Breaking the cycle: Addressing Nigeria’s productivity gap amid Africa’s economic challenges

Nigeria often hailed as the “Giant of Africa,” is a paradox—endowed with vast natural resources and a youthful population, yet its potential remains largely untapped. As the continent’s largest economy, it faces a stubborn productivity gap that threatens to deepen the socio-economic divide not only within its borders but also across Africa. Despite its abundant resources, Nigeria’s economic trajectory mirrors broader challenges identified in The Economist’s recent special report, The Africa Gap. Why has Nigeria, with all its wealth, struggled to drive sustained economic growth, and what urgent reforms are necessary to break the cycle?

Nigeria, like much of Africa, has seen undeniable progress in health and education over the last century. Literacy rates have improved, life expectancy has increased, and university enrolments are at record highs. Yet, economic transformation remains an elusive goal. In 1960, Nigeria’s GDP per capita was comparable to that of East Asian nations, but today, countries like South Korea and Vietnam have outpaced Nigeria by leaps and bounds. Over the past six decades, the World Bank notes that Africa’s productivity growth—including Nigeria’s—has been stagnantly driven by an increase in labour and capital, rather than technological innovation or efficiency gains.

“Despite its oil wealth, Nigeria has failed to build robust industries that create jobs and contribute to economic diversification.”

Nigeria’s agricultural sector offers a striking example of this crisis. Dominated by smallholder farmers, it remains anchored in outdated techniques and inadequate infrastructure. With less than 5 percent of sub-Saharan Africa’s agricultural land irrigated and significant post-harvest losses due to lack of cold storage, Nigeria has failed to modernise a sector that could, if reformed, drive substantial growth. Meanwhile, its neighbours in South Asia have achieved impressive agricultural gains without expanding land use—highlighting the unsustainable path Nigeria has taken.

The country’s industrial and service sectors paint a similarly grim picture. Despite its oil wealth, Nigeria has failed to build robust industries that create jobs and contribute to economic diversification. Manufacturing accounts for a meagre share of GDP, hindered by poor infrastructure, exorbitant borrowing costs, and chronic power shortages. Similarly, the service sector remains entrenched in low-skill, informal work rather than the high-value, technologically advanced sectors needed to compete in the global economy.

The most striking aspect of the Africa Gap report is its focus on governance as the primary driver of stagnation. In Nigeria, the effects of weak governance are devastating. Corruption syphons off vital resources, undermining the capacity to invest in infrastructure, education, and healthcare. Short-term political goals overshadow long-term economic planning, while public institutions remain too fragile to enact real change.

Worse still, a lack of ambition at the highest levels exacerbates the problem. As the report highlights, many African leaders—including Nigeria’s elite—are content with a “low-ambition/muddling-through developmentalism” approach that prioritises political survival over transformative change. This mindset has led to missed opportunities, such as the underutilisation of regional frameworks like the African Continental Free Trade Area (AfCFTA), which could integrate Nigeria into larger, more dynamic markets.

Addressing Nigeria’s productivity gap requires bold, transformative action:

Invest in human capital: Education remains the foundation of any productive economy, yet Nigeria’s education system suffers from underfunding, overcrowded classrooms, and a lack of modern curriculum. Reforms must prioritise vocational training, STEM education, and digital literacy to equip the workforce for a 21st-century economy.

Revitalise agriculture: Nigeria’s agricultural sector must undergo a comprehensive transformation, emphasising technological innovation, better infrastructure, and more efficient resource management. Expanding irrigation, improving cold storage, and modernising transport networks will drastically reduce waste and boost productivity. Supporting smallholder farmers through policy and private investment is crucial for long-term growth.

Foster industrial growth: Manufacturing holds the key to Nigeria’s economic diversification. The government must create an environment conducive to industrial development by addressing energy shortages, reducing operational costs, and incentivising local production. Nigeria can learn from Mauritius, which transitioned from a resource-dependent economy to one driven by manufacturing.

Strengthen governance: Economic reforms will remain hollow unless Nigeria strengthens its governance structures. This includes curbing corruption, ensuring transparency, and investing in long-term development strategies. Enacting clear property rights and creating a predictable business environment will attract investment, both domestic and foreign.

Leverage regional integration: Fully implementing the AfCFTA presents Nigeria with the opportunity to unlock larger markets, attract investment, and foster regional cooperation. However, this requires harmonising trade policies, improving infrastructure, and reducing barriers to cross-border commerce.

Breaking Nigeria’s productivity cycle demands more than incremental policy adjustments; it requires a fundamental shift in mindset. Leaders must transcend complacency and embrace bold reforms that prioritise long-term growth over immediate political gains. Countries that have achieved success—whether in Asia, Latin America, or Africa—have done so by forging a development bargain among elites, one that focuses on expanding the economic pie rather than hoarding it.

Nigeria has the potential to lead Africa’s economic transformation. Its youthful population, vast resources, and emerging markets position it to close the productivity gap. However, time is of the essence. Without urgent action, Nigeria risks becoming a cautionary tale in Africa’s development journey. The question now is: will Nigeria rise to the challenge or remain mired in a cycle of stagnation?