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Demography and Economic Growth in Nigeria
- 1. Economic Development in Nigeria: A Demographic Perspective Committee on African Studies Harvard Africa Seminar, April 13, 2010 David E. Bloom and Salal Humair Department of Global Health and Population, HSPH
- 4. Nigeria’s economy has stagnated: No growth in income per capita Source: World Development Indicators 2008
- 5. Indonesia and Pakistan have seen economic growth Source: World Development Indicators 2008
- 6. Nigeria’s economy compared with world regions Source: World Development Indicators 2008
- 7. Comparing economic growth rates average annual growth rate of GDP/capita (PPP), 1980 - 2006 Source: World Development Indicators 2008
- 8. Nigeria’s fertility rate has started to fall Source: UN, World Population Prospects, 2008
- 9. The infant mortality rate has fallen, but not steadily Source: UN, World Population Prospects, 2008
- 10. Life expectancy has risen, but not steadily Source: UN, World Population Prospects, 2008
- 11. Crude birth and death rates are falling Source: UN, World Population Prospects, 2008
- 12. Population growth has been rapid Source: UN, World Population Prospects, 2008
- 13. The ratio of working-age to non-working-age people has been pretty steady Source: UN, World Population Prospects, 2008
- 14. Changing Age Structure, 1950-2010: A 3-dimensional view Source: UN, World Population Prospects 2008
- 15. Average annual growth rate of GDP per capita, 1975-2005 Source: World Development Indicators 2008
- 16. Changing age structure, 1960-2005 Source: UN, World Population Prospects 2008
- 20. The demographic transition Population growth rate time Death rate Birth rate
- 23. Nigeria’s population is set to soar Source: UN, World Population Prospects, 2008
- 24. The fertility rate is expected to continue falling Source: UN, World Population Prospects, 2008
- 25. The infant mortality rate is projected to continue falling Source: UN, World Population Prospects, 2008
- 26. Life expectancy will continue to rise Source: UN, World Population Prospects, 2008
- 27. Crude birth and death rates will continue to fall Source: UN, World Population Prospects, 2008
- 28. Population growth rate will decline substantially Source: UN, World Population Prospects, 2008
- 29. The ratio of working-age to non-working-age people is set to increase dramatically Source: UN, World Population Prospects, 2008
- 30. Growth of the working-age to non-working-age ratio, 1960-2050 ( under 3 UN fertility scenarios) Source: UN, World Population Prospects, 2008
- 31. Comparing the growth rates of the working-age and non-working-age population Source: UN, World Population Prospects, 2008
- 32. Changing Age Structure, 1950-2050: A longer 3-dimensional view of Nigeria’s trajectory Source: UN, World Population Prospects, 2008
- 33. Source: UN, World Population Prospects, 2008 1950
- 34. Source: UN, World Population Prospects, 2008 1960
- 35. Source: UN, World Population Prospects, 2008 1970
- 36. Source: UN, World Population Prospects, 2008 1980
- 37. Source: UN, World Population Prospects, 2008 1990
- 38. Source: UN, World Population Prospects, 2008 2000
- 39. Source: UN, World Population Prospects, 2008 2010
- 40. Source: UN, World Population Prospects, 2008 2020
- 41. Source: UN, World Population Prospects, 2008 2030
- 42. Source: UN, World Population Prospects, 2008 2040
- 43. Source: UN, World Population Prospects, 2008 2050
- 44. Changing Age Structure, 1960-2050: Nigeria compared with East Asia Source: UN, World Population Prospects, 2008
- 46. Changing Age Structure, 1960-2050: Nigeria compared with Indonesia and Pakistan Source: UN, World Population Prospects, 2008
- 48. The elderly will make up a larger share of the population Source: UN, World Population Prospects, 2008
- 49. Will demographic heterogeneity induce economic inequality and political instability?
- 50. Ratio, working-age to non-working-age population, by state Source: Population and Housing Census, National Population Commission, Nigeria, 1991 and 2006
- 55. Demographic data is also a big political issue Source: http://news.bbc.co.uk/2/hi/africa/4512240.stm
- 57. Potential impact of demographic dividend on per capita income Source: Bloom et al. 2010. Nigeria’s demographic dividend. Background paper for the NGN project
- 58. Potential impact on per capita income with institutional and health improvements Source: Source: Bloom et al. 2010. Nigeria’s demographic dividend. Background paper for the NGN project Year GDPpC "business-as-usual" GDPpC with DD & added LE GDPpC improved IQ & LE 2010 $2,070 $2,070 $2,070 2015 $2,521 $2,653 $2,664 2020 $3,070 $3,435 $3,461 2025 $3,738 $4,486 $4,535 2030 $4,553 $5,882 $5,966
- 59. Potential impact of the demographic dividend on poverty Source: Source: Bloom et al. 2010. Nigeria’s demographic dividend. Background paper for the NGN project Year # lifted out of poverty with DD and added LE # lifted out of poverty with improved IQ & LE 2010 - - 2020 5.8 million 5.8 million 2030 31.8 million 34 million
- 61. Nigeria will need lots of jobs Source: Author calculations. Year WA pop Unempl-oyment Jobs needed Between years Jobs to be added 2010 85,525,401 20% 52,358,719 2015 97,731,223 15% 63,570,579 2010-15 11,211,860 2020 111,088,850 10% 76,509,768 2015-20 12,939,189 2025 125,325,513 8% 88,233,036 2020-25 11,723,268 2030 140,036,212 7% 99,661,452 2025-30 11,428,415
- 62. But jobs will also need to be productive: Nigeria’s economic lifecycle - individual Source: Mason et al. 2010. Population and economic progress in Nigeria. Background paper for the NGN project
- 63. Education will be key in making jobs productive: economic lifecycle - aggregate Source: Mason et al. 2010. Population and economic progress in Nigeria. Background paper for the NGN project Needs of children Labor surplus
- 64. And results can be achieved with little: Nigeria’s current education expenditures Source: Mason et al. 2010. Population and economic progress in Nigeria. Background paper for the NGN project
- 65. Nigeria’s education and health spending Source: Mason et al. 2010. Population and economic progress in Nigeria. Background paper for the NGN project. Actual ($) % of spending Education, Public 142 7.33 Education, Private 922 47.63 Health, public 39 2.01 Health, private 833 43.04 Total 1,936 100 Total Public 181 9.33 Total Private 1,755 90.67 Per capita spending (2004 $s)
- 66. Nigeria’s human capital investment compared to other countries Source: Nigeria: The Next Generation Task Force secretariat, 2010.
