Economic Growth And The Demographic Disconnect

By Dipo Baruwa

Statistics show that Nigeria’s Gross Domestic Product (GDP) has recorded steady growth over the last five years, averaging about 2.4 per cent per annum, compared to roughly 2.0 per cent in the preceding five years. This performance is significant in relative terms, yet it has not translated into meaningful economic development, which remains characterised by rising poverty incidence and, in many respects, abstract. For instance, the World Bank estimates that over 40 per cent of Nigerians live below the poverty line, with about 13 million people falling into poverty between 2015 and 2023.
A closer look at the sectoral composition of GDP, in relation to the demography of the population and structural changes in the economy, offers some explanation for this disconnect. Quite rapidly, and without adequate linkages, the economy has shifted from the dominance of the primary sectors, agriculture and mineral mining, to a services-dependent structure. This transition was not organic but inadvertently propelled by governmental policies, actions, and inactions. Consequently, services now account for over 50 per cent of GDP, while agriculture has declined from its lofty heights at independence to about 25 per cent. Industry contributes around 20 per cent, with manufacturing stagnating below 10 per cent, a steep fall from its promising trajectory in the twin decades of the 1970s to 1980s. Yet, employment remains disproportionately skewed: about 35 per cent of the labour force is still engaged in agriculture, while most others are absorbed into low-value informal services such as petty trade and personal services.
This transition has also been accompanied by rapid migration from rural areas into urban centres, with the urban population rising from 48 per cent in 2015 to over 53 per cent in 2023. Yet, urban labour markets remain characterised by high underemployment and a system that rewards formal certifications over technical and vocational competencies. While such demographic and sectoral shifts may be classified as indicators of growth, they are not measures of development. This explains why output expansion has not translated into improved livelihoods or fostered structural transformation.
A fundamental consequence of the changes is that the economy has become efficiency-driven without the complementary infrastructure. While the services industries, particularly financial services and information and communications technology (ICT), sustain the aggregate GDP growth, they are ill-suited to stimulate inclusive growth in an economy in the state Nigeria’s economy is currently finding itself. They lack the capacity and depth to absorb the country’s rapidly growing workforce or generate the kind of value addition that can drive sustainable and broad-based development.
This creates a mismatch between GDP performance and development outcomes. The sectors propelling growth, which are efficiency-driven, are structurally inclined to generate limited employment opportunities with weak or no linkages to poverty reduction. In other words, growth is occurring in areas that do not mirror the structural demography of the population. The reality is that the bulk of Nigerians are youthful, underemployed, and mostly skilled for labour-intensive segments such as agriculture, light manufacturing, and informal enterprises. Unfortunately, these sectors are declining in productivity and shedding workforce, in contrast to the expansion of technology-driven services.
According to International Labour Organisation (ILO) estimates, the services sector now accounts for over 51 per cent of total employment in Nigeria; agriculture accounts for about 34 per cent; and industry, including manufacturing, accounts for just about 12 per cent. Within the services sector, employment has grown by an average of 2.5 percentage points over the last five years. To compound the challenge, employment growth within the services sector has been concentrated mainly in low-value subsectors such as retail trade and informal personal services. These activities create little or no value addition but vividly reflect the competencies of Nigeria’s largely youthful, semi-skilled population and the structural orientation of its import-driven, informalised economy. The converse is true for agriculture and manufacturing, where job opportunities have steadily declined – agriculture’s share of total employment fell from 36.4 per cent in 2019 to 34.3 per cent in 2023, and industry has remained stagnant, underscoring Nigeria’s weak industrial base.
This structural imbalance reinforces the challenge of “jobless growth,” where output expands in sectors with limited potential for poverty reduction and structural transformation, leaving the majority of the workforce trapped in low-productivity activities.

