What's Nigeria’s economic record compared to other African countries?

How do you know when you are excelling at something? By measuring your performance today against your performance in the past. It's why people get on scales periodically when they have a weight goal. And why your work appraisals measure your current performance against your past.

Similarly, countries tend to review their performances over time. Most macroeconomic indicators like inflation rates or GDP measure the country's performance today versus a year or month prior.
 

​​​​But this can sometimes be insufficient in telling how well a country has performed. A country could grow by 5%, which is good because the country has witnessed some growth. But if its peers grew 15%, there's obvious room for improvement. So, apart from checking for a country's performance relative to the past, it's also critical to check relative to peers.

So in this article, we review Nigeria's economic performance—how it has grown and improved the well-being of its people—against other African peers.

We selected  Nigeria’s peers based on two criteria: population and the size of their economies. Given that Nigeria is the largest economy by both metrics—the most populous country in Africa and the largest economy, we’ll look at other African countries that are almost as large. Therefore, we selected two countries from each of the four (out of five) regions: North Africa, Southern Africa, East Africa and West Africa.
 

The chosen

We chose the countries based on their population size because a country’s population size determines its growth potential. For one, a country’s population largely determines the size of its labour force. So, a large country is more likely to have a large labour force than a small country. For example, Nigeria has a population of over 200 million people and a labour force of 70 million people—that alone is more than the entire population of Togo, Senegal, Cote d’Ivoire, Cameroon, and Benin combined.  In short, a large country means more people to work and grow that country.

Of course, the size of the labour force still depends on the country's population distribution. For example, out of Vietnam’s 77 million people, 55 million are in the labour force, while Japan, with almost twice Vietnam’s population (126 million people), only has a labour force of 68 million people. That’s because the average age in Japan is 48, while in Vietnam, it's 30.

Thankfully, Africa is largely a young continent, with an average age of 18 years which narrows our focus to only the size of each country’s population.

Another reason population size is critical for economic comparison is that a country's population largely determines the potential for the country's economic performance because the people in the country make up the market size of that country.

Similar to the labour force situation, a large population in a country means more people to buy goods and services within that country.

Finally, when we look at a country’s economic size (and its growth) in per capita terms (per person), we get a picture of the country's standard of living. A country that grows slower than its population increases—like Nigeria—will struggle to generate enough future growth to improve the well-being of the people in said country.

Using population as a metric, we compare the performance of two of the most populous countries in each region.

Remember, we’re measuring Nigeria’s economic performance against its African peers, which we selected based on population and economic size. So far, we’ve explained why we’re using population.

The second criterion for selection is the size of the country's economy, which compares Nigeria with other countries with a similar economic size. Below, we can see each region's top countries by size.

Now, based on these metrics, the countries we'll be comparing Nigeria to are: Egypt and Algeria from North Africa, South Africa and Angola from Southern Africa, Kenya and Ethiopia from East Africa and Ghana from West Africa. Essentially, we have chosen these peers because they look similar to Nigeria in terms of their size: population and economy.
 

How low can you grow?

We've looked into how we selected the countries to compare Nigeria with; the second part of the analysis is how we want to assess economic performance.

The most common way to measure economic performance is by using the size of the economy—Gross Domestic Product (GDP).

The chart above shows first that most of Africa's largest economies experienced a decline in their economic performance between 2011 and till date, compared to the previous decade. The most obvious reason was the impact of Covid-19 on most of these economies when all countries contracted due to lockdown measures and recessions in most of the world. All of the selected countries, apart from Ethiopia, experienced a recession. Other reasons, like commodity price crashes, are also to blame for the poor performance in this decade.

In Angola and Nigeria, the gap between growth in this decade and growth in the last decade is the widest, and it's no coincidence that both are oil-exporting countries. Like Nigeria, Angola's exports are primarily made up of crude oil, and 2011- 2021 could have been a better decade for many trading in crude. Although the decade started strong with a barrel of black gold trading at close to $100 in 2011, prices hit rock bottom in 2015 and 2020, and these countries felt the impact.

Countries like South Africa, which relies more on mining and manufacturing, faced a  similar experience in 2016 because the country shrunk due to a decline in global demand for minerals.

Therefore, the 2011-2021 decade wasn't great for most African countries, but the oil-exporting countries felt the impact largely more, given how reliant they are on their export proceeds.
 

