Revisiting Growth Accounting in Nigeria: The Role of Factor Accumulation versus Total Factor Productivity

Abstract

This study revisits the proximate sources of Nigeria's economic growth by decomposing real GDP growth into the contributions of physical capital, labour, and total factor productivity (TFP) within a neoclassical growth-accounting framework for 1995–2024. It extends previous aggregate analyses by examining three policy regimes: the post-adjustment democratic transition (1995–2003), the oil-boom and reform-consolidation period (2004–2013), and the post-oil-shock era of structural reforms and 
exchange-rate realignment (2014–2024). The objective is to determine whether Nigeria's growth shifted from productivity-driven (intensive) to input-driven (extensive). Results indicate that real GDP grew by an average of 4.17% annually, with labour contributing 55% of total growth, TFP 36%, and capital 9%. However, regime-specific estimates reveal a significant structural shift. TFP accounted for 61% and 52% of growth during the first and second regimes, respectively, but turned negative (-1.26%) in 2014–2024, while labour became the dominant growth source. This reversal in the Solow residual coincided with declining dollar-denominated per capita income, suggesting that recent growth weakness reflects falling productive efficiency rather than insufficient factor accumulation. Sustained growth therefore requires reforms that strengthen institutions, improve resource allocation, enhance human capital, raise investment quality, and diversify the productive base.