In the 1960s, Nigeria’s economic future was bright. Endowed with rich natural resources, arable land, and a young, growing population, the country seemed poised to lead Africa’s economic ascent.
For years, Nigeria’s GDP per capita exceeded that of China, spurring hopes that it would emerge as a regional powerhouse. Oil discoveries only amplified this optimism, with the economy initially benefiting from high revenues and rapid growth.
“Nigeria, despite its early lead, now trails significantly, with a GDP per capita of just $1,621. What caused these economies, once similarly poised, to diverge so dramatically?”
Yet Nigeria’s economic story would take a different turn. Today, China has soared to become the world’s second-largest economy, with a GDP per capita of $12,614, according to macrotrends and World Bank data in 2023.
Nigeria, despite its early lead, now trails significantly, with a GDP per capita of just $1,621. What caused these economies, once similarly poised, to diverge so dramatically?
Parallel beginnings, divergent paths
In the early years, the trajectories of both nations were remarkably similar, with Nigeria’s resource wealth and China’s vast workforce offering distinct yet promising economic foundations.
However, where China moved to industrialise, Nigeria became reliant on oil, diverting focus from agriculture and manufacturing. China’s reforms in the 1970s and 1980s—opening to foreign investment, embracing exports, and developing Special Economic Zones—lifted millions out of poverty and set the stage for long-term economic growth.
Nigeria, in contrast, remained tethered to oil. As prices fluctuated, so too did the economy, which became increasingly vulnerable. Efforts to diversify were sporadic and hampered by inadequate infrastructure and unreliable power.
Data from Macrotrends reveals that while China’s GDP grew almost 10 percent per year through the 1980s and 1990s, Nigeria’s economy lagged, with oil revenue propping up a limited industrial base and discouraging wider economic development.
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The oil trap and industrial decline
The curse of dependency became evident as oil revenue eclipsed other sectors, overshadowing manufacturing and agriculture, which had been traditional economic pillars.
A report from the Lagos State Employment Trust Fund (LSETF), titled Going Down the Memory Lane: Learning from the History of Manufacturing in Nigeria, sheds light on how oil overshadowed Nigeria’s manufacturing sector.
Throughout the 1990s and 2000s, Nigeria’s manufacturing output declined significantly. The report reveals that most manufacturing firms were not export-orientated and lacked the efficiency needed to compete globally.
Consequently, many competitive companies relocated their factories abroad, leaving Nigeria’s manufacturing sector to dwindle.
Even industries like beverages, textiles, cement, and tobacco, which once kept the sector afloat, struggled, often operating at half capacity. Between 2000 and 2008, Nigeria’s manufacturing sector experienced one of its worst declines, with 820 companies either shutting down or suspending production.
The textile industry, once a major employer with nearly 700,000 workers and a turnover of $8.95 billion, witnessed a catastrophic collapse. By 2004, what was once a thriving sector had dwindled to just ten stable factories.
The report underscores a missed opportunity in Nigeria’s history: an overdependence on oil revenue not only hindered the manufacturing sector but left the economy vulnerable to global oil price fluctuations.
Olugbenga Alawode, an economist, reflects on the nation’s lost opportunities, noting that “Nigeria’s oil wealth created short-term gains but undermined the sectors that produce real, sustainable prosperity.”
The focus on quick oil profits crowded out investment in manufacturing and agriculture, which could have absorbed Nigeria’s young labour force and created a robust export base. He added.
Policy interventions miss the mark.
Various government attempts to reduce Nigeria’s oil dependency fell short. The Nigerian Enterprises Promotion Decrees of the 1970s mandated foreign companies to share ownership with Nigerians, but the policy lacked essential support—like reliable power and transportation networks—that would have enabled local industries to thrive.
Elfaruk Umar, economist, explains, “The intention was good, but without the basics like electricity and infrastructure, these industries couldn’t compete.”
Infrastructure deficits undermined efforts to foster an indigenous industrial sector, ultimately stifling diversification efforts.
Read also: High expenditures drive Nigeria’s budget deficit-to-GDP to 7.5%
A potential economic rebound
Recent developments hint at possible progress. In August 2024, Nigeria’s Purchasing Managers’ Index (PMI) rose to 50.2, marking the first sign of economic expansion after a year of contraction.
Growth in the services and agricultural sectors led the way, highlighting the potential for sectors beyond oil to revive Nigeria’s economy. But the industrial sector remains in decline, and without concerted policy efforts, the risk of further stagnation persists.
China’s model offers lessons for Nigeria.
China’s model demonstrates the transformative power of industrialization. By channelling resources into exports, attracting foreign investment, and building manufacturing capacity, China engineered one of the fastest economic transformations in history.
For Nigeria, emulating some of these strategies—investing in manufacturing, improving infrastructure, and creating an environment conducive to investment—could ignite a similar shift.
As Alawode notes, “China leveraged its human capital and resources to sustain long-term growth. Nigeria has the potential to do the same by focusing on diversification and fostering a competitive business environment.”
An opportunity for redemption
The economic trajectories of China and Nigeria reflect the consequences of strategic decisions. For Nigeria, the early promise has faded, overshadowed by missed opportunities and an overreliance on oil.
Yet it’s not too late to alter course. By investing in manufacturing, supporting diverse sectors, and strengthening infrastructure, Nigeria can still unlock its economic potential and secure a more sustainable future.
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