Nigeria - Overview of economy

Nigeria Overview Of Economy 1183
Photo by: Kheng Guan Toh

As of 2001, the most conspicuous fact about Nigeria's economy is that the corruption and mismanagement of its post-colonial governments has prevented the channeling of the country's abundant natural and human resources—especially its wealth in crude oil—into lasting improvements in infrastructure and the construction of a sound base for self-sustaining economic development. Thus, despite its abundant resources, Nigeria is poorer today than it was at independence in 1960. Still one of the less developed and poorer countries of the world, it has the potential to become a major economic power if the leaders resolve to learn from past mistakes and to harness the country's rich natural and human resources for a productive and sustained effort to promote economic development.

Before the country was colonized by Britain, during the second half of the 19th century, the various nationality groups that currently make up Nigeria were largely an agricultural people. They were food self-sufficient and produced a variety of commodities that were exported overseas. British colonial administrators amalgamated (joined together) the nationality groups in 1914 into a larger economy for exploitation for the benefit of British industrial classes. Under colonial rule, Nigeria remained an agricultural country, exporting raw materials to Britain and importing from it finished goods. Therein lay the origins of the dependence of Nigerian economy on commodity markets of the industrialized Western world for its foreign exchange. While the industrialization of the country was discouraged, rudimentary foundations for a modern Nigerian economy, however, were laid. Colonial economic policies shaped future independent Nigeria's economy, particularly in marketing, labor supply, and investment. The process of colonial rule and formal economic exploitation ended in 1960 but left Nigeria a relatively strong but undiversified economy. Thereafter, Nigerians were poised to remedy this defect and to build a self-sustaining Nigerian economy comprising agricultural, industrial, and service sectors.

From independence in 1960, the state took up the direction and planning of economic growth and development. Education was progressively expanded at all levels to reduce the rate of illiteracy and to provide the requisite skills and labor force for development. Infrastructure of roads and communication networks were constructed far beyond what was inherited from colonial rule. Hydroelectric dams were built to generate electricity. Secondary industries and automobile assembly plants were established to create more employment opportunities. Because of the paucity (small number) of indigenous (native or local) private capital, these activities were undertaken and financed by the government, often with foreign assistance from such countries as Britain and the United States. Foreign oil companies, such as Shell-BP, Exxon-Mobil, Chevron, Agip, and Texaco, operate in partnership with the government in the oil sector, the mainstay of Nigeria's economy. The capital-intensive oil sector provides 95 percent of Nigeria's foreign exchange earnings and about 65 percent of its budgetary revenues.

Because the established, government-owned industries and businesses were often inefficient and corrupt, productivity was low at best. In particular, mismanagement and corruption were endemic (characteristic of) in the successive governments and throughout the nation. However, the gravest problem was caused by the government's decision to stress the industrial sector above all others. Caught in a web of competing demands for scarce resources, the officials took the path of rapid, large-scale industrialization at the expense of the agricultural sector, as well as light manufacturing. They directed the bulk of investment capital towards the promotion of what Western advisers captioned "industrial take off." This decision to abandon the known—agriculture—for the unknown—rapid large-scale industrialization—was a fundamental error. The capital and the skill needed for rapid, large-scale industrialization were not sufficiently available. Thus, an unskilled workforce and insufficient funds severely handicapped the industrial sector. Also, Nigeria's neglect of the agricultural sector aggravated already problematic food shortages. Nigeria had raised enough food to meet domestic needs during its colonial period and in the decade following independence. However, it experienced food shortages in the 1970s and 1980s, which necessitated the importation of food from foreign countries. Among the imports were palm oil (from Malaysia), of which Nigeria had been the world's largest producer and exporter, and rice (from the United States) which was considered less nutritious than Nigerian brown rice. Once Africa's largest poultry producer, Nigeria lost that status because of inefficient corn production and a ban on the importation of corn. Furthermore, it is no longer a major exporter of cocoa, peanuts, and rubber.

Several forces compounded the problems of the agricultural sector. The migration of labor from the rural areas to the urban centers reduced the traditional agricultural labor force. Ecological constraints such as poor soil, erosion, drought, and the absence of agricultural research added to the problem. Other constraints on agricultural production include the use of antiquated technology due to a lack of capital, the low status given to agriculture in the education of the youth, inefficient marketing, an inadequate transportation infrastructure, lack of refrigeration, trade restrictions, under-investment due to unavailability of credit, low prices, and unstable pricing policies which resulted in farmers literally subsidizing urban dwellers and other sectors of the economy. In addition to these handicaps, import constraints limit the availability of many agricultural and food-processing plants. In general, land tenure discourages long-term investment in technology and modern production techniques.