- 67. Low health spending reflected in low level of maternal health Source: Nigeria 2008 demographic and health survey: key findings.
- 68. Low health spending reflected in high levels of child mortality Source: Nigeria 2008 demographic and health survey: key findings.
- 69. Low health spending reflected in low level of children vaccination coverage Source: Nigeria 2008 demographic and health survey: key findings.
- 70. Low health spending reflected in high level of unmet need for family planning Source: Unpublished background memo for the NGN project.
- 71. Unmet need in the context of current fertility Source: Nigeria 2008 demographic and health survey: key findings.
- 73. Nigeria’s untapped human capital: the diaspora Source: US Department of Homeland Security, Office of Immigration Statistics, 2008 Yearbook of Immigration Statistics. Number of persons obtaining legal permanent residents who were born in Nigeria, fiscal years 1961-2008
- 74. The Nigerian US diaspora is well-educated Source: Nigerian-born Population in the United States, unpublished background memo, NGN project
- 75. And the diaspora is a significant resource Source: The World Bank. Migration remittances factbook 2008. Updated Nigeria data from personal communication.
- 80. Backup slides
- 81. Estimation results Source: Bloom et al. 2010. Nigeria’s demographic dividend. Background paper for the NGN project
Notas do Editor
- Thank you. My colleague Salal Humair and I appreciate this opportunity to be here today to brief you all on a project we’ve been pursuing as part of the Nigeria: Next Generation Task Force, which I co-chair along with Ngozi Okonjo-Iweala ( CLICK ). Ngozi is Managing Director of the World Bank, and was Nigeria's Finance Minister and then Foreign Affairs Minister from 2003 to 2006 [the first woman to hold either position in Nigeria]. The project is named Next Generation Nigeria and it looks at Nigeria’s economic prospects through a demographic lens. Our project is ostensibly backed by President Goodluck Jonathan of Nigeria, and is funded and supported by the British Council ( CLICK ) and based at the Harvard School of Public Health ( CLICK ). We’re aiming to gain some insight into Nigeria’s challenge of economic growth, insofar as it is connected to Nigeria’s demographic profile and potential trajectories. And we’re backed by an impressive Task Force ( CLICK ) made up of Nigerian and international academics and public figures. [ Task Force Alhaji Lamido Ado Bayero, the Chiroman (Crown Prince) Kano Donald Duke, Governor of Cross River State, 1999-2007 Frank Nweke, Director General, Nigeria Economic Summit Group Lord Triesman, Chairman of England’s Football Association Pat Utomi, Dean of Lagos Business School Maryam Uwais, human rights attorney Secretariat David Steven, Riverpath Associates Salal Humair, Harvard School of Public Health. Plus, Holly Reed (CUNY demography), Abiodun Alao (University of Cambridge political science), Andy Mason (Univ of Hawaii economics), and Dr.s Lanre and Doyin (Univ of Ibadan economics).
- During this session, Salal and I would like to make three key points. The first has to do with what is certainly one of the oldest and most persistent questions in the field of economics: why are some countries richer than others? This question was first posed by Adam Smith more than 2 centuries ago in his seminal treatise: The Wealth of Nations . And economists have been chipping away at the answer ever since. Economists typically look at economic performance in terms of international macro-economic management, openness to trade, the quality of governance, natural resource abundance, workforce education, and so on. We’re not proposing that we expunge any of those factors from consideration. In fact, there is strong evidence indicating they are all important. But we will argue for amending the list to include demographics – which appear to have more oomph with respect to economic growth than any of the traditional growth determinants. Then, building on that proposition, we will sketch the implications of Nigeria’s future demographic trajectory for its future economic performance. And here we will argue that Nigeria’s demographics is projected to evolve in a way that will create a strong – and potentially very strong -- impulse for economic growth. And finally, we will highlight the fact that Nigeria faces some significant impediments to realization of this “demographic dividend” and discuss some steps it can take to overcome those obstacles.
- We’ll begin by laying out some basic facts concerning first, the performance of the Nigerian economy and second, Nigeria’s demographics. With regard to the economy, perhaps the most salient fact is that since 1980, per capita income has not grown: GDP per capita in 2006 was about the same as it was in 1980. Note that the solid-bar figures shown here, and most other income figures that we will be using after this, are expressed in terms of purchasing power parity. As in essentially all developing countries, these numbers are higher than the corresponding exchange-rate-based figures you may have seen elsewhere and that we also show here. The basic idea of PPP is to allow for valid comparisons of income levels across countries.
- We can compare Nigeria’s economic performance with some other countries. In 1980, Nigeria’s GDP per capita was slightly higher than that of Indonesia and Pakistan. In the ensuing years, Nigeria’s economy has stagnated, while Pakistan, and especially Indonesia, have grown considerably. Indonesia’s income per person is now roughly twice Nigeria’s. Why compare Nigeria with Indonesia and Pakistan? All 3 have in common: gdp/cap in 1980, large population, heavily Muslim (though Nigeria the least, at 50%), history of inter-group armed conflict, hot climate, ample coastline. Nigeria and Indonesia are major oil producers. Nigeria and Pakistan have a history of British rule, Indonesia of Dutch rule. Differences: TFR – Nigeria (4.9), Indonesia (2.3), Pakistan (3.6) Inequality – Gini: Nigeria (44), Indonesia (39), Pakistan (31) [Governance – has been different, but we don’t think there’s anything systematic to say here. All 3 have had long authoritarian and/or military rule.]
