1
Introduction:
This master's thesis examines the relationship between Nigeria's economic growth and
human development. It seeks to determine whether economic growth significantly impacts the
Human Development Index in the country. By analyzing key factors of economic growth, the
study provides insight into the paradox of increasing poverty and inequality in Nigeria despite
recent economic expansion. The thesis also offers potential solutions to address these
challenges.
The Federal Republic of Nigeria, located in West Africa along the Gulf of Guinea,
achieved independence in 1960. Covering an area of 923,768 square kilometers, Nigeria is
one of the largest countries in the world and shares borders with Benin, Niger, Chad,
Cameroon, and the Atlantic Ocean. After years of civil war, military coups, and dictatorial
regimes following independence, Nigeria transitioned to a civilian-based democratic system
in the 1990s, paving the way for democratic and economic development. Rich in natural
resources, particularly oil, Nigeria is one of Africa's largest crude oil producers and a member
of the Organization of Petroleum Exporting Countries (OPEC). The country's diverse and
culturally rich population, comprised of over two hundred ethnic groups, adds to its global
appeal. With a significant increase in population in recent years, driven by a high fertility rate:
a peak of 401.3 million Nigerians before 2050, according to TheGuardian (Chukwuma
Muanya, 2023). Nigeria is now the most populous country in Africa and the sixth-largest in
the world and continues to grow. This combination of political stability, natural wealth, and
demographic dynamism has positioned Nigeria as an influential player on the global stage.
According to the World Bank, the country counts 218,541,212 (THE WORLD BANK, 2023).
This growth will keep increasing when we observe the curve. The more the Nigerians are
increasing, the more the interior market of the country is expanding, and the more its
economic dynamic is stimulated. The political transformation in Nigeria, combined with its
abundant natural resources, has contributed to significant economic growth in recent decades,
positioning it as the largest economy in Africa by GDP. For example, the country experienced
growth rates of around 3.6% in 2021 and 2.9% in 2022, according to the African
Development Bank (AFB, 2022), even despite a recession caused by the COVID-19
pandemic and falling global oil prices.
Oil has been the primary driver of this economic expansion, accounting for more than
half of Nigeria's export earnings. Other key sectors contributing positively to growth include
,2
agriculture, manufacturing, and services, although these remain underdeveloped relative to
their potential.
However, Nigeria's heavy reliance on the oil sector, a market subject to extreme
volatility, presents a significant risk. Fluctuations in oil prices and production can quickly
undermine economic stability, potentially leading to a collapse in growth.
Moreover, despite being one of the fastest-growing economies in the region, the
Nigerian government has struggled to translate this economic success into corresponding
human development improvements. Challenges such as income inequality, political
corruption, ethnic and religious tensions, and social disparities persist, keeping Nigeria among
the world's poorest countries and limiting the broader societal impact of its economic growth.
Nigeria's ongoing challenges have positioned the country at 156th place out of 187
countries in the Human Development Index (HDI) according to the United Nations
Development Program (UNDP). This ranking is based on factors like life expectancy, access
to education, and living standards. Despite economic and social difficulties that have hindered
its growth, the country remains viewed as a nation with tremendous economic potential, partly
due to its natural resources and a young population fueled by a high birth rate.
To mitigate reliance on the oil industry and prepare for future obstacles, the government has
implemented several strategies, such as establishing the Nigerian Investment Promotion
Commission (NIPC) to boost private sector investment. Additionally, policies have been
introduced to stimulate growth in the agriculture and manufacturing sectors.
The core aim of this thesis is to empirically analyze the impact of economic growth on human
development in Nigeria, using research drawn from scientific articles and data from
institutions like the World Bank. The analysis will address the following questions:
1. What is the current level of economic growth, and what are the key sectors of the Nigerian
economy?
2. What are the trends and implications of Nigeria's population growth?
3. What is the actual impact of economic growth on human development in Nigeria?
4. What are the sociopolitical challenges associated with high population growth in the
future?
