EPISODE SUMMARY: The discussion examined what economic productivity means at the state level in South west Nigeria and why it matters more than budget size, population or internally generated revenue. It explained that a state can collect large federal allocations and still be unproductive, while a state with modest revenue can be highly efficient, because productivity measures the value created per unit of land, labour and capital rather than what is simply received. The conversation moved across how productivity should be measured using a basket of indicators, the gaps in state level economic data, and the distinct strengths and weaknesses of Lagos, Ogun, Oyo, Osun, Ondo and Ekiti. It stressed that fiscal independence should come from growing the tax base and pursuing broad-based growth, not from taxing already-stretched households and businesses more aggressively. It also explored the reforms needed to turn productivity gains into real jobs and incomes, including how youth unemployment in the region is less about job scarcity and more about a mismatch between available skills and available work. It closed with a look at how transport, power, security and agricultural value chains are best tackled regionally, and the coordinating role the DAWN Commission plays in that integration.

[Kechiro Ambro-Moye]: Hi everyone, and welcome back to another episode of the Kingsgate Brief, the podcast series brought to you by the Kingsgate Advisors Institute. We’re excited to have you join us for another episode where we discuss deeper perspectives of important economic, development, and policy issues in a way that is easy to understand, practical, and relevant for everyday decision-making. At Kingsgate Advisors Institute, we believe that valuable ideas and research should not just remain only in boardrooms, research papers, policy meetings, and development conferences, rather, they should be shared in a way that everyone can understand, connect with, and use. In every episode, we invite practitioners, thinkers, and thought leaders to help us unpack issues shaping Nigeria, Africa, and the global economy as a whole in a way that is easy to understand and apply. 

I’m Kechiro Ambro-Moye, a Research Analyst at Kingsgate Advisors Institute, and I’ll be your host for today’s conversation. Before we begin, we’d love for you to stay connected with us by following our social media pages, especially on LinkedIn and Instagram. Please like, comment, and share your thoughts, subscribe to our YouTube channel, and turn on the notifications so you never miss a new episode. I’d encourage you to visit our website, where you’ll find more resources to help you make informed decisions. 

Today’s discussion focuses on a topic that affects everyone, whether you live in Southwest Nigeria or not. It will be focusing on how productive our states are and what that means for jobs, incomes, and the cost of living. Southwest Nigeria is one of the most economically important regions in the country. It includes Lagos, Ogun, Oyo, Osun, Ondo, and Ekiti, and together these six states have strong advantages in areas such as trade, agriculture, manufacturing, transportation, education, and a whole lot. However, despite these strengths, economic growth is not the same across all the states, and many people are still not fully benefiting from the region’s potential. 

So, the main focus of today’s conversation is productivity. A state is not considered productive simply because it has a large budget, or a growing population, or higher internally generated revenue. True productivity means using labour, land, businesses, infrastructure, and public resources more effectively to create greater value. It also means that this value leads to better jobs, higher incomes, improved public services, and a better quality of life for citizens. This is important because many Nigerian states still rely heavily on monthly allocations from the Federation Account Allocation Committee (FAAC) and if Southwest states want to become more financially independent, the solution is not just to increase taxes on people and businesses that are already facing economic challenges. Instead, they need to grow their economies by supporting businesses, strengthening industries and value chains, improving infrastructure, developing workers’ skills, attracting investment, and creating an environment where businesses and individuals can be more productive. 

By the end of today’s discussion, we hope you’ll have a better understanding of what productivity means at the state level and how it can be measured. You’ll also gain insight into the strengths, the challenges, and productivity gaps across the six southwest states. We’ll explain why building stronger and more productive economies is the key to achieving fiscal independence, rather than simply increasing tax collection. We’ll also explore how higher productivity can lead to better jobs, higher incomes, and improved living standards. Finally, we’ll discuss the role of the DAWN Commission and how it is working to create more economic opportunities across the Southwest region. 