- Nigeria’s economy has performed in a way similar to SSA as a whole. Meanwhile, East Asia has zoomed ahead. The “world” figure, of course, includes data from the high-income countries. [Regional figures are per-capita income for all persons in a region. Hence, they are population-weighted. The level and growth of the East Asia figures are dominated by China.]
- We can also look at these data another way, by observing the average annual growth rate of GDP/capita from 1980 to 2006. Nigeria, like SSA as a whole, has stagnated, while the world as a whole, and particularly East Asia, has grown. Indonesia and Pakistan have moved ahead. Economically, Nigeria is falling further behind.
- Now, let’s look at Nigeria’s demographics. As you can see here, Nigeria’s TFR (the total number of children per woman) started to fall about 20 years ago. The decline has been steady, but not particularly rapid compared with some other countries. With Nigeria having started this decline relatively late, and with the gradualness of the fall, it still has a TFR of about 5, which is higher than many other developing countries. TFR – Nigeria (4.9), Indonesia (2.3), Pakistan (3.6) – from CIA Ranking from CIA: 32 (meaning there are only 31 higher in the world) ##out of ??; also, WDI latest year?#
- Infant mortality – the number of deaths before age 1 out of every thousand live births -- matters a lot. Infant deaths are of course of great consequence to the families involved, but IMR also tells us something about the overall state of country’s health system, the health of its people, and the propensity for state failure. In many countries, infant mortality has fallen enough that families have responded by having fewer children, since they know that even when they have fewer children, the ones they have are likely enough to survive and be able to support them in old age. For the most part, this drop in infant mortality in Nigeria has not yet happened to an extent sufficient to bring about a rapid decline in family size. Ranking from CIA: 13
- Another important demographic indicator is life expectancy. Life expectancy provides a reasonable overall indicator of the health of a country’s people. Nigeria has been improving in this respect, but it is still very far behind many other developing countries, not to mention the developed world. Ranking from CIA: 13 [technically, the CIA does life expectancy backwards from most of the other indicators, so they say Nigeria is 212 out of 224]
- Crude birth and death rates are another measure used by demographers. Setting aside the issue of emigration, the difference between these rates tells us the population growth rate – and that rate is quite high in Nigeria. CIA rankings: CBR: 30 CDR: 13
- Population growth in Nigeria has been rapid, at more than 2% per year. CIA ranking: 59 A 2% rate of growth may not sound like much to some of you, but in demographic terms a 2% rate is huge. For example, as many of you may know, a 2% rate of growth leads to a doubling of population after 35 years. For example, the doubling of the world’s population from 3 to 6 billion between 1960 and 2000 took place on the strength of roughly 2% annual growth. What only some of you may know is that after 700 years, the population increases by a factor of 1 million. After 1200 years at a 2% rate of growth, the people occupying the planet would outweigh the planet itself. And after 6000 years at a 2% rate of growth, we would reach the point where the mass of human flesh would be expanding outward from the earth at the speed of light. So as I said, 2% may not be much to write home about as a rate of return, but as a rate of population growth it’s quite astronomical and absolutely unsustainable over the long run.
- Now I’d like to look at a demographic indicator that you can imagine has a bearing on the economic situation. We’ve taken data from the United Nations Population Division and divided people up into working-age individuals, that is, age 15 to 64, and non-working-age individuals, that is, everyone else. The ratio of the size of these two groups is plotted here. Note that there has been very little change between 1960 and the present. There is an uptick in recent years, and later in this presentation, we’ll see where that’s leading (and that’s why we have scaled this graph to allow for the higher numbers you will see later). This ratio turns out to be quite important in understanding the relationship between demographic change and economic growth, so we want to go into it a little further.
- The three-dimensional graph gives an overall picture of Nigeria’s age structure and its evolution. Along the x axis we have a set of 5-year age groups. The z axis gives the year, and the y axis shows the size of the population for each age group in each year. Each colored slice shows the age distribution for a particular year. We can see that in 1950, the age structure was relatively flat: Yes, there were more children than adults, but the difference was not nearly as pronounced as it is now. The shape of the slices changes over time. Later we will see how these shapes change even more. A striking feature of this chart is its presentation of the change in the size of the total population. That total is represented by the total size of a slice. Compare the sizes for 1950 and 2010.
- Okay, we’ve seen the history and present state of Nigeria’s economy and the history and present state of Nigeria’s demography. What do these tell us? To answer that question we need to review some recent thinking on population-development linkages. Perhaps the most efficient way to do that is to compare the economically and demographically most extreme regions of the developing world: East Asia and SSA. [And let me tell you at the outset that the conclusions we are about to reach are extremely robust. They are robust to adopting a global focus, to extending the time frame back before 1975, to using income per capita measured in PPP terms rather than exchange rate terms, and to different modeling and statistical strategies.] On the economic side, the tall blue bar on the left has a name: It’s called the East Asian miracle. This label refers to fact that never before had such a large group of countries grown their average incomes so rapidly for such a long period of time. This economic growth was dubbed a miracle by the World Bank because it seemed to defy explanation. In contrast to East Asia, on the right side of the chart we have SSA, which has exhibited the worst economic performance of any region during those same years. Average per capita income growth has essentially been zero during the three decades between 1975 and 2005. Average annual growth rate of GDP/cap, 1975-2005: East Asia: up 6.4% -- from $212 to $1,358 SSA: down 0.2% -- from $587 to $561 Nigeria: Essentially flat (up .03% -- from $424 to $428) [These figures, which are in constant 2000 USD, are exchange-rate-based, since World Bank PPP figures only go back to 1980. But the PPP figures after 1980 show the same story.]
