Diagnosing Nigeria's Structural Transformation Using Decomposition Analysis

This study analysed Nigeria's structural transformation from 1991 to 2024 using the McMillan-Rodrik sectoral decomposition analysis. The study used annual secondary data from the World Bank World Development Indicators on sectoral value added and employment for agriculture, industry, and services to decompose annual changes in aggregate labour productivity into within-sector and structural change effects. The annual effects were then summed over the period and examined across Nigeria's policy regimes. The analysis revealed that 68% of Nigeria's labour productivity growth is attributable to within-sector efficiency gains, while only 32% is attributable to structural reallocation of labour. These findings indicate that growth has been driven primarily by improvements in internal sectoral efficiency rather than by labour moving toward more productive sectors. This pattern is consistent with the jobless growth phenomenon, as within-sector improvements are often capital-intensive and generate limited employment, whereas substantial structural change is essential for mass job creation. Although the structural effect is positive, its limited size suggests that labour mobility has predominantly shifted toward services, where productivity is only modestly higher than in agriculture, rather than toward high-productivity manufacturing. The study concludes by outlining relevant policy implications.