By: Banji Oyelaran-Oyeyinka

IN 2023, Nigeria’s new governmentcame 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 stabilized macroeconomic indicators, but they did not stabilize Nigerian lives. This is the paradox at the heart of Nigeria’s current moment: necessary reforms that are not sufficient to end poverty. And to understand why, we introduce two key concepts from development economics — premature liberalization and premature deindustrialization — 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 crisis, yet the very reforms deepen the crisis 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 liberalization. And this is where the story of poverty persistence begins. The first concept is premature liberalization: Opening the gates before building the house

In the 1980s and 1990s, Nigeria adopted the World Bank/IMF Structural Adjustment Programmes (SAPs). These reforms demanded:Rapid removal of tariffs, Privatization 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 includingindustrial 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 Industrializing. This second concept is even more devastating.Premature deindustrialization occurs when a country’s manufacturing sector shrinks before it reaches high income levels or before it fully industrializes. Europe and East Asia industrialized first, then deindustrialized, moved into the Services sector. They modernized agriculture into a high productivity, high-skilled and technology-driven sector that in essence, industrialized. These economies attained Manufacturing contribution to GDP of around 20-30 percent and GDP/per capita of $10,000 plus and as well, high levels of manufacturing employment in GDP. Nigeria deindustrialised without industrialising. The symptoms includedeclining 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. Services sectordominate in Africa, but they are mostly informal — street trading, transport, petty retail — sectors that cannot generate productivity growth. Most African countries began deindustrializing at one third the income level of Europe and East Asia. Nigeria is a textbook case. Structural Adjustment Programmes (SAPs)locked Nigeria into a Poverty Trap. SAPs created a chain reaction that still shapes Nigeria’s economy today:Rapid liberalization, flood of cheap imports, collapse of domestic manufacturing, rise of informal services, Premature deindustrialization and persistent poverty. This is why poverty persists despite reforms. Nigeria stabilized 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 Deepened? 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 grounds up including revitalization of rural economies otherwise poverty will persist.

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Just to be clear. Nigeria’s reforms were necessary. Nigeria’s 2023 reforms were bold. But they were only the beginning, and policy makers will do well to accept that. However, the instruments were applied to an economy that had already been structurally weakened by decades of premature liberalization and premature deindustrialization.To escape poverty, Nigeria must reverse these dynamics by rebuilding productive capacity through:Industrial policy, Infrastructure investment, reliable electricity, transport networks, broadband connectivity, 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, monazites 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.

•Professor Oyelaran-Oyeyinka is a development economist and Chairman, Foundation for Technology, Innovation and Development.