Nigeria’s Dual Economy


Back in secondary school, I distinctly remember being taught in Social Studies class that Nigeria operates a mixed economy – an admixture of socialism and capitalism. It made little sense to me then, just as I am still struggling to understand what this mixed economy means now. More recently, I’ve had cause to believe that Nigeria does have a mixed or rather, a dual economy – not the capitalist-socialist variant my secondary school teacher mentioned – where parallel economies exist side by side within the national economy.

The Nigerian economy has evolved considerably since my secondary school days in the late 1990s to early 2000s. One such change is the wave of liberalisation, privatisation and deregulation that swept across significant parts of the public sector from the early 2000s under the Obasanjo regime. These include the privatisation of the Nigeria Telecommunications Limited (NITEL), liberalisation of the telecoms sector which led to the introduction of GSM mobile telephony, the re-capitalisation of the banking sector from 2005, the (on-going) process of deregulating the downstream sector of the oil industry which culminated in the contentious partial removal of subsidies and so on. All these should leave no one in doubt that Nigeria is on a steady path towards fully-fledged capitalism.

These liberalisation policies along with the boom in global commodity prices, mainly oil, which Nigeria heavily relies on as a primary source of foreign exchange (90%) and government revenues (85%) along with the booming banking and telecoms sector, have led to massive inflow of revenue and steady economic growth, averaging 6 to 7 per cent per annum. Nigeria is one of the 10 fastest growing economies in the world. According to global investment bank Goldman Sachs, Nigeria is one of the Next Eleven or N-11 emerging countries driving the global economy, after the BRICS countries. With the upcoming revision of GDP figures, Nigeria, like Ghana in 2010, could overnight be upgraded to an upper middle income country.

Lagos Nigeria. Photo credit: Nairaland.com
Lagos Nigeria. Photo credit: Nairaland.com
A Section of the Abuja Central Business District. Photo credit: Nairaland.com
A Section of the Abuja Central Business District. Photo credit: Nairaland.com

Without being overly pessimistic, it is easy to be confounded (I certainly am) by these figures and projections, especially when one considers the stark reality on ground that sometimes contradicts the figures. Looking at Abuja or Lagos, one could easily conclude that Nigeria is an emerging country and the next big driver of the global economy. The new shopping malls, the exclusive hotels, the “happening” joints, the brightly painted duplexes and the endless stream of air conditioned SUVs on the wide roads can give the impression that Nigeria is catching-up with the United Arab Emirates (UAE), and we do hope it is. However our fervent optimism should be tampered with pragmatism over our real pace of development.

There is the general perception that Abuja, the capital city and Lagos, the commercial nerve-centre are anomalies – they are the exception rather than the norm – and are far removed from the realities of the other 35 states in Nigeria. It is not uncommon to hear people in other parts of Nigeria speak of Abuja and Lagos with such awe and fascination, as they would, of a North-American or Western-European capital. This could also explain the high rate of not just rural-urban migration, but also urban to urban migration, particularly to these two cities. Many of my friends and classmates from Ahmadu Bello University (ABU) Zaria are now domiciled in Abuja and Lagos because this is where the “opportunities” and “infrastructure” are. If I were living in Nigeria, I would most likely be living and working in either of these two cities.

The fact is that there is just so much more to Nigeria than Abuja and Lagos both of which account for less than 20% of its over 170 million people. Sometimes, it’s tempting to assume that some consultancies and development organizations go to Abuja and Lagos, interview a few bankers, high-ranking civil servants and successful “business owners” and then conclude that Nigeria is “emerging” and rubbing shoulders with Malaysia and Indonesia. A huge bulk of the population is engaged in the informal sector which data and projections do not sufficiently capture.

A part of Suleja, just several kilometers away from Abuja.
A part of Suleja, just several kilometers away from Abuja.

In many parts of Nigeria, a traditional and informal economy exists side by side with the trappings of modernity; and by implication, grinding poverty and stupendous wealth paradoxically coexist. In the north-western city of Birnin-Kebbi, the capital of Kebbi state, it is not uncommon to see peasant farmers use donkeys, camels and other beasts of burden as a mode of transportation while big Japanese and German SUVs carrying public officials, politicians and business men zoom past. In Kano, spacious, and exquisitely-designed elegant mansions abound in tree-lined GRA areas, while bright yellow tricycles, reminiscent of New Delhi in India, popularly referred to as KEKE-NAPEP (named after a poverty alleviation program that introduced it) dot the busy streets.

