By Banji Oyelaran-Oyeyinka
In 2023, Nigeria’s new government came with a bold promise: to finally confront the structural distortions that had held the economy hostage for decades. The new government removed fuel subsidies, unified the exchange rate, and began dismantling long‑standing distortions that economists had warned about for years. These reforms were necessary. They were courageous. They were overdue.
Yet today, Nigeria still has Africa’s largest population of poor people — 39 million below the national poverty line and 133 million in multidimensional poverty. Food inflation has soared above 40 per cent, real incomes have collapsed, and job creation remains painfully slow. The reforms stabilised macroeconomic indicators, but they did not stabilise Nigerian lives.
This is the paradox at the heart of Nigeria’s current moment: necessary reforms that are not sufficient to end poverty.
To understand why, we introduce two key concepts from development economics—premature liberalisation and premature deindustrialisation—concepts that explain why poverty persists despite reform and why Nigeria’s struggle resembles Joseph Heller’s Catch‑22: a circular trap with no easy exit.
The Nigerian condition mirrors Heller’s satirical world—chaotic, circular, and full of contradictions. The government must reform to escape the crisis, yet the very reforms deepen it in the short term. It must remove subsidies to save the budget, yet removing subsidies fuels inflation that punishes the poor. It must unify the exchange rate to attract investment, yet unification triggers price shocks that erode wages.
This is not incompetence. It is structural. Nigeria is trying to fix an economy that never built the productive foundations needed to withstand liberalisation. And this is where the story of poverty persistence begins.
The first concept is premature liberalisation: opening the gates before building the house.
In the 1980s and 1990s, Nigeria adopted the World Bank/IMF Structural Adjustment Programmes. These reforms demanded rapid removal of tariffs, privatisation of state enterprises, currency devaluation, cuts to public spending, and financial deregulation.
The theory was simple: free markets would unleash growth. But Nigeria lacked the essentials of a competitive economy, including industrial capacity, technological capability, infrastructure, skilled labour, and domestic capital formation.
Opening the economy under these conditions was like opening the gates of a fortress before building the walls. The result was predictable: Manufacturing output collapsed. Imports flooded the market. Real wages fell, and poverty increased even as macroeconomic indicators improved.
This is the essence of premature liberalisation — liberalising before building the productive base.
This then led to premature deindustrialisation: losing industry before industrialising. This second concept is even more devastating. Premature deindustrialisation occurs when a country’s manufacturing sector shrinks before it reaches high-income levels or fully industrialises.
Europe and East Asia industrialised first, then deindustrialised, and moved into the services sector. They modernised agriculture into a high-productivity, highly skilled, and technology-driven sector that, in essence, industrialised. These economies attained a manufacturing contribution to GDP of around 20-30 per cent and a GDP/per capita of $10,000 plus, as well as high levels of manufacturing employment.
Nigeria deindustrialised without industrialising. The symptoms include declining manufacturing share of GDP, declining industrial employment, rising informal services and stagnant productivity.
Nigeria’s manufacturing share has stagnated at 7–10 per cent for 40 years. The services sector dominates in Africa, but they are mostly informal—street trading, transport, and petty retail—sectors that cannot generate productivity growth. Most African countries began deindustrialising at one‑third the income level of Europe and East Asia.
Nigeria is a textbook case. Structural Adjustment Programmes locked Nigeria into a poverty trap. SAPs created a chain reaction that still shapes Nigeria’s economy today: Rapid liberalisation, flood of cheap imports, collapse of domestic manufacturing, rise of informal services, premature deindustrialisation and persistent poverty.
This is why poverty persists despite reforms. Nigeria stabilised the economy at that time but got into a Catch-22. It never built the productive engine needed to reduce poverty.
And why did poverty deepen? First, loss of industrial jobs: manufacturing jobs are high‑productivity and high‑wage. Their collapse pushed millions into informal work. Second, decline in state capacity: SAPs required cuts to education, healthcare, infrastructure, and agricultural extension. Human capital weakened. Third, commodity dependence: Nigeria became even more reliant on oil — a volatile, low‑employment sector. Fourth, weak domestic markets: imports displaced local production, draining foreign exchange. Lastly, stagnant productivity: this happens because informal services cannot generate the productivity growth needed for development.
And so, we must break out of the Catch-22 loop: Build a production economy, from the ground up, including revitalisation of rural economies; otherwise, poverty will persist.
Just to be clear. Nigeria’s reforms were necessary. Nigeria’s 2023 reforms were bold. But they were only the beginning, and policymakers will do well to accept that. However, the instruments were applied to an economy that had already been structurally weakened by decades of premature liberalisation and premature deindustrialisation. To escape poverty, Nigeria must reverse these dynamics by rebuilding productive capacity through: Industrial policy, infrastructure investment, reliable electricity, transport networks, broadband connectivity, and technological upgrading that turns micro and small firms into medium and large ones.
Lastly, strategic protection of emerging industries. You may call it “guided capitalism”. Stop exporting raw agricultural materials and minerals such as lithium, monazite, and others. Demand and enforce domestic processing.
Macroeconomic stability is important — but stability without production is stagnation.
The pathway to sustainable development is to turn the reform into structural transformation. The next phase must go beyond stabilisation to structural transformation — building factories, supply chains, energy systems, and technological capability. Only by shifting from a consumption economy to a production economy can Nigeria break the Catch‑22 that has trapped millions in poverty.
And only then will reforms, which take time, become not just necessary — but sufficient.
Prof. Oyelaran-Oyeyinka is a development economist and chairman of the Foundation for Technology, Innovation and Development
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