- Now let’s look at the demographic side of the picture. In this chart, we have plotted in red the ratio of the working age to the non-working age population in East Asia. And we have plotted that ratio in blue for sub-Saharan Africa. The working-age population is defined as the population in the age interval 15-64, while the non-working age population is defined as the population less than age 15 plus the population aged 65 and over. We understand, of course, that we have some workers under age 15 and over age 65, and some non-workers between ages 15 and 64. But we can assure you that accounting for those issues will not change the main points we are here to make. With regard to this chart, please note the following: The ratio of workers to non-workers has been lower in SSA than in EA throughout the entire period shown. This is a reflection of a relatively high burden of youth dependency in SSA, due to a long history of consistently high fertility. In 1950, the difference between East Asia and SSA was fairly small, but it grew dramatically from 1980 on. And today, EA has roughly 2.25 workers for every non-worker, which is much more than SSA’s 1.1 workers per non-worker.
- That’s a really big difference. It’s akin to a household having a whole extra worker for every non-worker. For a household, such a differential will tend to translate into a commensurately large increase in income per household. And this intuition about individual households essentially aggregates up to the level of countries and regions. A key premise of what we are suggesting to you is that the economic growth difference you saw in the previous slide and the demographic difference you see in this slide is not coincidental. We will return to this point shortly.
- “ East Asia and Pacific” is the World Bank’s term. For all gdp/cap info in this ppt, the list of countries is: American Samoa, Australia, Brunei Darussalam, Cambodia, China, Fiji, French Polynesia, Guam, Hong Kong, China, Indonesia, Japan, Kiribati, Korea, Dem. Rep., Korea, Rep., Lao PDR, Macao, China, Malaysia, Marshall Islands, Micronesia, Fed. Sts., Mongolia, Myanmar, New Caledonia, New Zealand, Northern Mariana Islands, Palau, Papua New Guinea, Philippines, Samoa, Singapore, Solomon Islands, Thailand, Timor-Leste, Tonga, Vanuatu, Vietnam. For demographic data from the UN, we sum Eastern Asia, Southeastern Asia, and Oceania, leading to a nearly identical list of countries. No countries are added in the demographic data, but the following are not included: American Samoa, Kiribati, Marshall Islands, Northern Mariana Islands, Palau.
- As a brief aside, it’s useful here to understand something about the underlying process that led to the divergence of the age distributions in EA and SSA. At the heart of the process is a phenomenon known as the Demographic Transition. SWITCH TO NEXT SLIDE This term refers to the nearly ubiquitous change countries make from a regime of high fertility and high mortality to one of low fertility and low mortality. But it tends to happen in an asynchronous fashion, with death rates declining first and birth rates following suit later. One result is a transitional period of population growth, which has traditionally been the main focus of economists interested in demographics.
- But that’s not the whole story, because as every demographer knows, mortality declines in high mortality populations are mainly associated with declines in infant and child mortality (due typically to the spread of vaccines, antibiotics, safe water, sanitation, etc.). That causes a baby boom. Not the usual one in which there are more births, but one in which more babies that are born actually survive. The baby boom ends when fertility subsequently declines – which it invariably does as couples realize that fewer births are needed to reach their targets for surviving children, and as those targets are moderated. This baby boom is initially young, and that’s very consequential because of the need to feed, clothe, house, and provide medical care and schooling for this cohort. All of that takes resources, which have to be diverted from other uses such as building factories, infrastructure investments, etc. And that diversion of resources tends to slow the process of economic growth, as conventionally measured. But then the iron law of demography kicks in. You all know that law, because it tells us that with the passage of every year, our age goes up by one. It’s important here because it means that the baby boom will invariably reach the working ages within a period of 15-25 years. And when that happens the economic situation changes as the productive capacity of the economy expands on a per capita basis. It does this because of the expansion of labor supply as the boomers reach working ages. Potential output also grows because the working ages are also the prime years for savings and that’s key to capital accumulation and technological innovation. Savings gets a further boost as longevity increases in the latter phases of the demographic transition. The idea here is that people save more in anticipation of longer periods of retirement. And that savings promotes further capital accumulation and economic growth.
- To summarize, mortality declines at the beginning of the demographic transition catalyze fertility declines. And that’s the ball to keep our eyes on since they are potent drivers of economically consequential changes in the age structure of the population. If we had more time, we would show you that EA had the fastest and most pronounced demographic transition in history, whereas the demographic transition in SSA has been extremely sluggish.
- What all this suggests is that the superior economic performance of East Asia since the mid-1970s is not coincidentally related to East Asia’s age structure. Rather, it is causally related to East Asia’s age structure evolving in a way that has been highly favorable for economic growth and for enjoyment of what has come to be known as the demographic dividend. Demonstrating this point -- using rigorous theoretical and statistical tools and appropriate data -- is an activity that has occupied many of my colleagues at Harvard and beyond during the past 10 years. And this body of work appears quite uniformly to indicate that roughly 2 percentage points of the growth rate of income per capita in East Asia – representing 1/3 of the so-called miracle -- can be accounted for by demographic change. Economic growth in East Asia was not a miracle at all. THINKING THAT IT WAS A MIRACLE was simply a reflection of our ignorance because we neglected to take proper account of demographics. Not from a randomized controlled trial. Not with killer IV. But plausible, theory-based, and underlying labor and savings mechanisms seem to be born out (internally consistent). Now, let’s switch gears and apply this idea about the importance of age structure to Nigeria. Perfect as enemy of the good.
- First, we’ll look at the UN’s projections about demographic change in Nigeria. Nigeria is expected to have 289 million people in 2050, based on the UN’s medium-fertility scenario.
- The UN projections assume that fertility will fall nearly to replacement level (about 2.1 children per woman) by 2050. Obviously, this could change, depending on what policies are chosen and many other factors.
- With a continued decline in infant mortality, some couples will likely decide to have fewer children. Still, the projected IMR in 2050 is far higher than in developed countries today, and it is higher than in many developing countries today.
- The overall health of the population, as proxied by life expectancy, can be expected to improve. The cautionary point here is that even in 2050, life expectancy will not be very high by the standards prevailing today in many countries.
- And the distance between the CBR and the CDR will fall – implying a declining rate of population growth.
