Factors behind Economic Shrinking: Single Case Study Insights from Nigeria

Abstract: This thesis addresses the research problem of volatile growth and in particular economic shrinking in developing countries. A single case study of Nigeria drawing on qualitative as well as quantitative data assesses four potential factors behind the country’s frequent and high shrinking rates between 1960 and 2017. The study finds a lack of structural transformation, productivity and diversification as well as a high reliance on the particularly volatile oil industry, no observable effects of demographic factors and potentially problematic frequent incidences of warfare particularly in recent years. Lastly, the thesis identifies an uncompleted institutional transition from a limited to an open access social order largely due to persisting inequalities resulting in a lack of economic opportunities for part of the population. The thesis provides broad policy recommendations with regard to the assessed factors taking into consideration how Nigeria has temporarily reduced economic shrinking in the past and how the country can profit from these previous experiences in the future. Institutional change constitutes the ultimate factor Nigeria needs to improve in order to become more resilient to economic shrinking since this will lead to automatic improvements in the other factors. These factors require an economic diversification with lower reliance on the oil sector and a reconciliation of the diverse societal groups in order to avoid further violent conflict in the future.