The Nigerian Productivity Problem

This blog explains that human capital is valuable because it improves what people can do. It is the second part of the Policy Brief: Turning Population into Productivity that examined why human capital should be treated as a national productivity system. This second part of the brief examines why human capability is not consistently being converted into higher productivity and economic value, and what changes in policy delivery could help workers and enterprises move towards more productive activity.

Key Data

People can work, solve problems, adopt technology, manage enterprises, and create value through health, knowledge, skills, experience and capabilities. But ability isn’t productivity. It should be applied in workplaces, companies, markets and institutions so people can improve over time.

Nigeria has a large workforce, and a substantial enterprise base, but much economic activity is low scale and informal. In Q2 2024, 85.6% of employed Nigerians were self-employed and 93% of the employment was informal. [1] Note that these numbers do not mean that self-employment or informality are inherently unproductive. But they demonstrate that productivity cannot be based solely on formal wage employment. This is especially relevant given the structure of Nigeria’s enterprise economy. According to the 2020 National Survey of MSMEs, there are 39.65 million micro, small and medium enterprises, 96.9% of which are micro enterprises. In the survey, MSMEs contributed 46.31 percent of the national GDP and 87.9 percent of the employment. [2] The productivity of these enterprises is thus directly related to household incomes, employment and the national output.

Why the Problem Matters

Productivity is the point at which human capability becomes economic value. When productivity remains low, economic participation can expand without generating the income growth required to reduce poverty and improve living standards. Despite the millions of people in various forms of employment, skills being acquired and the large number of registered businesses in operation, these inputs do not consistently translate into rising output per worker, stronger enterprises or higher earnings.

Human capital can be underused

A person may have acquired education, technical skills or work experience but still have limited opportunity to apply and deepen those capabilities. The World Bank’s 2026 HCI+ analysis explicitly includes employment and workplace skill development alongside health and education. For Nigeria, the HCI+ score is 131, while the education pillar is 64 which is falls significantly short of the lower-middle-income-country (LMIC) median of 88. [3]

The same analysis estimates that existing human-capital deficits in Nigeria are associated with a loss equivalent to 111% of future labour earnings. [3] The government needs to understand where capability is being lost or underused after people enter economic life. Skills that are not used, reinforced or upgraded at work do not generate their full potential economic return.

Employment does not automatically mean productivity

The National Bureau of Statistics (NBS) reported an employment-to-population ratio of 76.1% in Q2 2024, while unemployment was 4.3%. At the same time, 93% of employment was informal and 85.6% of employed people were self-employed. [1] A labour market can therefore show high participation and low unemployment while still containing large amounts of low-productivity work.

The World Bank has found that many Nigerians are working but it is insufficient to raise living standards. This highlights the importance of structural transformation towards more productive sectors and of raising productivity in farm and non-farm household enterprises in the short run. [5] The problem is that policies that help people move from unemployment into any work do not ensure that these economic activities become progressively more productive.

Nigeria’s enterprise structure is central to the productivity problem

The scale of the MSME sector means that enterprise productivity is not a niche business-policy issue. The 2020 SMEDAN/NBS survey recorded 39.65 million MSMEs, of which 96.9% were micro enterprises. MSMEs accounted for 46.31% of GDP and 87.9% of employment. [2] This means that relatively small improvements across millions of businesses could have substantial economy-wide effects. It also means that policy must distinguish between enterprises that primarily provide livelihoods and those with realistic potential to increase productivity, employ more people and scale.

The World Bank’s analysis of Nigerian firms reinforces this point. It identifies a concentration of employment among both the least-productive and most-productive firms, with a missing middle of more productive firms that could absorb labour and generate stronger productivity spillovers. [6] The problem therefore is that too much economic activity remains at low productivity while productive firms face constraints to growth.

Productivity is shaped by the conditions around the firm

The World Bank’s Country Private Sector Diagnostic identifies constraints including infrastructure, finance, skills, competition and the broader business environment. [7] When electricity is unreliable, logistics are expensive, finance is short-term or costly, and market access is limited, firms have less capacity to invest in equipment, technology, management and workers.

This is why productivity should be understood as a systems issue. A skilled worker in a poorly equipped enterprise may not be able to use that skill. A viable business may not grow because it cannot access the finance or infrastructure required to expand. A training programme may report successful completion even when people enter work where there is little opportunity to practice or upgrade their skills. The constraint can therefore sit outside the intervention that government is currently measuring.

