Do Nonprofits add any real value to the Economy?

August 4, 2025

Dolapo Ogunfowora

Editor

We’ve all heard the whispers: “Nonprofits? These people have come again.” “Another NGO? Must be siphoning donor funds.” There’s this common misconception that nonprofits exist mainly to evade tax and siphon government funds, you know, embezzle or launder money in a quasi-legal way. According to Pactman, there are about 500,000 nonprofits operating in Nigeria alone (only 100,000 are formally registered) and it’s easy to be cynical. If they’re so numerous, then why do challenges persist? Why does poverty remain so stark? I mean there’s only 230+ million of us and some even argue that starting a new nonprofit has become a “pandemic” in itself, a well intentioned madness with diminishing returns.

So let’s cut through the noise and ask the difficult question: Do Nonprofits add any real, tangible value to the economy, or are they merely part of a system stuck in inefficiency and suspicion?

The answer is very subjective based on where you look from, so let’s be agnostic about it and look beyond both the idealistic hype and the jaded dismissal.

The first question you might have is: “Why do Nonprofits even exist in the first place?” Well, the core premise of nonprofits is simple; they exist to improve aspects of the quality of life or prevent its deterioration. You might rightly ask again, “Isn’t that the government’s job?” Ideally, yes. But reality paints a different picture. Nonprofits often arise as a structural response to critical deficits in public goods essentially acting as buffers against government limitations in satisfying public demand.

Think of it as a hidden economy of care and resilience, and I do agree that their output and productivity are tough to quantify but stick with me. When public health systems are strained, nonprofits run clinics and vaccination drives. When formal education fails marginalized communities, nonprofits set up alternative schools and skills training. They respond to disasters, provide legal aid, and even champion environmental causes. All the areas that are often underfunded or neglected by the state.

I promised to take an agnostic point of view about it so what are the alleged benefits that nonprofit claims to offer? Their value, proponents argue extends beyond the delivery of immediate service:

The Hidden Economy Output: Nonprofits generate significant economic activity that’s often overlooked, would you believe it if I said nonprofits in Nigeria contributed over 0.5% to the GDP in 2023. Nonprofits employ staff, purchase goods and services, rent offices, and manage budgets, all of these spending ripples through the local economy in one way or the other. Furthermore, their output –healthier citizens, educated youth, cleaner environments– contributes to national productivity and social stability.
Innovation & Experimentation: Nonprofits usually move more flexibly than large government bureaucracies and can often pilot innovative solutions. They test new approaches to poverty alleviation, healthcare delivery, or education reform, providing valuable lessons(even from failures) that can inform larger-scale public policy.
Mitigating Social Ills and Boosting Wellbeing: Research, though primarily from the US suggests a strong link between nonprofit presence and community wellbeing. Nonprofits act as buffers, associated with reduced expressions of negative emotions, disengagement, and negative social relations within communities. For instance, look at the initiative taken by different nonprofits in Nigeria to educate marginalized children and youths, this will definitely contribute to a more stable environment for economic activity.
Social Capital & Advocacy: Nonprofits connect people, build networks and amplify the voices of marginalized groups. They advocate for policy changes, hold authorities accountable, and empower communities to articulate their needs. You know, the essential functions for a healthy democracy and equitable economic development.

We’ve talked about the “alleged” good and you might have been like hmm, nonprofits are really not that bad. So, why does the Cynicism persist? To paint a picture I will draw from experiences documented in Malawi, Senegal and Rwanda.

The Sustainability Gap: In Rwanda, Engineers without borders installed a UV water disinfection system in Murumba and years later it lay broken and unused. Why? Lack of community involvement and ownership. The system was practically imposed on them and not co-created. The locals lacked the training, resources or incentive to maintain it. How many Nigerian NGO projects e.g. boreholes, ICT centers, health posts, suffer the same fate, becoming white elephants after the donor funding dries up?
Ignoring Local Context & Culture: World Vision drilled wells across geologically diverse terrains in Louga Region, Senegal. In areas with quaternary sands, the water, though clean, tasted unpleasant due to high iron content and the villagers despite hygiene training, abandoned the wells for familiar(contaminated) sources. Just like the polio vaccine boycott in northern Nigeria a few years ago, due to rumours from influential high-profile individuals, which increased the incidence across the country and parts of the world. The rumours that caused the boycotts had traction because of a number of contextual circumstances unique to northern Nigeria. How many Nigerian initiatives fail because they don’t understand local preferences, power dynamics, or existing practices?
The Education Void: Another example from Malawi is the Save the Children Fund who drilled boreholes but failed to educate the community on why clean water matters and establish the link to hygiene. People continued using old sources alongside the new ones, borehole committees collapsed without funding, and the long term impact was negligible to the community. The thing was although these clean water sources were made available but delivering infrastructure alone without changing knowledge and behaviour is often futile.
Lack of Coordination & The Madness: With half a million NGOs(many unregistered), duplication effort is rampant, impact is diluted and resources are spread thin, communities suffer from “project fatigue”. A personal experience of mine was going for a clean up in one of the slums in Lagos and the community felt entitled like it was our obligation to do it (we obviously weren’t the first Non-profit to go there), they even asked us to pay before we could clean up. The community was obviously tired of people coming to them, taking pictures and sharing food and goodies every other weekend. The lack of a robust coordinating framework and transparent impact measurement fuels the perception of inefficiency.

So what is the way forward, going from that suspicion to solution. For Nigerian nonprofits to shed the cloak of suspicion and realize their true economic and social value a fundamental shift is needed:

Embrace True Community Ownership: We need to move beyond token consultations and start involving communities from problem identification through design, implementation, and maintenance. We need to build the local capacity and help communities foster ownership of projects, we let them know it’s for their benefit.
Invest Deeply in Contextual Understanding: The old ways of just looking at a community peripherally should stop and rigorous assessments, not just needs assessment but cultural, social, economic and environmental analyses need to be conducted before designing interventions.
Prioritize Education & Behavior Change: Infrastructure without understanding is wasted, we need to start integrating robust education and behavior change communication into every project to ensure that communities grasp the WHY and adopt these new practices.
Demand Transparency, Accountability & Collaboration: Registered nonprofits must adhere to strict financial and programmatic reporting. Platforms for NGO coordination and information sharing are essential to avoid duplication and maximize impact. Donors should also prioritize collaborative funding models.

Nonprofits also need to be able to share stories of failure as well, they are just as important for overall success, but I don’t even think we do these in Nigeria, who wants to admit failure anyways. NGOs need to create a safe space to admit failures and analyze the root causes of why a particular project failed, so the sector can prevent a repetition.

So Blessing or Guise? The Verdict is in Our Hands

Nigerian nonprofits are neither a panacea nor a universal scam, they are a potential force for immense good, a vital component of social and economic fabric that are filling the critical gaps and acting as a buffer against state failure. They employ people, deliver essential services, and build social capital, contributing to that “hidden economy” of wellbeing and resilience.

However, their current value is severely undermined by persistent issues of poor sustainability, cultural misalignment, duplication, lack of transparency, and insufficient community integration. The experiences from across Africa serve as stark warnings.The true economic value of Nigerian nonprofits or I dare say developing countries won’t be realized through sheer numbers or grand launch events. It will come from a relentless focus on deep community partnership, rigorous contextual understanding, sustainable models, genuine accountability, and a willingness to learn from both successes and, crucially, failures.

So, are nonprofits a blessing to the economy? They can be. But transforming their potential into consistent, measurable, and trusted value requires a fundamental overhaul of how they operate and are regulated. The ball is in their court – and in ours, as citizens demanding better. What’s your take?