5. What policies should be implemented to address these challenges and capitalize on growth?
, 3
By focusing on these questions, the thesis aims to provide a comprehensive
understanding of Nigeria's economic landscape and its intersection with human development,
shedding light on potential pathways for sustainable progress. The answers to these questions
will provide a comprehensive overview of the Nigerian economy, highlighting its strengths,
main components, and the subsequent impact on the Human Development Index (HDI), a
critical measure in the relationship between economic growth and human development. The
analysis will draw from secondary data sources including the World Bank, the International
Monetary Fund, Nigeria's Bureau of Statistics, and various scientific articles and studies. This
approach will ensure a clear understanding of the intricate connection between economic
growth and human development within the Nigerian context. Ultimately, the master's thesis
aims to offer insights into policies that could foster sustainable development and alleviate
extreme poverty in Nigeria, with implications that may extend to other African nations facing
similar developmental challenges.
Literature Review
Theories and Models of Economic Growth:
Economic growth is a vital concept for economists, helping policymakers understand
how the economy can expand and develop sustainably, and guiding decisions related to
employment, living standards, and human development. Various theories and models have
been constructed to explain the mechanisms behind economic growth. A review of these
approaches illuminates different angles of economic analysis.
1. Mercantilism: One of the earliest concepts of economic growth, Mercantilism, focuses on
the accumulation of wealth. Introduced by the French economist Antoine de Montchrestien
(Montchrestien and Billaçois, 1999), this theory emphasizes the role of profit opportunities in
goods production and access to credit (McDermott, 1999). During the period when gold and
silver coins were abundant, Mercantilism advocated for restrictions on gold exportation and
encouraged the export of goods to maintain an inflow of precious metals. The idea was to
create a trade surplus that would boost the economy by collecting gold and silver (Osipian,
2007).
2. Physiocracy: Emerging in France in the 18th century, Physiocracy regarded wealth as
value derived from land, specifically agriculture. This theory posited that the value of
Introduction:
This master's thesis examines the relationship between Nigeria's economic growth and
human development. It seeks to determine whether economic growth significantly impacts the
Human Development Index in the country. By analyzing key factors of economic growth, the
study provides insight into the paradox of increasing poverty and inequality in Nigeria despite
recent economic expansion. The thesis also offers potential solutions to address these
challenges.
The Federal Republic of Nigeria, located in West Africa along the Gulf of Guinea,
achieved independence in 1960. Covering an area of 923,768 square kilometers, Nigeria is
one of the largest countries in the world and shares borders with Benin, Niger, Chad,
Cameroon, and the Atlantic Ocean. After years of civil war, military coups, and dictatorial
regimes following independence, Nigeria transitioned to a civilian-based democratic system
in the 1990s, paving the way for democratic and economic development. Rich in natural
resources, particularly oil, Nigeria is one of Africa's largest crude oil producers and a member
of the Organization of Petroleum Exporting Countries (OPEC). The country's diverse and
culturally rich population, comprised of over two hundred ethnic groups, adds to its global
appeal. With a significant increase in population in recent years, driven by a high fertility rate:
a peak of 401.3 million Nigerians before 2050, according to TheGuardian (Chukwuma
Muanya, 2023). Nigeria is now the most populous country in Africa and the sixth-largest in
the world and continues to grow. This combination of political stability, natural wealth, and
demographic dynamism has positioned Nigeria as an influential player on the global stage.
According to the World Bank, the country counts 218,541,212 (THE WORLD BANK, 2023).
This growth will keep increasing when we observe the curve. The more the Nigerians are
increasing, the more the interior market of the country is expanding, and the more its
economic dynamic is stimulated. The political transformation in Nigeria, combined with its
abundant natural resources, has contributed to significant economic growth in recent decades,
positioning it as the largest economy in Africa by GDP. For example, the country experienced
growth rates of around 3.6% in 2021 and 2.9% in 2022, according to the African
Development Bank (AFB, 2022), even despite a recession caused by the COVID-19
pandemic and falling global oil prices.