The challenge is progression, not simply participation

The most important distinction for policy is between participation and progression. Participation asks whether someone is working or whether a business is operating. Progression asks whether output, earnings, capability, technology use, market reach or firm size is improving. The latter is much closer to the development objective of productivity growth.

Nigeria already has important policy instruments and delivery mechanisms that touch productivity. The Federal Ministry of Labour and Employment lists the National Policy on Productivity 2012 and the National Employment Policy among its policy instruments, and a National Council on Productivity was inaugurated in 2022 to support implementation of the productivity policy. [8][9] ITF also operates Performance and Productivity Improvement Training, including diagnostic studies for MSMEs, while SIWES is designed to connect students with real work settings. [10][11] SMEDAN’s Cluster Development Support similarly includes diagnostics, technology, skills, finance and market linkages. [12] The gap is therefore not the absence of productivity-oriented interventions but in the limited use of their lessons and outcomes as a common basis for improving the wider economic system.

Why existing support needs a productivity lens

Government already supports people and enterprises through skills programmes, enterprise development, finance, infrastructure and sector interventions. These programmes are necessary, but their results are often described in terms of people trained, businesses reached, loans disbursed or beneficiaries supported. Those measures are useful for programme management but do not tell government whether economic capability is improving.

A productivity lens would ask a different set of questions. Did the enterprise increase output per worker? Did sales grow because production became more efficient? Did workers use and deepen their skills? Did the business adopt technology or improve management practices? Did earnings rise? Did a viable firm move towards greater scale? These questions would not replace existing programme indicators. They would add the outcome layer needed to determine whether public interventions are producing economic value.

The demographic pressure makes this urgent

The World Bank estimates that about 3.5 million people enter Nigeria’s labour force each year. [4] The country therefore needs more than enough economic activity to absorb new entrants. It needs an economy capable of generating increasing value from the people already working and from those entering the labour market. If millions of new workers are absorbed mainly into low-productivity activities, employment can increase without a corresponding improvement in incomes or living standards.

The productivity problem is consequently the next stage of the human-capital agenda. Nigeria has to move from asking whether people have acquired capabilities to asking whether the economy is organized well enough for those capabilities to produce value. That requires attention to workplaces, firms, markets, infrastructure, finance, management and the policy systems that connect them.

Policy Recommendations

Make productivity progression an outcome across existing economic programmes

The Federal Government should require major publicly funded employment, skills, human-capital and enterprise-support programmes to demonstrate measurable improvement in the productive capacity of their beneficiaries, alongside existing activity and participation indicators. Programme performance should therefore consider whether supported individuals and enterprises increase output, earnings, revenue, productivity, technology use, production capacity, job quality or movement into higher-productivity activities. This would shift programme assessment from asking how many people were trained, financed or reached to asking what changed in their economic capability after support. Where appropriate, evidence of productivity progression should inform decisions on programme continuation, expansion and future funding. The objective is not to create another productivity programme, but to make productivity improvement an explicit performance expectation across existing interventions.

Use existing productivity diagnostics to connect enterprise support across government

The Government should establish a common referral and learning mechanism through which productivity and enterprise diagnostics conducted by existing institutions inform the design and delivery of subsequent support. Institutions such as the Industrial Training Fund (ITF) and SMEDAN already undertake enterprise assessments and diagnostics that identify operational, skills, technology, finance, market and other constraints. The gap is not necessarily the absence of diagnosis, but the weak connection between diagnosis and the institution best positioned to address the constraint. Diagnostic findings should therefore be capable of triggering referrals to relevant government programmes and agencies, with the intervention and subsequent productivity outcome recorded. This would reduce repeated assessments, limit generic support and enable government to respond to enterprises according to their actual binding constraints.

Introduce productivity pathways within public enterprise support

Government should strengthen existing enterprise-support programmes by differentiating support according to an enterprise's productivity pathway rather than relying primarily on firm size or broad beneficiary categories. Enterprises should be assessed according to their current productive position and the constraint preventing them from moving to the next stage. Support could therefore distinguish between enterprises primarily seeking livelihood resilience, enterprises with identifiable productivity constraints, enterprises demonstrating potential for expansion, and firms capable of scaling into larger markets or value chains. The intensity and type of support should reflect the enterprise's next productive stage, with progression informed by measurable improvements in production, management, technology, markets, revenue, employment or other relevant indicators. This would build on existing enterprise-support mechanisms while introducing a clearer logic of progression: stabilization, productivity improvement, expansion and scale.

