Two Sides of a Coin: FDI and Nigeria’s Service-Led Structural Transformation

By the 2014 rebasing of its GDP, Nigeria became Africa’s largest economy trumping its long time contender, South Africa. Amongst several things, the significant growth implies changes in the sectoral contribution of domestic output and employment.


Conventionally, for a developing country context it is expected that international trade, foreign direct investment, industrial policy and global price fluctuations would have contributed to the shifts in the distribution of factors of production and final output.

Given the uninclusive nature of the impressive surge in output, it is important to investigate what sectors accounted for the structural change. Using historical data on the Nigerian economy, Oyebanke and I examined (in a forthcoming paper) the contribution of foreign direct investment to structural transformation.


Specifically, in the paper we provided answers to the following questions: What are the sources, nature and characteristics of the structural changes that have occurred in Nigeria’s sectors over the past three decades? What sort of domestic and export policy changes are required to speed the process of structural change? What is the role of the State and its policies in this transformation? What institutional mechanisms exist or need to be put in place to ensure that FDI leads to equitable outcomes in Nigeria?

We found that, while the percentage of those employed in the industrial and agricultural sectors have been reducing in more recent years, the service sector has been employing more people. In addition, labour productivity growth attributable to a structural change has increased in recent years in the service sector, and surpassed that due to within sector changes from 2005 to 2009.

Furthermore, the industrial sector was observed to have received the greatest percentage of FDI over the years, but has been declining in recent decade while that to the service sector has been increasing. Notably, FDI to the agricultural sector has been miniature. Thus, we conclude that FDI to Nigeria has been contributing to a service-sector led structural transformation.

The findings of the study provide several implications for national socio-economic and industrial policies. For instance, we recommend a strategic infrastructure development programme, which will create a conducive environment for and stimulate large-scale domestic and foreign agricultural and manufacturing investments.

Towards generating inclusive structural transformation, we advocate policy support to protect and promote smallholder agriculture and small-scale industry engagements.


The discussion continues...

Comments

Unknown said…
Outlined factors -
:the emergence of the brics economy especially China and India who shifted foreign investment to Nigeria to take advantage of of the under utilized materials and cheap labour with maximum potentials.
:the advent of Globalization which induces cross border transaction.
:the ability of the Nigerians to become innovative as result of limited job opportunities, this has geared domestic income.
:...and others factors IT, technological improvements, improved training and education.
20 September 2015 at 08:13
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