Economic growth for all 

However, the picture of these countries' growth is just one piece of the puzzle.

GDP growth alone tells an incomplete story about how well a country has performed and does not show how well the country's population is faring. Likewise, economic growth alone may result from people in the country working harder instead of smarter—that is, there's more growth with less productivity. Finally, the growth might only be concentrated in the hands of a few if a country is unequal, which makes growth not just an incomplete picture but a faulty one.

A middle ground between measuring growth alone and growth as it influences the people is comparing GDP per capita in each country.

One primary trend that may be difficult to see from the chart above is the impact of the base effect. Countries with smaller bases have the potential to grow more than countries with larger bases. For instance, South Africa, with a GDP per capita of $10,500 in 2000, increased by 22%, while Ethiopia started with less than $1000 and increased by 222% to $2300 per person.

Beyond that, remember that each country is meant to grow as fast as its population so that the income generated in the economy can improve the living standard of those in that country. Between 2000 and 2010, most countries grew rapidly, with the likes of Angola and Nigeria almost doubling their GDP per capita.

However, this decade, growth has been sluggish for most and even reversed for a few. For instance, GDP per capita in South Africa and Angola reduced even after both countries grew in the decade. This means that the growth was not enough to improve the well-being of those in that country.

This proves the points we made earlier in the article. We initially started by stating that population was one of the criteria for selecting countries to compare Nigeria with because it informs if true economic growth translates to improved well-being for the people. And we've seen that although most African countries witnessed significantly less growth between 2011 and 2021, this growth has not been commensurate with increased income for the people in these countries.
 

Are people getting better economically?

To wrap this article up, we'll review one last metric to measure how well these countries are performing in improving the lives of the people in the country. 

In this segment, we want to check if people’s lives are improving in the country because what use is a country’s growth if it doesn’t improve the lives of the people living there?

We'll answer this question by using Human capital development (HDI) to measure people's well-being in all countries.

HDI tells us how well people in a country live in terms of having the basic requirements for good living: a long and healthy life, a decent education and living a decent enough life. 

Going by that metric, we see that these selected countries have experienced an improvement in their HDI values since 2000. This means that literacy rate, healthcare and income, essential for a living, have progressed. 

Our point of focus is still Nigeria, and although Nigeria has made some progress (increasing its scores by 26%), its HDI remains low compared to its peers. 

So far, we've seen that many African countries have had a pretty rough decade, plagued by sluggish growth and recessions. This has affected how much income is available to people in these countries and their potential to improve their well-being. 

Nigeria, in particular, has witnessed one of the most drastic declines in GDP growth, which has meant that the income available to its people has only increased marginally. 

But this marginal performance is not enough to conclude on how well Nigeria has improved its people’s well-being. One of the limitations of the human development index is that it is an index of averages. It basically shows an average of a country’s performance across various areas. So, it’s possible for the country to perform badly in some metrics but so well in others that it skews the overall score. 

To solve this limitation, we’ll take the well-being conversation a step further to see how Nigeria is performing across three areas: access to electricity and clean fuels and deaths by clean fuels. Electricity and clean fuels are basic necessities for living and, to a large extent, inform a country’s infrastructural development, the income and healthcare of its people.

We’ll start with access to electricity. If you’re in Nigeria, grid collapses are not new. It’s why people have generators or solar home solutions as backup power providers. In many cases, people even have both. We’ve covered the reasons for Nigeria’s epileptic power situation in different articles: from the non-cost-reflective tariffs to the outdated infrastructure.

With those limitations, it's unsurprising that Nigeria is not performing better than its peers. In the last two decades, Nigeria has only increased the proportion of people with access to electricity by 20%. In contrast other countries like Kenya and Ethiopia, which started with low proportions of people with electricity, experienced significant growth.

 Similarly, compared to other African peers, as seen in the below chart only 15% of Nigerians have access to clean fuels for cooking—one of the lowest among its peers.



Although the value has increased tremendously over the last two decades, it’s still insufficient. Clean fuels are so essential because the use of dirty fuels is closely related to pollution and death. Mckinsey records that  600,000 people die annually from exposure to fumes from biomass fuels like charcoal.

Seeing how far behind Nigeria is compared to others on all metrics is sobering. But this creates a good baseline for the incoming government to work with, as its performance in the next ten years will depend on how well it can improve the growth and well-being of Nigerians today.