- Indeed, Nigeria’s population growth rate is projected to decline substantially. But even as the fertility rate falls, the large number of childbearing-age people will ensure that population will continue to rise. (Population momentum)
- We saw before that the ratio of WA to NWA people has begun to increase. What’s really notable here, as we look forward, is how rapidly this ratio is projected to change in the coming decades.
- Here is a plot of UN projections for the WA to NWA ratio through 2050. The UN makes three different projections, based on different fertility rate scenarios: low, medium, and high. These scenarios have very different implications for the demographic ratio we are looking at. Insofar as all 3 scenarios involve further fertility reductions, they all suggest further improvement in the working-age share of the population. For example, under the medium fertility scenario, Nigeria’s working-age population will grow at nearly triple [2.7 times, actually] the rate of its dependent population between 2010 and 2050. And that will translate into a growth rate that is between ## TO BE FILLED IN # percentage points higher than it would be if not for the favorable demographics. Annual average growth rate of population, 2010 – 2050: WA: 2.02%; NWA: 0.74% Nigeria: 2045-50 tfr = 2.91 (high); 2.41 (medium); and 1.91 (low) East asia tfr today is 1.68
- This table shows how different Nigeria’s demographic future will be, compared with the past. From 1970 to 2010, the growth rates of the dependent and working-age populations were about equal. Over the next 40 years, the story will be very different, as you can see. The dependent population will grow much more slowly than the working-age population. Note that Indonesia, over the previous 40 years, already had vastly different growth rates for the dependent and working-age segments of the population. These rates will roughly even out over the next 40 years.
- The three-dimensional graph gives an overall picture of future changes in Nigeria’s age structure, including UN projections through 2050. If we look at the shape of the slices near 2050, we can see that they are not only different from 1950, but they’re also different from 2010. In the next couple of decades, we are beginning to see a bulge in the working-age share of the population. [You could give an explanation here about the interplay between declining TFR and population momentum leading to only a very gradual reduction in the number of births – a decline seen only in the final years of this chart.]
- Another way to demonstrate the impact of Nigeria’s demographic changes on the age structure of the population is to look at a succession of population pyramids for Nigeria. Here we see the 1950 pyramid. The image shows the percentage of population in each age group, with males on the left side in blue and females on the right side in red. In 1950, Nigeria had a very young population, with children dominating adults and adults dominating the elderly. That pattern is what gives Nigeria’s age distribution its pyramidal shape in 1950. But as we move forward in time - past 2010 - we will see that the base of the pyramid gets relatively smaller and the pyramid begins to look more like some of us – a little heavy around the waist. This bulge represents the share of the working-age population in Nigeria.
- This slide allows us to assess Nigeria’s demographic future in relation to the age structure dynamics of East Asia. As we said earlier, we think that Nigeria’s demographic future has a lot of bearing on its future economic possibilities. We have four comments to make on this slide. First, the ratio of working-age to non-working-age people in Nigeria has been lower than that of East Asia since 1960, corresponding to a higher burden of youth dependency. Second, Nigeria’s demographic cycle is roughly 50 years out of phase with that of East Asia. A pure demographic perspective suggests that the next three decades will be a period of catch-up for Nigeria with respect to per capita income in East Asia. This catch-up – assuming it occurs as projected -- will be beneficial for Nigeria, though Nigeria is very likely to remain far below East Asia’s income levels.
- Third, in all 3 Nigerian fertility scenarios – low, medium, and high – the working-age ratio is slated to increase. But under the low-fertility scenario, judging by the slope of the curve in 2050, Nigeria will eventually reach a higher working-age ratio than East Asia ever did. The medium scenario shows Nigeria’s considerable promise, and even the high scenario shows a substantial increase over today’s ratio. The medium and low fertility scenarios bode quite well with respect to Nigeria’s potential for reaping a sizable demographic dividend. They bode especially well insofar as there are well over 31 million Nigerians in the age group 15-25. The dynamism and fluidity of this young age group is well established. The skills, habits, and behaviors they develop in the realms of work, saving, spending, and reproduction will profoundly shape Nigeria for years to come. And finally, while 15-24 year olds in Nigeria outnumber those aged 65 and over by more than 6 to 1, Nigeria will see considerable population aging by 2050, which will tend to slow the pace of economic growth and require the development of what today are virtually non-existent systems of pension and health care finance.
- Return now to comparison of Nigeria with Indonesia and Pakistan. In 1970, the ratio of WA to NWA people in Nigeria was about the same as in Indonesia and Pakistan. But after that, the demographic profiles of these countries began to diverge. Indonesia changed first, as a declining fertility rate led to an increase in the WA/NWA ratio. And Pakistan, which has had a relatively slow decrease in fertility rate, also gradually diverged from Nigeria’s trajectory.
- To be clear, we are not saying that demography is destiny or that age structure changes automatically lead to economic growth. We are simply saying that demographic change can lead the development process by creating potential for economic growth. Some countries need to think about catalyzing the DT – public health investments that reduce IMR/CMR – primary health care; safe water and sanitation, vaccines and drugs Others need to think about speeding up fertility transition – family planning supplies and services; girls education and job opportunities And others need to recognize that the realization of those benefits depends on whether economy is structured so that it can absorb workers into productive employment (strong interaction effects): Good governance Good fiscal and macroeconomic management Open trade policy Well-developed financial markets Education Absence of labor market distortions (high minimum wages and overly powerful unions) Nigeria is at such an early and tenuous stage of the Demographic Transition that it probably needs to thing about all 3.
- Population aging is another challenge Nigeria will have to face. Due to large cohorts reaching older ages, and to fertility decline, and to longevity increase. Share of 60+ and 80+ populations increasing. [The actual elderly numbers for 2050 are as follows: 60+: 28 million 80+: 2 million ##What are the numbers for 2010?#
- Finally, inequality within Nigeria is a concern worth exploring. More specifically, we have spoken about Nigeria thus far as if it were a homogeneous entity. But that is hardly a good description, as Nigeria encompasses numerous sources of powerful heterogeneity in the form of language, religion, income, education, perspective, etc. Sometimes heterogeneity can be a source of constructive synergy. Other times, heterogeneity can be the cause of social and political unrest and instability. Although a full discussion of inequality in Nigeria is beyond the scope of this talk, we would like to alert everyone to the magnitude of cross-state demographic heterogeneity as a possible source of potentially destabilizing economic inequality.