The problem of food shortages and imports was addressed in the late 1970s and early 1980s. In the late 1970s the military government of Olusegun Obasanjo embarked upon "Operation Feed the Nation." His civilian successor, President Shehu Shagari, continued the program as the "Green Revolution." Both programs encouraged Nigerians to grow more food, and urged unemployed urban dwellers to return to the rural areas to grow food crops. The government provided farmers with fertilizers and loans from the World Bank. The food situation has stabilized, although Nigeria still imports food. A related problem which has not been completely resolved is the pollution of water in the Delta region and Ogoniland by oil companies. Water pollution disrupts farming efforts and has been a source of friction between farmers on one side and the national government and the oil companies on the other.

The oil boom which Nigeria experienced in the 1970s helped the nation to recover rapidly from its civil war and at the same time gave great impetus to the government's program of rapid industrialization. Many manufacturing industries sprang up and the economy experienced a rapid growth of about 8 percent per year that made Nigeria, by 1980, the largest economy in Africa. The growth, however, was not sustained. The new oil wealth did little to reverse widespread poverty and the collapse of even basic infrastructure and social services. The iron and steel industry, started with the help of the Soviet Union, still has not achieved a satisfactory level of production. The oil boom also provoked a shortage of labor in the agricultural sector as members of the rural workforce migrated to jobs in the urban construction boom and a growing informal sector . When the price of crude oil fell and corruption and mismanagement still prevailed at all levels, the economy became severely depressed. The urban unemployment rate rose to 28 percent in 1992, and crime also increased as 31.4 percent of the population lived below the poverty line.

Nigeria's debts mounted as administrators engaged in external borrowing and subsidized food and rice imports and gasoline prices. In the 1980s, economic realities forced Ibrahim Babangida's military regime to negotiate a loan with the World Bank and to reschedule Nigeria's external debts . His regime undertook an economic structural adjustment program (ESAP) to reduce Nigeria's dependence on oil and to create a basis for sustainable non-inflationary growth. However, external borrowing to shore up the economy created more problems than it alleviated. Much of the borrowed money never reached Nigeria. The portion that reached the country often went towards abandoned or nonperforming public sector projects. External loans escalated Nigeria's debts to US$30 billion during the Babangida regime and consumed external earnings in debt servicing . Similarly, the ESAP prescribed by the International Monetary Fund (IMF) failed to advance the economy, and aggravated the problems of inflation and unemployment. It caused a reduction of state spending on education and health care. Continuing political instability due to Babangida's annulment of the presidential election results in June 1993 and the subsequent authoritarian rule of Sani Abacha (1993 to 1998) made the general economic situation worse. The gross corruption by the Abacha regime and its violations of people's fundamental rights turned Nigeria into an international pariah for 6 years, and thus discouraged foreign investment in the economy. Many industries and manufacturing companies could not obtain raw materials and closed down. Others operated under severe handicaps, including rampant power outages and refined petroleum scarcity. Not enough had been done in the years of plenty to diversify the economy or to sustain the development. Military coups (military overthrow of civilian governments) and political instability worsened the situation.

There was considerable optimism in May 1999 when Oluseguan Obasanjo became Nigeria's civilian president. Many hoped that he would lift Nigeria from the verge of economic bankruptcy. One of Obasanjo's objectives to that purpose was to secure debt relief from Nigeria's foreign creditors. However, these creditors insisted that Nigeria's wealth of untapped resources provided the means for the country to pay off its debts, and refused to cancel its debts of US$30 billion.

