El-Rufai says Nigeria’s economic slowdown driven by misallocation of talent

Nasir El-Rufai, former Kaduna State governor, currently standing trial in respect of abuse of public office, when presided over Kaduna state between 2015 to 2023, has argued that Nigeria’s persistent economic underperformance is largely the result of a structural misallocation of talent.

In a policy commentary released on Tuesday on his social media handle, seen by BusinessDay, the former governor, now an ADC ‘s chieftian, noted that at moment, Nigeria ‘ s most capable individuals are drawn toward rent-seeking activities rather than productive enterprise.

El-Rufai described Nigeria’s economic challenge as fundamentally an “incentive problem,” contending that the nation does not suffer from a shortage of talent, capital, or ideas, but from a system that rewards access to state power and regulatory discretion more than innovation and value creation.

According to him, across societies, skilled individuals naturally gravitate toward sectors offering the highest returns to their abilities. However, when those rewards are concentrated in activities that merely redistribute wealth rather than generate new economic value, long-term growth weakens.

“Nigeria’s growth problem is not primarily a shortage of talent, capital, or ideas. It is a problem of where our best talent goes—and why,” he said.

Structural Economic Challenges

El-Rufai pointed to several indicators highlighting structural weaknesses in the Nigerian economy.

While the country recorded about 4.1 percent GDP growth in 2024, he noted that the pace remains insufficient for a country with Nigeria’s population and demographic pressures. Nigeria’s GDP per capita, estimated at about $1,084, places it among lower-income economies despite its large market and resource base.

He further highlighted that informal employment accounts for roughly 93 percent of the labour force, suggesting that most businesses operate on a small scale with limited capacity for growth. The country’s tax-to-GDP ratio of about 8.2 percent, one of the lowest in Africa, also reflects weak fiscal capacity and heavy reliance on discretionary revenue collection.

“These numbers describe an economy where scale is risky, visibility attracts predation, and long-term investment struggles to compete with short-term access,” he said.

Infrastructure and Regulatory Constraints

The former governor also cited structural bottlenecks discouraging productive investment.

Nigeria’s electricity grid, he noted, delivers just over 5,300 megawatts for a population exceeding 200 million, making large-scale manufacturing difficult. Similarly, vessel turnaround time at Nigerian ports averages about five days, significantly above global benchmarks, increasing costs and delays for businesses.

He argued that such conditions raise the risk of entrepreneurship and push talented individuals toward sectors linked to government influence or regulatory brokerage.

Rent-Seeking and Economic Growth

El-Rufai warned that rent-seeking activities weaken economic growth in three ways: by absorbing labour and capital without producing output, by increasing the cost of doing business through delays and informal payments, and by diverting highly skilled individuals away from innovation and enterprise.

“When the brightest minds are pulled away from production, technological progress slows and the economy’s long-run growth declines,” he stated.

Reform Agenda

To address the challenge, El-Rufai said Nigeria’s economic reforms should focus on ensuring that value creation becomes more rewarding than value capture.

He proposed reducing discretionary government powers, strengthening property rights, digitising regulatory systems, and making it easier for businesses to scale and export.

He also suggested measurable targets that could signal progress within two years, including raising reliable electricity supply toward 8,000–10,000 megawatts, reducing port turnaround time below four days, increasing wage employment to about 18–20 percent, and raising the tax-to-GDP ratio toward 10 percent through digitisation and broader tax compliance.

A Strategic Economic Choice

El-Rufai concluded that Nigeria’s economic trajectory will depend on whether the system rewards productive enterprise or rent-seeking behaviour.

“If the system rewards brokers over builders, we will continue to underperform. If it rewards producers over extractors, growth will follow—rapidly and durably,” he said.

He added that Nigeria’s long-term success depends on creating incentives that encourage its most talented citizens to build, innovate, and export rather than pursue influence within rent-driven systems.