- Here we plot the ratio of the WA to NWA for Nigeria’s states in 1991 and 2006, using data from the corresponding censuses. [Note that six states were created after 1991 (Bayelsa, Ebonyi, Ekiti, Gombe, Nassarawa, and Zamfara), and are missing from this particular graph.] The 45 degree line represents zero change in the WA/NWA ratio from 1991 to 2006; the space above the line corresponds to an increase from 1991 to 2006; and the space below the line corresponds to a decrease from 1991 to 2006. We make four observations on this graph. First, the WA/NWA ratio for Nigeria as a whole increased from 0.93 in 1991 to 1.22 in 2006. Second, there was relatively little cross-state variation in 1991, with a difference of 0.56 between the highest ratio (Kaduna) and the lowest (Lagos). Third, there was somewhat more variation in 2006, with a range of 0.94 between the highest (Lagos) and lowest (Kwara) ratios. Over two-thirds of Nigerian states experienced a rise in the WA/NWA ratio from 1991 to 2006. The most notable change occurred in Lagos (South West region), which underwent an increase from 0.709 in 1991 to 1.88 in 2006. The largest decline in the WA/NWA ratio took place in Kaduna (North West region), which experienced a fall from 1.27 in 1991 to 1.04 in 2006. Fourth, as the WA/NWA ratio indicates, we can see that the demographic transition is underway at different speeds in different Nigerian states and across regions. Insofar as demographic cycles induce economic cycles, the degree of demographic heterogeneity in Nigeria could serve as a catalyst for further inequality and could have a potentially destabilizing effect on the country and surrounding region.
- So, there are three take-away messages here. The first is that demographics matter – as a general proposition -- to the pace of economic growth. The second message is that demographics can matter a lot!
- To be more specific: The size of the economy can, in the aggregate, triple from 2010 to 2030 as a result of the demographic dividend, instead of doubling. This is likely to be very attractive to the Nigerian policy-makers given their vision of the being one of the top world economies by 2020. Moreover, the average Nigerian can have about $1300 extra in 2030 over the default 2030 income (PPP). Considering that the current per capita income is around $2000, that is a significant amount. Finally, 30 million additional people can be lifted out of poverty. To put it into context, the current poverty level is around 64% based on the $1.25/day threshold. This is from the World Bank/UN estimates for 2004. 30 million in 2030 will represent roughly 13% of the population. In the default scenario, about 46% of people will be under the poverty line in 2030. Imagine that number can be reduced to almost 33%. This has the potential to render a wholesale change in the complexion of Nigerian society. The point here is that Nigeria’s demographics are like a valuable national asset. And like any asset, they can yield a high return if managed well. But the challenge of managing those assets well is quite considerable in the case of Nigeria because that involves addressing the formidable challenges of governance, inter-ethnic tensions, and oil dependence. But with respect to those issues, demographic change in Nigeria suggests the stakes involved in getting those issues right are higher than usual.
- So, we now come to some central questions. How do we know how big Nigeria’s DD is? More importantly, what can we do to collect this dividend. What are the challenges? And what are the opportunities we can capitalize on? That is what Nigeria: The Next Generation project had set out to do. We’ll share in a moment what we have discovered. NEXT SLIDE.
- Before we begin. Let me point out a major limitation in doing demographic research for Nigeria, and in making concrete data-driven recommendations. These limitations have to do with the quantity/quality of data, access to it, and the lack of significant academic research on Nigeria. The major sources of demographic data for Nigeria are the Nigerian National Bureau of Statistics, and DHS. The Nigerian Bureau of Statistics reports more economic than demographic data. The 2006 Nigerian Census was the first census conducted in Nigeria since 1991, and was, like earlier surveys, surrounded by controversy. And was not available in electronic form until now. DHS has done four surveys in Nigeria (1991, 1999, 2003 and 2008. Their data quality is good, but they do not collect all data - for instance, income data. And in some cases their sample may not be representative – for instance the rural/urban distribution. And literature on Nigeria is sparse. We find a limited number of studies in total, and those mainly on reproductive health and family planning (1990s and 2000s), but from small community studies at best, and not using National data.
- Demographic data in Nigeria is also a big political issue. Controversies surround every census … largely because allocation of federal funds and the apportionment of parliamentary seats are based on the census results. The south regularly accuses the north (which is largely the base of the party in power) of census fraud for political and economic gains. The 1991 census was also surrounded by controversy. The 2006 census results were not released before the 2007 general elections. They were in fact released in 2009. So, the main point is: getting national-level demographic data is not only technically but politically difficult. It will be good to keep this in mind when we talk about Nigeria’s options.