In spite of some opposition, Obasanjo embarked upon a program of privatizing some parastatals in order to reduce corruption, promote efficiency, and raise productivity. He introduced an anti-corruption bill which passed through the legislature, and recovered some of the revenues that had been stolen from the country and deposited in Western banks. The inflation rate , which was estimated at 12.5 percent at the start of his administration, was estimated at 6.6 percent in 2000. Significant exports of liquified natural gas started in 1999, and increased crude oil prices in 2000 provided his administration with additional revenues. So far, however, he has been unable to bring about economic recovery. Industrial capacity utilization appears to have diminished. Worse still, infrastructural facilities, including the National Electric Power Authority (NEPA), continue to be in a state of disrepair. Expected massive inflow of foreign investment, on which the government had hinged its economic revival program, failed to materialize. This is in part because of the high cost of doing business in Nigeria and a lack of transparency in economic decision-making in the country. In addition to these realities, the unemployment situation in the country remains unchanged months after the restoration of civilian government. In fact, it has worsened among university graduates and ranged from 30 to 40 percent in 2000. Political uncertainties due to ethnic and religious conflicts between Muslims and Christians, and constant feuding between the president and the legislators aggravate the economic climate. Widespread armed robbery and a crime syndicate known locally as 419 prey on foreign nationals, further hindering foreign investment and tourism. The country's economy needs the collective efforts of the president and the National Assembly as well as more definite measures to address its ills in order to foster its recovery and growth. Currently, funds available to the government are insufficient to meet the needs of all sectors of the economy at once. External investors can contribute through long-term investment and joint ventures in Nigeria's large national market. Crude oil, the price of which rose sharply recently, remains a very considerable asset. Properly managed, it could provide a solid platform for more sustained Nigerian development and prosperity in the 21st century and beyond.

User Contributions:

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Jul 31, 2010 @ 11:11 am
The article talks plain truth about what is going in our agricultural sector,we need qualified,professionals agriculturalist to handle this very important sector not leaving it in the hands of politician who are not qualified or professionals in area.
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Nov 5, 2010 @ 5:05 am
truly all the countries that have ignore agricultural SECTOR SHOULD PREPARE THEMSELVES TO Em-back on the job.
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Nov 13, 2010 @ 2:02 am
The article is very interesting and i will like to recieve updated related articles
Suchi Plangshak
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Jan 14, 2011 @ 5:05 am
The artle really captures an aspect of the 'reality' of post-colonial Nigerian social structure. specifically it tells us about the reality of the economic base of present day nigerian society. The neglect of the agricultural sector really marked the genesis of the present economic crisis in Nigeria. At present, post-colonial Nigerian society is at the dead-end of development because the developmental strategies adopted by successive administrations are either defective or inappropriate. Majority of Nigerians are still grappling with the challenge of poverty and hunger and our institutions are not functioning properly. Corruption is pervasive and unemployment rate can not be quantified. The gap between the few rich and the majority poor is widening by the day and infrastructural facilities remain at the bay. Consequently, there is a loss of confidence in the Nigerian state my majority of the populace and harmonious co-existence of the people is becoming more elusive. Ethno-religious conflicts and communal classhes remain a feature of the Nigerian society and security of life and property remained a serious challenge. There is serious need to promote principles equality of all citizens irrespective of premordial differences, justice and equal rights if Nigeria must developed. The leadership must be strenghtened so that confidence of the followership can be restored.
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Jan 17, 2011 @ 10:22 pm
The above article is realy intresting in the sence that, it preview what has happened in the past and carry most of nigerians along to havebrief knowledge of these things.kudos to the writters.I will like to receive updated related articles
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Feb 28, 2011 @ 8:08 am
This is exact portrait of our so-called post-colonial economy,and it seems we have a long way to raise up via our contemporary political,nepotist squanders, but the most important question to ask ourselves is that:
Who is this qualified person that could drive us out of these endless economic crises? Politicians??? Militants???
Or who is he?
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Jun 10, 2011 @ 9:09 am
Am highly impressed with the article.Notwithstanding,there is still a way out of this bondage.If our Government and we individual in the economy can summon courage and remember our old and neglected oil wheel of this nation before the emergence of oil boom of 1970.Once we are ready to embark on LARGE SCALE Agriculture the problem is solved but our leaders lack foresight as a result of there own selfish interest.Malaysia came to Nigeria to pick a seed of palm fruit,now they are one of the largest producer of palm oil in the world.WHERE ARE WE GOING IN THIS COUNTRY.
Clement Korgbeelo
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Jul 6, 2011 @ 3:15 pm
An elegant & interesting article. Pls update it to reflect economic realities in Nigeria.
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Aug 14, 2011 @ 11:11 am
it is a good article how i wish our govt can take to the various step and learn from past mistake.
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Aug 20, 2011 @ 10:10 am
Could this article be taken as the foundation of Nigeria political economic.
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Sep 5, 2011 @ 9:09 am
Well, for someone to give us a recap of our past and present situations of Nigerian economy, a big kudos to you. However, Nigeria is in a serious predicament than what you have asserted in your article and i do not know if president GOODLUCK understands that he would only be remembered for his own roles. History will only remember that during his administration he appoints various technocrats as part of his economic team but if they succeed, he takes the credit and if the story is the same like that of OBANSANJO, I'm sure he is young enough to see the aftermath of his administration. Nigeria does not need a weakling as her president. Permit me to say it, the president should take his time and study history and see how great-men were able to propel their country's limited natural resources became developed nations. To me the problems of this nation can be solved if only the president can retreat and focus on one particular aspect of the economy,i tell you, he would be known as an objective historical force.
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Nov 10, 2011 @ 12:12 pm
It's educative,informative and's interesting,but should add more details for higher comprehening and focusing.
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Nov 15, 2011 @ 12:00 am
I urge all Nigerians at home and aboard to ask them self this simple question: Was Nigeria better off 30 years ago than Nigeria of today? I am very convinced that majority will answer yes. As far as I am concerned, we all have to face these problems head on. On the part of our elected officials that we voted to run the country, I would say they have tried to do their best, but it is only that their best is not just good enough. Let all of us join hands with the present government to improve the growth and development of Nigeria's economy by also improving our roads, bridges, provision of electricity, water, education, security to the citizen and visitors when all these in fracture are in place and the country continued to records years of stability then many investors will be interested to invest in Nigeria.
Kazeem O. Yusuf
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Dec 16, 2011 @ 9:09 am
Nigeria needs to focus not on the on the petroleum sector alone. We are blessed with a lot of endowments. Infact, it doesn't necessarily mean we have to depend on natural resources before we can move forward for good. All we need to do is to lay a good policy which will benefit all masses as whole and sop the policies which still create gaps between the rich and poor.
Irene D.
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Feb 20, 2012 @ 7:07 am
Apart from being educative, it is a way of asking our present government to re-stair the ship of affairs of our dear country to the right direction as oppose to being concerned with irrelevant issues. It's been intensively illustrated above the complete abandonment of agriculture as a sustainable source of livelihood in Nigeria. We all know how reliance is placed solely on petroleum product and how very few Nigerians are enriching themselves from this source at the detriment of over 180 million people.

