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By Victor Okeke
For many years, Nigeria has lived with a difficult contradiction. It is a country with immense natural wealth, a large and energetic population, and a reputation for entrepreneurial drive, yet its economic growth has not translated into broad and stable prosperity. Periods of expansion have often been followed by slowdowns, and even when the economy grows, it does not always create enough jobs for the millions of young people entering the labour market each year. This has led to a pattern where opportunity exists, but is unevenly shared, leaving large parts of the population outside the benefits of growth.
Part of the reason lies in the structure of the economy itself. Nigeria has tended to rely heavily on sectors that generate high income but do not employ many people. Oil and gas, which have long been the backbone of government revenue, produce substantial wealth but require relatively few workers. The financial sector is increasingly sophisticated and profitable, but it too has limited capacity to absorb large numbers of job seekers. Even the fast-growing technology space, while promising, tends to expand output faster than employment. As a result, growth in these sectors can raise national income without significantly improving livelihoods across the broader population.
This pattern has wider consequences. Economies driven primarily by capital-intensive or skill-intensive industries often experience rising inequality, because the gains from growth are concentrated among those who already have access to capital, education, or specialised skills. Nigeria has seen aspects of this dynamic over time, particularly through its dependence on oil. When oil prices are high, foreign exchange inflows strengthen the currency, making it harder for local industries to compete. This weakens manufacturing and other tradable sectors, leaving the economy exposed when commodity prices fall. The experience is well known in economic literature and has been described as a classic case of the resource curse.
Looking beyond Nigeria, there are clear examples of countries that began with limited resources but achieved sustained transformation by following a different path. South Korea in the 1960s was poorer than many African countries and had few natural advantages. Its progress was not the result of chance but of deliberate policy choices that focused on building industrial capacity. The government supported firms in sectors such as textiles, steel, and shipbuilding, while insisting on performance, particularly in export markets. Companies that met targets received continued support, while those that failed were not shielded indefinitely. Over time, this created a disciplined environment in which firms competed, learned, and expanded into more advanced industries.
China’s experience offers another perspective. Beginning in the late 1970s, it gradually opened its economy, encouraged foreign investment, and integrated into global production networks. Rather than attempting to master every stage of production at once, it focused on specific segments such as assembly and manufacturing, and then steadily moved into higher-value activities. This process allowed China to build capabilities over time while maintaining strong growth and employment. Vietnam has followed a similar trajectory more recently by positioning itself as a reliable manufacturing base, attracting investment, and steadily increasing the sophistication of its exports.
What these experiences have in common is a clear commitment to structural transformation, which involves shifting resources from lower-productivity activities into higher-productivity ones. Manufacturing has historically played a central role in this process because it has the capacity to absorb large numbers of workers while also generating productivity gains. It creates linkages across the economy, from raw materials to logistics and services, and allows countries to benefit from economies of scale. By contrast, a service-led growth path without a strong industrial base often produces uneven outcomes, with some high-value services generating income but not widespread employment. Nigeria appears to be moving in this direction, which raises concerns about the sustainability and inclusiveness of its growth pattern.
In today’s global economy, the nature of production has changed, but the importance of manufacturing has not disappeared. Production is now organised across borders through global value chains, where different countries specialise in different stages of the process. This creates an opportunity for countries that are still developing their industrial base. Instead of building entire industries from the ground up, they can enter at specific points such as processing, assembly, or component manufacturing, and gradually expand into more complex activities. For Nigeria, this could involve sectors like agro-processing, textiles, or light manufacturing, where there is already some foundation to build upon.
The role of government in this process is often debated, but international experience suggests that the issue is not whether the state should be involved, but how it should be involved. Effective industrial policy is not about making arbitrary choices or protecting industries indefinitely. It involves identifying the constraints that limit growth, supporting new and promising sectors, setting clear expectations, and withdrawing support when those expectations are not met. This requires institutions that are capable, transparent, and able to adjust policies as conditions change. Nigeria has elements of such a framework, but they need to be strengthened and better coordinated to produce consistent results.
At the same time, Nigeria must navigate a global environment that is becoming more complex. Trade remains essential for growth, but it is increasingly shaped by political considerations, with even advanced economies turning to protectionist measures. While some level of protection can help emerging industries develop, it carries risks if it becomes permanent or poorly designed. Higher tariffs can raise costs for consumers and businesses, and can lead to retaliation from trading partners. The experience of the early twentieth century shows how damaging widespread protectionism can be to global economic activity. For Nigeria, the challenge is to strike a balance by supporting domestic industries where necessary while maintaining openness to trade, investment, and technology.
Another important dimension is the question of inclusion. As economies grow and modernise, the benefits are not always evenly distributed. Advances in technology and the increasing importance of skills can widen the gap between those who are able to participate in high-productivity sectors and those who are not. In Nigeria, this makes investment in education, training, and infrastructure especially important, as these are the foundations that allow more people to take part in the modern economy. While remittances from Nigerians living abroad provide support for many households, they cannot replace the need for domestic job creation on a large scale.
A practical path forward would involve several interconnected steps. Building a stronger manufacturing base should be a priority, particularly in areas where Nigeria has existing advantages. Oil revenues, rather than being used mainly for consumption, could be directed more consistently toward infrastructure and human capital development. The financial system can play a more active role in supporting productive investment, while technology can be applied across sectors to improve efficiency and competitiveness. Greater integration into global value chains would allow Nigerian firms to learn from international partners and gradually upgrade their capabilities. At the same time, policies designed to support new industries must be implemented with discipline and clear benchmarks to ensure that they deliver results.
Nigeria’s situation is not defined by a lack of potential. The country has the resources, the market size, and the human capital needed to achieve sustained growth. The challenge lies in making consistent choices about the direction of the economy and following through on those choices over time. Sectors such as oil, finance, and technology will continue to play important roles, but they cannot by themselves provide the scale of employment and transformation required. The experience of other countries shows that diversification and industrial development remain central to long-term success, and that progress depends on how effectively a country uses the tools available to it.
In the end, the question is not whether Nigeria can grow, but how it chooses to do so. The decisions taken now, particularly around production, investment, and policy design, will shape the structure of the economy for decades. Countries that have succeeded in similar circumstances have done so not because they had more resources, but because they used them with discipline and clarity of purpose.
• Okeke is a Master of Public Policy candidate at the KDI School of Public Policy and Management, South Korea