To help us explore these important issues, we’re pleased to welcome our guest, Mr Adesoji Faray ibi, the Head of Research at the DAWN Commission in Southwest Nigeria. Mr Farayibi is a Development Economist and Policy Analyst. He also co-leads First-Ford Africa, a research community focused on evidence-based and impact-driven policy research, and he chairs the Nigeria Alumni of the African Program on Rethinking Development Economics (NAPORDE). His research and consulting expertise span contemporary topics in development economics and public policy, including governance, sustainable finance, climate change, entrepreneurship, labour, and energy issues. 

[Adesoji Farayibi]: Thank you for having me. 

[Kechiro Ambro-Moye]: Okay, let’s get right into it. I would like to start with the basics before we get into the numbers. When we say a state economy is productive, what does that actually mean, and how is it different from simply having a large budget, or a high internally generated revenue or a large population? 

[Adeji Farayibi]: Thank you very much. 

Productivity simply means output per unit of the factors of production. When we talk about the factors of production, we are talking about land, labour, and capital. Productivity is simply the output generated from each unit of those factors of production. When we talk about productivity in the context of a state or a state economy, productivity simply means the value that the state generates per unit of resources used. It could be measured per worker, in terms of the number of workers the state has. It could be measured per hectare, in terms of the amount of land available. It could also be measured per naira of public investment. It is really about efficiency and value creation; it is not simply about size. 

A budget tells you what a state has collected, but productivity tells you what a state has created. In other words, budget size, population, and even IGR, that is, internally generated revenue, are all inputs or receipts. They are not outcomes. A state can have a large budget from federal allocations and still be unproductive. Another state can have modest revenue and still be quite efficient. For instance, two students may spend the same number of hours studying. That is the input. Yet they may obtain very different examination results. That is the outcome. The same thing applies to states. The question is this: what are the results we are getting? That is why productivity matters. 

Productivity determines whether growth is broad-based and whether it translates into high er household incomes and improved living standards, rather than simply increasing GDP figures. When we talk about productivity, we are talking about what the state has created, not simply the size of its budget. 

[Kechiro Ambro-Moye]: Thank you very much. That is actually a very helpful distinction to start with. Now, building on that, how should productivity actually be measured at the state level in Nigeria? Which indicators give us the clearest picture? And is it output per worker? Is it sector performance, or household income? Or is it a combination of all of these? 

[Adesoji Farayibi]: There’s no single number that tells the whole story. You actually need like a basket of indicators, not just a headline figure. For instance, when we want to look at these indicators, we look at dif ferent things. Output per worker is the most important because it talks about labour productivity. That’s the core efficiency measures. Then we now talk about sector performance because we look at the states, which sectors are actually growing in value-added, not just in employment. When we talk about the composition of the GDP, we have the share of the sectors in the GDP. Which sectors are growing in value-added, not just in employment? We also look at the household income or consumption trends of the households of the citizens. Does growth reach the people? Because that’s where growth can break down if it doesn’t reach the people. When we are looking at pro ductivity, we also look at the household income and consumption trends. And this tells us whether growth reaches the people or not. 

Then we consider employment quality, whether it’s formal or informal employment. Are there un deremployment rates? Not just the job created, because there can be jobs or people could be un deremployed, which we shall go into later. What are the jobs? Are they formal or are they informal? We look at employment quality generally. Then another aspect is looking at the business activity indicators themselves. We go into how many new businesses are registered. What is the rate of survival of the MSME, the micro, small and medium scale enterprises? Then what is the state of the ease of doing business at those stage levels? This really matters. And also, we look at the IGR relative to the GDP. When we want to consider productivity, sometimes we also look at the IGR, but it’s not just about the internal and international revenue alone.

We look at the IGR relative to the GDP, so that we can do the comparative analysis very well. This shows fiscal efforts relative to the economy size, which is a much fairer comparative analysis across states because we cannot be comparing it, for instance, with Lagos state, with a different GDP size. Another thing is what the infrastructure utilisation is across the states in terms of power availability, the road density, the ports and logistics throughput. Therefore, when we talk about these indicators of productivity, there’s no one indicator that should be used alone. A state can look productive in terms of GDP, but can be weak in terms of jobs. It can also be strong in terms of IGR and weak in terms of household welfare. But when we consider a composite view, that’s what’s presented against misleading headline productivity figures. What I would say generally is that there’s no single number that tells the story. We need a basket. These are what I’ve enumerated.