It is a wake up call for the government of Goodluck Jonathan to focus on reviving the country from the present famine situation as well as make Nigeria a conducive environment for us. (in terms of security)
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Mar 1, 2012 @ 3:15 pm
The article above is very interesting.i will like to be updated on it more
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Mar 4, 2012 @ 2:02 am
Nigerian governmet are investing in oil and gas sector only negleting the agricultural sector leading to food insecurity.then what is the use of the oil and gas to the masses that our fuel price is not stable.our goverment should always try to consider the masses.
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Jan 12, 2013 @ 10:10 am
It is quite disheartening that after having known the scenario behind our problem. We are still infinitely making same. Why should our economy be decided by unspecialize and outdated politician while the economist who are trained have no opinion. Thanks
Agbinda Tavershima
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Apr 28, 2013 @ 7:19 pm
I have been so much informed by the write up, i appreciate. What i don't understand is why every body is critisizing the government and over stressing on the predicaments of the nation. Now that we know where our problem lies, i think we should model out ways of tackling it. We are leaders and followers in our families, let us change our individual attitudes and our nation will be changed.
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May 24, 2013 @ 5:05 am
I am very imfress by this article, i wish our Government can read this article and adopt the corrected mistakes listed in the article.
musa yakubu
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Jun 29, 2013 @ 6:06 am
I am very impress with this article. Please i want to know what happen from 2001 to date (level of the economy). Thanks ones more
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Feb 6, 2015 @ 3:15 pm
Really enjoyed this article, more knowledge, can you just mail me a brief discussion on the economic environment in which investment industries operates in nigeria today. Thanks
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Aug 13, 2016 @ 12:12 pm
This article was really helpful. It portrays the real situation of the Nigerian economy and also shows that the Nigerian economy has the potential of becoming a major economic power if only the leaders will learn from past mistakes and implement adequate policies for development.
Ani Gabriel
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Nov 9, 2018 @ 10:22 pm
Thank you very much,the writer.Your article is an insight over ignorance.please I will like to have ralated update, mostly specified on pre-colonial period,colonial period,post-independence period with special regard to development of economic and social organization.Each discuss separatly.Thank you sir.

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