Overall, there is certainly more to Nigeria which these reports and figures arguably fail to capture, and of course which leave many like me at best deeply confounded and confused, and at worst dismissive and cynical at such projections. While certain parts of the economy are “growing”, the same cannot be said of other sectors where the bulk of the population is engaged, leaving the impression that there are parallel economies within the national economy and conclusions drawn from the “booming” sectors are conflated to cover other sectors as well. Global consultancies would do well to factor in and capture these nuances and complexities.

Related:

Africa is Rising! At Least Its 1% Is

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16 thoughts on “Nigeria’s Dual Economy

  1. Well said. I guess our leaders love hearing that we are a fast growing economy, gives them an excuse not to do anything for the teeming population living below he poverty line

  2. Well said. I guess our leaders love hearing that we are a fast growing economy, gives them an excuse not to do anything for the teeming population living below the poverty line

  3. Another thing that gives the picture that our economy is growing is the focus on the middle class. Yes, the middle class is growing and it is driving the economy. And our middle class is 32 million-strong, more than many entire African countries. U can see that by the way multinationals are flocking to set up shop here: SABMiller’s brewery in Onitsha (largest in Africa), many shopping malls in Abuja, Lagos and maybe PH.
    But in d end, if policies to lift the bottom class up aren’t put in place, the gains of the middle class will be wiped out by the poverty at the bottom.

  4. Err. I by to disagree. What appeared to be informal distinct economy are all intertwined in the ‘booming’ ‘modern’ economy. The farmer in Kebbi produces Onions etc for Lagos market. The same farmer produces Tomatoes for companies like GINO in Lagos who in turn produce tomato paste for the ‘modern economy’. These farmers that appear informal actually feed Nigeria’s South and Major Cities.

    I think, you should seek to explore the connection, it is there.

    Keep up the good work though. Cheers

    • I see your point; the connection is there. But how efficient and ‘fair’ is the connection? The farmer that does the bulk of the work and produces the Onions in Kebbi lacks the capacity to transport it to Lagos, where there is much higher demand, and given the perishable nature of these farm produce and lack of adequate storage facilities (mainly due to inadequate electricity supply), he has to sell, and fast. So he sells at a giveaway price to a middleman who transports it one way or the other and eventually sells it to the retailers and consumers at much higher rates. In the end, the consumer complains about how expensive he buys it, the farmer complains about how cheaply he is ‘forced’ to sell and the transporter, in response to either party, complains about how terrible the roads are and how much it cost him to transport it. The connection is there but is very unhealthy, and I still think the farmer ends up with the least out of the whole deal.

  5. Each rating agency is interested in its own peculiar data, there are other agencies such as TI, WHO etc that are interested in the negative or informal Data that you think are not captured, and their reports are not so SWEET compared to the BOOMING reports. “Kowa da abinda ya dameshi”.

  6. Although Nigeria is booming now, to keep up the pace they would do well to diversify away from oil. As you can see from my latest blog post, the country still derives around 80% of its fiscal revenues from the black stuff. With all that money coming from oil, there is little incentive for the government to tackle corruption from its ranks and pursue tax-evaders.

    Recent developments in telecoms and banking look promising but more needs to be done.

    Nice piece.

  7. Of course,9jaria is movin toward modernazation and fuly flag capitalist society.jst take an axampls of increase in car’s and bicycles among individuals.

  8. yeeaah absolutely right abuja and lagos cannot speak to the entire country,majority of the Nigerian population are living below poverty level,while few that are in abuja and some order part of lagos are the well do or elite,keep up the good work cheeers

  9. Below we list archeological finds from modern times that,
    if authenticated, change history:. There’s no doubt that the gulf oil spill is offering a post-graduate course in how to live on planet earth (and how not to), but will anyone learn. Two weeks ago, the homeowner tried to light a candle in her bathroom while running water and a huge fireball exploded up to the ceiling.

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