Implications and Policy Options

The persistence of this structural imbalance has deep implications for Nigeria’s economic trajectory. First, the concentration of growth in service-based sectors with low labour absorption rates leaves the majority of Nigerians excluded from the benefits of economic expansion. With over 70 per cent of the population under the age of 35, the country cannot afford growth patterns that fail to generate sufficient employment. A “jobless growth” model risks entrenching cycles of poverty, social unrest, and rising inequality. It is, therefore, not surprising that the increasing rate of restiveness among the youth fuels the drive for quick fixes such as cybercrimes and mass migrations (the japa syndrome), leading many into unwarranted misfortunes. The 2022 African Polling Institute reported that 70 per cent of Nigerians aged 18–35 expressed a strong desire to relocate if given the chance. This concern has only deepened, with the 2024 Afrobarometer Round 10 survey showing that 56 per cent of Nigerians overall, and 60 per cent of those aged 18–35, have considered leaving, citing lack of job opportunities as the primary factor.
Second, the decline in agricultural employment and the stagnation of manufacturing signal a retreat from the very sectors historically known to drive structural transformation. Globally, no country has achieved broad-based development without significant investment in agricultural modernisation and industrialisation to facilitate leveraged progression from primary activities. Nigeria’s weak industrial base, coupled with declining agricultural productivity and poor sectoral linkages, means that growth is not anchored in value-added production, but rather in consumption-driven and efficiency-driven services. This structural imbalance partly explains why fiscal and monetary policy palliatives have been ineffective in tackling inflation, serving only to manage indicators rather than addressing root causes.
Third, the mismatch between demographic realities and economic structure erodes resilience. In the face of shocks, such as global commodity price fluctuations or financial crises, the economy remains vulnerable, as it is not sufficiently diversified to absorb disruptions or sustain long-term competitiveness.
Addressing these challenges requires a recalibration of Nigeria’s development strategy, anchored on deliberate, apolitical implementation.

Several priorities stand out:

Reindustrialisation and Industrial Policy: Nigeria must deliberately foster a manufacturing revival, anchored on light manufacturing and agro-processing. These sectors are labour-intensive, capable of absorbing large numbers of young workers, and critical for diversifying exports.

Agricultural Transformation:
Agriculture still employs over one-third of Nigerians but suffers from low productivity. Targeted investments in mechanisation, irrigation, storage (particularly cold chain systems), and value chain development can unlock its potential as both a source of food security and mass employment.
Skills Development and Workforce Alignment: The education and skills pipeline must be reoriented to match demographic realities. Vocational training, technical education, and digital skills should be prioritised to bridge the gap between the youthful labour force and evolving market demands. Frequent shifts in educational policy have been unhelpful, while the politically driven conversion of polytechnics into universities has weakened the pipeline of technicians and artisans essential for industrial growth.
Support for Informal Enterprises: With over 80 per cent of employment occurring in the informal sector, structured policies to enhance productivity, access to finance, and formalisation pathways will be essential for inclusive growth.

Balanced Growth Strategy:
While ICT and financial services will remain important drivers of efficiency and innovation, growth must be complemented by strong backward and forward linkages into agriculture, industry, and trade to ensure development outcomes mirror demographic realities.

Enabling Environment for Private Sector Participation:
A stable regulatory framework, consistent policy direction, and infrastructure investments are critical to attracting long-term private sector capital, which is indispensable for driving structural transformation.

Conclusion

Nigeria has made investments in light manufacturing, agro-processing, agricultural mechanisation, and skills development. However, these efforts have often lacked scale, continuity, and institutional backing, while being heavily influenced by political considerations. The absence of policy consistency has also discouraged private sector commitment. As a result, these initiatives have fallen short of delivering structural transformation or absorbing the country’s growing youthful workforce, thereby undermining sustainable outcomes. Unless decisive action realigns economic growth with demographic realities, Nigeria risks deepening the trap of jobless growth; expanding GDP while neglecting the very sectors that could employ its youth. Correcting this structural imbalance is not only urgent but fundamental to unlocking Nigeria’s true development potential.

Dipo Baruwa is a business climate development analyst.