- Coming back to our first question on how we know the size of the dividend … To estimate the dividend, we assembled 5-year country-level panel data from 1965 to 2005 for a global sample from multiple sources. We followed the general cross-country comparison literature and considered geographical characteristics (tropical area, landlocked-ness), human development (years of secondary schooling, life expectancy at birth), and institutional measures (institutional quality from the Knack Keefer Index, Sachs Warner index, and trade openness) as explanatory variables. Using the UN population prospects projections, we projected the economic growth attributable to the demographic dividend. We learnt from our regressions that the demographic change, institutional quality and life expectancy variables are very significant. <COMMENTED OUT>... But secondary years of schooling is not. This is because of strong correlation between secondary schooling, life expectancy and population growth difference. That prevents us from isolating the effect of education in the regression. But education is important, as we will presently see … <END COMMENTED OUT>
- What do these results mean? From our results and the UN population prospects projections, we computed that demographic change and increased life expectancy can add about 1-1.5% to economic growth over the next 20 years. With a conservative default growth rate scenario of about 4%, this gives the above projected per capita income graph for the “business-as-usual” case (blue line) and with the DD and increased LE. This means the average Nigerian can have about 30% higher income than the default case in 2030 because of the demographic dividend. Put another way, using the demographic dividend, the average Nigerian can have close to 3 times more income than today by 2030. <COMMENTED OUT> The 4% default growth rate is conservative, given Nigeria’s strong growth in the past decade. But considering the almost 0 growth in the 1990s, it may not be that low a long-range guess. Also, if we assume a higher default growth rate, the impact of the demographic dividend will be more than 30% because of compounding. <END COMMENTED OUT>
- With more health and institutional improvements, things could be better. Let us quickly look at the numbers. In this table, we show the default scenario in the second column, called “business as usual”, the scenario with the demographic dividend and life expectancy improvements in the 3 rd column, and the last column, where we assume that Nigeria makes institutional quality improvements slowly to be roughly at the level in 2030 where Indonesia is now, and its life expectancy reaches 64 by 2030. You’ll notice that the difference in numbers between “business-as-usual” and the DD case is large, but the numbers in the third column (with institutional improvements) are not very much larger than the second column. About $30 more in 2020 and $80 more in 2030 than the DD scenario. So why are we showing you this last column?
- This is why. Small changes matter. Even with these small improvements, millions can be lifted out of poverty by 2030. But … we’ll come to that statement again in a moment … This table shows how many people can be lifted out of poverty “over and above” the default scenario by capitalizing on the demographic dividend. The columns are Focusing on the second column … by 2020, more than 5.5 million, and by 2030 more than 30 million additional people can break the poverty barrier because of the demographic dividend and the general life expectancy increase. Notice the last cell in the last column. That shows that institutional and further improvements can lift 2.2 million more people out of poverty than just the demographic change. That is about 1% of Nigeria’s total population in 2030. For those 2.2 million, that change really matters! But … to be sure … the impact of institutions is much more far-reaching than formal econometrics can tell at the moment - partly because of lack of good measures for institutions. So an investment in institutional quality is likely to have much more impact than what we are saying here.
- We have what we think is a compelling case for Nigeria to spend focused energy on capitalizing on the demographic dividend, because the opportunity is substantial in size, and the impact on lives very substantial. That, of course, raises the more difficult question of “How”. What are some of the main opportunities Nigeria can capitalize on to realize its demographic dividend? Like many developing countries, the best opportunities many times turn out to be the biggest challenges. In Nigeria’s case, we’ll see that as well. We’ll talk about three major challenges in more detail, and mention some of the others at the end. These are jobs, education and health.
- Nigeria will need lots of jobs. Without jobs, there is no real way to distribute the dividend, and the demographic transition could become a source of great instability. We did some quick calculations to determine how many jobs Nigeria will need. Using labor participation and unemployment rates by looking at comparable countries, we estimate Nigeria will need to double the number of jobs it currently has by 2030. Right now it needs around 52m jobs. In 2030 it will need almost 100 million jobs. Using a rough reduction in unemployment trajectory, that means almost 11-13 million new jobs need to be created every 5 years. To make it more present to our minds, that is 2-3 million new jobs every year. That seems like a tall order, and it is. We can come to the number later, but first let’s also talk about another aspect of jobs.
- And that is productivity. Above is a figure from a background paper for the Nigeria project by Andrew Mason and colleagues. They estimate how much an average Nigerian consumes over her/his life span (the blue line) compared to how much she/he produces (the red line). The figure shows at every age, how much an average Nigerian is producing vs. consuming. You can see that Nigerians are consuming more than they are producing during the first 33 years of their lives. For the next 30 years of their lives their labor income exceeds their consumption. After age 63 Nigerians produce less than they consume, on average, over the remainder of their lives. As a comparison, the span during which labor income exceeds consumption for some other developing countries are higher: 35 in India, 34 in Indonesia and Philippines and 37 in China (Again from a paper by Andrew Mason). While the raw number does not make much sense without other demographic data as we will see in the next slide, the main takeaway of this figure is that Nigerian jobs are low-productivity, and so not only does Nigeria need to create jobs, it needs to make them more productive.
- To understand the combined impact of demographics and job productivity, we show another graph from the same paper by Andrew and colleagues. This is the previous economic lifecycle graph multiplied by the age distribution of Nigeria’s population. It therefore reflects the aggregate consumption and total production in Nigeria - both by age. You can see two things from this figure. The impact of low productivity, and the potential for education to improve things. On productivity, … note that t he current labour surplus is not enough to pay for the needs of children and old people. In fact, only 28-29% of the lifetime deficit is funded by income earned in the labour market. The rest is made up by income from natural resources, remittances from Nigerians overseas, development funding from other governments, and from debt. Nigeria, in other words, is living permanently beyond its means, and will continue to do so unless the productivity (the red curve) expands and rises. On the potential impact of education, notice the hump in the blue line which must move to the right. By investing in job productivity increases now, Nigeria has the opportunity to broaden and shift the aggregate red curve up significantly in the next few years and capitalize on the dividend. To do so, education (of the right kind) will be key. And that is the main message of this slide. That investment in education now can significantly impact the (currently very large) aggregate lifecycle deficit for Nigeria.
- But the current state of educational investment in Nigeria is disheartening. This picture shows the public and private education and health investment by age, from ages 0-24. The two thin slivers at the top are public education and public health spending in Nigeria. You can see that the state is not spending much on either, all the way through college. So even minor improvements in state investment could have a large impact.
- This is the same story of under-investment in numbers instead of a picture. Of the 100% spending on education and health, the state contributes 7% to education while private sources contribute 47%. The state contributes 2% to health while private sources contribute 43%. Over 90% of the spending on health and education is private, and only 9% public.
- Compared to other countries, Nigeria’s public human capital spending is very very low. From a paper by 2009 paper Andrew Mason in the European Journal of Population, Nigeria ranks last of 24 countries for its investment in human capital. Controlled for income, the government spends less than a third of the investment made in Kenya, China, India and the Philippines.
