Over the years, Nigeria has made concerted efforts to structurally engineer socio-economic development, hinged on its natural endowments. This drive has seen the country focus on sectors in which it has inherently defined comparative advantages: oil and gas, agriculture, and light manufacturing. The logic underpinning this approach is firmly rooted in neoclassical economic theory, which posits that countries maximise welfare by specialising in sectors where they possess relative efficiency advantages. Unsurprisingly, this concept has featured prominently in Nigeria’s industrial policies since independence, culminating most recently in the National Industrial Revolution Plan (NIRP).
Yet, despite decades of policy alignment with its perceived comparative advantages, Nigeria’s industrial outcomes have weakened considerably after early promise. Manufacturing contribution to GDP has progressively declined – from the relatively strong performance of the 1970s, through the modest stability of the 1990s, to its current state of stagnation and decline. The push for export diversification through the import substitution strategy introduced in the 1980s yielded only marginal success, with oil and gas continuing to dominate foreign exchange earnings. Industrial employment has failed to expand sufficiently to absorb Nigeria’s rapidly growing labour force, while rural–urban migration has intensified, contributing to declining agricultural productivity and the erosion of farming capacity.
Explaining Nigeria’s Industrial Underperformance
A substantial body of research and policy commentary has sought to explain Nigeria’s industrial development failure. Commonly cited factors include asymmetrical information between government and the private sector; poor coordination among public institutions both across and within tiers of government; decayed or inadequate economic infrastructure; insufficient domestic capital compounded by the high cost of finance; inconsistent and frequently reversed government policies; and a prolonged absence of democratic governance, which weakened accountability, long-term planning, and institutional continuity.
While these explanations are valid, they often remain fragmented and treated as isolated constraints. Collectively, however, they point to a deeper and more systemic problem: the absence of a coherent structural foundation for industrial policy implementation. Industrial strategies have existed largely at the level of intent and documentation, but without the institutional architecture required to translate policy ambition into productive transformation.
The consequence has been the persistent failure to establish a structured industrial ecosystem capable of supporting learning, coordination, scale, and competitiveness.
Compliance Without Transformation
At first glance, Nigeria appears to have complied faithfully with neoclassical prescriptions by prioritising sectors aligned with its natural endowments. However, compliance in policy orientation has not translated into compliance in outcomes. Oil and gas have remained largely extractive, with weak downstream integration and limited domestic value addition. Agriculture, though employing a significant proportion of the population, remains predominantly subsistence-based, fragmented, and low in productivity, with weak links to agro-processing and manufacturing. Light manufacturing has struggled to survive under the weight of infrastructure deficits, import dependence, and macroeconomic instability.
In this sense, Nigeria’s experience reflects formal compliance with comparative advantage theory without structural upgrading. Comparative advantage was treated as an end-state rather than a starting point for industrial deepening. The failure to convert natural endowments into industrial platforms undermined the very logic of the neoclassical framework Nigeria sought to follow.
Drift Toward Defiance Without Discipline
More recently, Nigeria’s growth trajectory has shifted toward services, particularly financial services, telecommunications, digital platforms, and professional services. These sectors have recorded measurable growth and contributed positively to GDP, even as manufacturing stagnated. Notably, these are sectors in which Nigeria does not possess an obvious static comparative advantage based on factor endowments.
This development suggests a de facto defiance of neoclassical comparative advantage, albeit an unplanned and weakly coordinated one. Unlike the deliberate defiance observed in successful late-industrialising economies, where the state actively nurtured new industries through coordinated policies, learning mechanisms, and export discipline, Nigeria’s shift has occurred largely through market forces responding to urban consumption, regulatory arbitrage, and technological diffusion.
The result has been growth without structural transformation. Services have expanded without anchoring themselves in productive sectors, manufacturing capability has not deepened, and exports remain dominated by primary commodities and a narrow range of services.
Floating Between Strategy and Structure
This brings the analysis back to the central question: has Nigeria truly complied with comparative advantage, or has it simply floated between compliance and defiance without the structural coordination required for either to succeed?
Nigeria’s industrial development trajectory suggests neither a disciplined adherence to neoclassical theory nor a coherent strategy of comparative-advantage defiance. Instead, it reflects a pattern of policy oscillation; anchored in sound theoretical ideas but undermined by weak institutions, fragmented governance, and limited implementation capacity.
Industrial policy, by its nature, requires coordination across sectors, agencies, and levels of government. It demands long-term commitment, embedded state–business relations, and institutional mechanisms for feedback, learning, and policy adjustment. In the absence of these foundations, both comparative-advantage-following and comparative-advantage-defying strategies are rendered ineffective, as policy intentions fail to translate into productive outcomes.
In Nigeria, however, most industrial sector regulators operate largely in silos, each pursuing narrow institutional mandates with limited interface across related sectors. This fragmentation undermines the coherence required for structural transformation. A clear illustration is the ongoing recapitalisation of financial institutions, which is ostensibly aimed at strengthening financial intermediation and deepening credit to the real sector. Yet, critical questions arise regarding the extent to which the ministry responsible for trade and investment is substantively involved in shaping this exercise, particularly in defining sectoral priorities, aligning credit allocation with industrial objectives, and setting performance-based targets for financial institutions in support of manufacturing, agro-processing, and export-oriented activities.
Without such coordination, financial sector reforms risk reinforcing short-term profitability and speculative activities rather than facilitating productivity growth in the real economy. The absence of joint planning, shared targets, and accountability mechanisms between financial regulators and production-oriented ministries weakens the transmission of policy from finance to industry.
This persistent lack of coordination among key production and regulatory agencies constitutes a structural defect in Nigeria’s industrial ecosystem. It results in policies that are individually rational but collectively sub-optimal, thereby constraining the state’s ability to steer investment, foster learning, and sustain industrial upgrading. Until institutional silos are dismantled and policy coordination becomes central to industrial governance, Nigeria’s industrial strategy, regardless of its theoretical orientation, will continue to fall short of delivering meaningful structural transformation.
Conclusion: Beyond Theory Toward Coordination
Nigeria’s industrial challenge is therefore not fundamentally about choosing between neoclassical compliance and heterodox defiance. It is about building the institutional and structural foundations that make any industrial strategy viable. Without coordinated governance, productive infrastructure, financial depth, and policy discipline, industrialisation remains aspirational rather than transformational.
Defying comparative advantage can succeed, but only when underpinned by deliberate capability building and coordination. Following comparative advantage can also deliver results, but only when natural endowments are used as platforms for value addition and learning. Nigeria’s experience demonstrates that the absence of structure, not the choice of theory, has been the binding constraint on industrial development.
Dipo Baruwa is a business climate development analyst.