Oil has been the primary driver of this economic expansion, accounting for more than
half of Nigeria's export earnings. Other key sectors contributing positively to growth include
,2
agriculture, manufacturing, and services, although these remain underdeveloped relative to
their potential.
However, Nigeria's heavy reliance on the oil sector, a market subject to extreme
volatility, presents a significant risk. Fluctuations in oil prices and production can quickly
undermine economic stability, potentially leading to a collapse in growth.
Moreover, despite being one of the fastest-growing economies in the region, the
Nigerian government has struggled to translate this economic success into corresponding
human development improvements. Challenges such as income inequality, political
corruption, ethnic and religious tensions, and social disparities persist, keeping Nigeria among
the world's poorest countries and limiting the broader societal impact of its economic growth.
Nigeria's ongoing challenges have positioned the country at 156th place out of 187
countries in the Human Development Index (HDI) according to the United Nations
Development Program (UNDP). This ranking is based on factors like life expectancy, access
to education, and living standards. Despite economic and social difficulties that have hindered
its growth, the country remains viewed as a nation with tremendous economic potential, partly
due to its natural resources and a young population fueled by a high birth rate.
To mitigate reliance on the oil industry and prepare for future obstacles, the government has
implemented several strategies, such as establishing the Nigerian Investment Promotion
Commission (NIPC) to boost private sector investment. Additionally, policies have been
introduced to stimulate growth in the agriculture and manufacturing sectors.
The core aim of this thesis is to empirically analyze the impact of economic growth on human
development in Nigeria, using research drawn from scientific articles and data from
institutions like the World Bank. The analysis will address the following questions:
1. What is the current level of economic growth, and what are the key sectors of the Nigerian
economy?
2. What are the trends and implications of Nigeria's population growth?
3. What is the actual impact of economic growth on human development in Nigeria?
4. What are the sociopolitical challenges associated with high population growth in the
future?
5. What policies should be implemented to address these challenges and capitalize on growth?
, 3
By focusing on these questions, the thesis aims to provide a comprehensive
understanding of Nigeria's economic landscape and its intersection with human development,
shedding light on potential pathways for sustainable progress. The answers to these questions
will provide a comprehensive overview of the Nigerian economy, highlighting its strengths,
main components, and the subsequent impact on the Human Development Index (HDI), a
critical measure in the relationship between economic growth and human development. The
analysis will draw from secondary data sources including the World Bank, the International
Monetary Fund, Nigeria's Bureau of Statistics, and various scientific articles and studies. This
approach will ensure a clear understanding of the intricate connection between economic
growth and human development within the Nigerian context. Ultimately, the master's thesis
aims to offer insights into policies that could foster sustainable development and alleviate
extreme poverty in Nigeria, with implications that may extend to other African nations facing
similar developmental challenges.
Literature Review
Theories and Models of Economic Growth:
Economic growth is a vital concept for economists, helping policymakers understand
how the economy can expand and develop sustainably, and guiding decisions related to
employment, living standards, and human development. Various theories and models have
been constructed to explain the mechanisms behind economic growth. A review of these
approaches illuminates different angles of economic analysis.
1. Mercantilism: One of the earliest concepts of economic growth, Mercantilism, focuses on
the accumulation of wealth. Introduced by the French economist Antoine de Montchrestien
(Montchrestien and Billaçois, 1999), this theory emphasizes the role of profit opportunities in
goods production and access to credit (McDermott, 1999). During the period when gold and
silver coins were abundant, Mercantilism advocated for restrictions on gold exportation and
encouraged the export of goods to maintain an inflow of precious metals. The idea was to
create a trade surplus that would boost the economy by collecting gold and silver (Osipian,
2007).
2. Physiocracy: Emerging in France in the 18th century, Physiocracy regarded wealth as
value derived from land, specifically agriculture. This theory posited that the value of