- This extremely low public investment in health is reflected starkly in indicators like maternal health, child mortality, child vaccination, and unmet need for family planning. You can see from this chart that only about 39% of births had access to a skilled provider. Almost 20% of the women had no assistance during birth, and another almost 20% had to depend on relatives. Basically 40% of the women had births on their own.
- This low level of maternal health is reflected in the closely associated indicators of child mortality. To compare: according to the UN Population division, the average IMR for the world is 49.4. Nigeria’s 75 is huge by comparison. In fact, according to the UN population division, Nigeria is ranked 183 rd out of 195 countries in IM and U5M.
- Part of the cause is the extremely low and varied coverage of child health services, as reflected in this map from the DHS 2008 survey. The regional differences are stark <mention numbers>.
- Low provision of health services is also reflected on another very important factor that has bearing on the population pressure: the unmet need for family planning. In Nigeria, 20% of women express an unmet need for family planning, 15% for spacing, and 5% for limiting. Compared to some other countries, Bangladesh, Pakistan, India, Indonesia, Nigeria has the highest unmet need except Pakistan.
- Taken together with the very high fertility in Nigeria, this unmet need represents a real lost opportunity for relieving the population pressure on services. Particularly in the North, where fertility rates are incredibly high and even small reductions could have a large impact.
- To recap briefly. Among Nigeria’s major challenges is job creation and job productivity, and job productivity is integrally tied to education and health. But there has been massive under-investment in both. As a result, Nigeria’s human capital is wasted at an unprecedented rate through mortality, unemployment and low productivity. The situation seems bleak within Nigeria. But the country may have other resources. SWITCH TO NEXT SLIDE
- For instance, the Nigerian diaspora. This is a graph of Nigerians in the US who obtained permanent residency in the US from 1961-2008. You’ll notice two things: that the Nigerian diaspora is substantial, 82000 or so in the US; and that it has grown rapidly in the last three decades – from 35 to 67 to 82 thousand. This increase in the last two decades also implies that a substantial number of them are now probably settled and well-off – typically diasporic communities also go through a life-cycle of contributions to their home countries, where the initial and the later years in their adopted country are most significant in terms of contributions to their country of origin.
- The Nigerian diaspora in the US is also well-educated. In fact, Nigeria seems to have among the highest percentage of graduates, undergraduates as well as graduates among immigrant communities. Compare to India and South Africa.
- And the global diaspora is a significant resource for Nigeria. Here are the remittances for Nigeria from 2001 onwards. You’ll notice a very rapid increase from 2003 onwards, jumping up significantly in 2007 (not sure why). Considering that the total revenue of the Nigerian government is $10 billion, the almost $10 billion inflow into the Nigerian economy (which is around $350bn) is a major impulse, almost 3%. So Nigeria does have human capital in untapped places, and it can potentially be tapped in ways more productive than just remittances – particularly in education and health, which are usually close to diasporic communities’ hearts and where they may be able to play a larger role than just sending capital.
- Summarizing, we have touched on three major challenges in collecting the demographic dividend: jobs, education and health. In jobs, not only the number needed is a huge challenge, with almost 2-3 million new jobs to be created every year till 2030 … but also the productivity of the jobs where Nigeria lags significantly behind other countries. In education, the very low public investment is a huge challenge, meaning much of the infrastructure will have to be built … but it is also a big opportunity, in the sense that a small amount of investment can reap large benefits. In fact, the same is true of health where low investment means both that the challenge and the opportunity are large. Better quality education may be more difficult … One last thing to comment on is that the potential for reinforcement in these three areas. For creating more jobs, one strategy might be large public investments in education and health, creating more jobs in these areas.
- There are many other challenges we have not touched upon for lack of time. These relate to <read some of the list above>. There is one other thing we have not discussed, which are recommendations for the Nigerian government and civil society. In the final report of the task force for the Next Generation Nigeria project, we mention all of these and give recommendations. We urge any of you who are interested in Nigeria’s development to look at the report when it is released.
- Coming to the final messages from this talk. Nigeria’s 2020 vision is to be one of the top 20 economies in the world. Regardless of what one thinks about the realism of that vision, a major push towards that goal can be the wise utilization of its demographic dividend. Nothing brings out this fact more starkly than when sees that the economy can triple in size instead of doubling by 2030. But to the average citizen, and specially those least empowered, the size of the economy appears less relevant than their own struggle. We saw that most clearly in the case of the “India Shining” slogan in 2004, which could not save the BJP from a huge election loss. A now documented and much-commented-on fact. ##If http://news.bbc.co.uk/2/hi/south_asia/3756387.stm “BJP admits 'India Shining' error”# Finally, while Nigeria faces huge challenges in creating the right environment for realizing its demographic dividend, in many areas such as education and health, the level of public investment is so low, and the indicators so bad – for both education and health, that it may not take a small amount of effort to realize large gains.
- We have what we think is a compelling case for Nigeria to spend focused energy on capitalizing on the demographic dividend, because the opportunity is substantial in size, and the impact on lives very substantial. But, we end a note of caution by pointing out that, as with every country, some of the general points we’ve made about the measures needed to help bring about the demographic transition may not apply to Nigeria.
- Here are the results of the estimation. This table looks somewhat cluttered at first glance, but we’ll only focus on the results in the last column. In the first column, you can see the variables clustered together using parentheses: (i) demographic variable, (ii) the institutional variables, (iii) the human development variables and (iv) the geographical variables. We run the regression for various combinations of variables, both OLS and instrumental variables. Focusing on the last column, you can see that: Demographic variable is very significant (in fact in all regressions) Institutional variables are quite significant, although the SW index is not very significant so we drop it. Life expectancy is positive and very significant but secondary years of schooling is not. This is because of strong correlation between secondary schooling, life expectancy and population growth difference. That prevents us from isolating the effect of education in the regression. But education is important, as we will presently see …