Measure capability utilization in the workplace

The Federal Government should strengthen existing human-capital and skills programmes by tracking beyond whether people obtain employment after training to if the capabilities they acquire are actually being used and developed in the workplace. Follow-up measures should examine whether workers are applying their skills, taking on greater responsibility, improving their performance, adopting new technologies or processes, increasing their earnings, or contributing to measurable improvements in workplace productivity. This would extend the assessment of human-capital programmes beyond participation, certification and initial employment to the utilization and development of capability after people enter work. It is particularly important in a labour market where employment does not necessarily mean that skills are being productively deployed. The objective is to determine whether investments in people are translating into greater productive capacity for individuals, enterprises and the wider economy.

Institutionalize periodic productivity bottleneck reviews.

Government should establish a periodic process for identifying and reviewing the binding constraints that limit productivity in priority sectors, value chains and locations. Drawing on labour, enterprise, sectoral and productivity evidence, these reviews should identify a small number of constraints that government can realistically influence such as infrastructure, finance, regulation, skills, technology, standards or market access and assign responsibility for addressing them to the relevant institutions. The reviews should not become another reporting exercise. Their purpose should be to provide a practical mechanism for government to determine what is preventing productivity from improving, which constraint matters most, who is responsible for addressing it, and whether the constraint has subsequently been reduced. This would turn productivity from a broad policy objective into a recurring method for prioritizing government action.

Conclusion

Nigeria’s productivity problem is that too much economic activity generates too little value relative to the capabilities, time and resources invested in it. The labour market is dominated by self-employment and informal work, while the enterprise economy is dominated by micro businesses. These structures are important sources of livelihoods, but they also reveal where productivity gains are most needed

References

[1] National Bureau of Statistics. (2024). Nigeria Labour Force Survey Q2 2024. Abuja: NBS.

[2] Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) & National Bureau of Statistics (NBS). (2021). 2021 MSME survey report. SMEDAN/NBS 2021 MSME Survey Report

[3] World Bank. (2026, February 12). Current deficits in nutrition, learning, and on-the-job skills are costing children born today half of their future earnings. World Bank. World Bank press release

[4] World Bank. (2026). Nigeria. World Bank — Nigeria country page

[5] Lain, J., & Pape, U. (2024). Are Nigerians getting more productive jobs? World Bank. World Bank article

[6] World Bank. (2022). Nigeria country economic memorandum: A new era of growth and opportunities. World Bank.

[7] Lewis-Bynoe, D., Ouled Belayachi, K., Mawoyo, C., Yameogo, N. D., Seyingbo, D., Flores, J., Aliyu, M., Stephens, A. M., Wade, J. C., Moelders, F., & Takahashi, I. (2025). Nigeria—Country private sector diagnostic. World Bank Group. World Bank — Nigeria Country Private Sector Diagnostic

[8] Federal Ministry of Labour and Employment. (2012). National policy on productivity. Federal Ministry of Labour and Employment — National Policy on Productivity

[9] Federal Ministry of Labour and Employment. (2022). FG inaugurates new National Council on Productivity. Federal Ministry of Labour and Employment — press release

[10] World Bank. (2026). Building human capital where it matters: Homes, neighborhoods, and workplaces. World Bank. World Bank — Human Capital Report 2026

[11] World Bank. (2026). Share of youth not in education, employment or training, total (% of youth population) (modeled ILO estimate)—Nigeria. World Development Indicators. World Bank Data — Nigeria NEET indicator

[12] Industrial Training Fund. (2026). Students Industrial Work Experience Scheme (SIWES): Objectives and resources. ITF — SIWES resources and objectives

[13] Industrial Training Fund. (2026). Performance and Productivity Improvement Training and MSME diagnostic studies. Industrial Training Fund — PPIT and MSME diagnostic information

[14] Small and Medium Enterprises Development Agency of Nigeria. (2026). Cluster Development Support for MSMEs. SMEDAN — Cluster Development Support for MSMEs

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Author's Bio

Dr. Henry Akwuebu is a Fellow of the Abuja School of Social & Political Thought, an Africa AI Policy Fellow with the Pan-African Digital Law and Policy Organization (Lawyers Hub Africa), a pioneer member of the Africa Public Policy and Governance Network (APPGN), and Head of Policy and Evidence at EMPIRICAL, where he leads policy research and evidence-informed policy engagement and advises on development, governance reform, institutional strengthening, strategy and transformation. He is also a contributor to Econolicy, a Canadian-based African policy research and journalism platform focused on economic trends and public policy.