistication of the economy, especially the service sector, labour productivity, international
competitiveness and social inclusion.
• Taking advantage of the intra-Africa trade and cooperation. Efforts are also ongoing to deepen
relationships with other African lions such as South Africa and Kenya. Nigerian banks for example,
are spread across the continent; SA companies are prominent in Nigerian telecoms, brewery and
the reviving shopping complexes
• In sum, Nigeria is potentially a wealthy nation that is set to unleash its potential. This could be
gleaned from its recent classification as part of the MINT nations - an association of four major
emerging economies of Mexico, Indonesia, Nigeria and Turkey with favourable demography and
economic prospects.
Opportunities
11. • Nigeria has competed and favorably
outpaced Egypt and South Africa in
attracting FDI in recent years.
• Nigeria has also continued to be one of
the most watched frontier markets
and investment destinations among
the emerging economies.
• While global average return on
investment stood at 7.7 percent in
2013, return on investment was as
high as 35 percent in Nigeria (UN,
2014).
Opportunities
12. • Nigeria is expected to make up 3 percent of the total world population and 14 percent of Africa’s
population by 2050. It is expected to continue to grow to 239 million by 2025 and 440 million by
2050 due to the population momentum (United Nations, 2012).
• UN projections assume that Nigeria is currently a medium-fertility country. However, because
Nigeria’s TFR is currently still over 5 children per woman, even with the assumption of a steady
decline, it is still not expected to reach replacement level fertility by the end of the projection
period, 2050 (United Nations, 2012).
• Working age population (WAP) is expected to grow from 97 million in 2015 to 151 million in 2030,
almost 16 percent of Africa’s labour force.
• This means significant pressures on the country’s capacity to provide social services, as well as an
absorptive economy to generate enough jobs for 151 million people by 2030 in the labour market.
Failure to provide these opportunities will result in rising unemployment and a higher risk of social
strains.
Population and WAP
14. • Recent studies suggest a demographic dividend is possible for Nigeria, with the right policy
actions – similar to East Asian “economic tigers” such as Hong Kong, South Korea, Singapore
and Taiwan (WEF, 2014).
• Through concrete policy actions in health, education and gender equality, galvanized with
labour targets, Nigeria can create significant economic outcomes out of its evolving
demographics, including:
– Increase in labour supply and economic productivity;
– Increase in savings as a result of the decline in dependent population;
– Decrease in fertility rates which will ameliorate pressures at home and promote better
care and higher disposable income for investments; and
– A broader market supported by increasing domestic demand.
• Given Nigeria’s diverse geopolitical regions however, the timing of the demographic dividend
will vary from the North to the South, based on age structures, dependency and per capita
income.
Demographic Dividend
15. Structure of Employment
• In Nigeria, the total labour force is made up
of all persons aged 15 – 64 years excluding
students, home-keepers, retired persons and
stay-at-home parents, and persons unable to
work or not interested in work (NPC, 2011).
• Unemployment rate is the proportion of
labour force who were available for work but
did not work in the week preceding the
survey period for at least 39 hours.
• The labour force increased by 3.0 percent on
average, from 56.17 million in 2005 to 67.26
million in 2011. However, the total labour
force in remunerative employment increased
at an average of 0.6 percent over the period
while unemployment growth has surged with
an average growth rate of 16.2 percent
between 2005 and 2010.
Table 5: The Labour Market Situation, 2005-2011
Year Population
Economically
Active
Population Labour force Employed Unemployed
2005 138,468,013 56,170,672 49,486,362 6,684,310
2006 140,431,790 78,922,666 57,455,701 50,388,650 7,067,051
2007 144,925,607 81,448,191 59,294,283 51,763,909 7,530,374
2008 149,563,227 84,054,533 61,191,700 52,074,137 9,117,563
2009 154,349,250 86,744,278 63,149,835 50,709,317 12,440,517
2010 159,288,426 89,520,095 65,170,629 51,224,115 13,946,515
2011 164,385,656 92,384,738 67,256,090 51,181,884 16,074,205
Source: CBN 2011a
16. • The agriculture sector has continued to provide the most jobs for Nigerians,
employing over 50 percent of the country’s labour force; followed by education
(20 percent) and defense and community social services (10 percent).
• The fall in employment in manufacturing industries over time (NBS, 2011) explains
Nigeria’s level of deindustrialization. This removal or reduction of industrial
capacity or activity, has had serious impacts on the country's economic growth
sustainability, with little progress in transformational development.
• The economic environment creates a domestic market with a trade composition
and pattern based on primary production, with very little role played in the global
production networks and value chains.
Structure of Employment
17. Employment Elasticity of Growth
• Our results show that the Nigerian
economy is characterised with positive
GDP growth with an employment
elasticity of approximately 0.72.
• This implies high employment-intensive
(lower productivity) growth.
• Relating to this outcome to previous
findings, Kahn (2001) asserts that
employment elasticity in developing
economies should ideally be around 0.7
until these economies attain upper-
middle-income status.
Table 8: Employment Elasticity of Growth in Nigeria, 1995 – 2012
Variable Aggregate Agriculture Industry Services
C
13.15399
(21.837)***
13.622
(47.188)***
14.951
(11.191)***
8.974
(0.911)***
LOG (Real output)
0.718438
(7.366)***
0.633
(11.636)*** 0.063 (0.232)
1.563
(0.214)***
R-squared 0.81 0.91 0.004 0.80
Adjusted R-squared 0.79 0.91 -0.072 0.79
F-statistic 54.26*** 135.41*** 0.054 53.540***
Durbin-Watson stat 0.46 1.18 0.572 1.14
Source: Computed
18. • El-Rufai (2015) estimated that there are currently 1 million federal civil servants
and between 2-3 million in States and Local Governments adjusting for the
increasing numbers of aides of the president, ministers, governors and legislators.
• The public service is clearly over-bloated. It is also perceived as dysfunctional,
inefficient, corrupt, lacking administrative capacity and incapable of attracting the
best and brightest:
• While public service pay is low relative to the cost of living, the overall burden of
payroll as a percentage of the budget is huge. At the Federal level, an average of
80 percent of the budget currently goes towards the payment of salaries. As many
as 26 out of the 36 states are owing arrears of salaries partly as a result of the
dwindling fortunes from oil.
Public Sector Employment
19. • Social protection is gradually emerging in Nigeria as a response to the widespread poverty. In recent years,
governments and several development partners are increasingly developing social protection instruments to
tackle the country’s high rate of poverty and vulnerability.
• Federal government-led social protection includes three main programmes:
– the conditional cash transfer in Care of the People (COPE) (funded initially through the DRG fund) targeted
at households with specific social categories (those with children of school-going age that are female-
headed or contain members who are elderly, physically challenged, or are fistula or HIV/ AIDS patients;
– the health fee waiver for pregnant women and children under five (financed through the DRG fund); and
– the community-based health insurance scheme, which was redesigned in 2011 to make it more effective
(Holmes, et. al, 2011).
• The various programmes however remain extremely small-scale in the context of the high number of poor and
vulnerable people.
Role of Social Protection and Social
Assistance
20. • To be written after analysis of new Labour
Survey data.
Conclusion