Nigeria has a dual economy with a modern segment dependent
on oil earnings, overlaid by a traditional agricultural
and trading economy. At independence in 1960 agriculture
accounted for well over half of GDP, and was the main
source of export earnings and public revenue. The oil
sector, which emerged in the 1960's and was firmly established
during the 1970's, is now of overwhelming importance
to the point of over-dependence: it provides 20% of
GDP, 95% of foreign exchange earnings, and about 65%
of budgetary revenues. Competition between ethnic and
regional groups for power and access to the country’s
oil wealth are increasing in intensity as the 2003 elections
approach.
The largely subsistence agricultural sector has not
kept up with rapid population growth, and Nigeria, once
a large net exporter, now imports food. Based on GNP
per capita, Nigeria is among the world's 20 poorest
countries. Economic growth since the early 1970's has
been erratic, driven primarily by the fluctuations of
the global oil market. During the 1980's and 1990's
Nigeria faced growing economic decline and falling living
standards, a reflection also of political instability,
corruption, and poor macroeconomic management (most
notably the failure to diversify the economy).
Labour market and unemployment
With
an estimated 60mn Nigerians unemployed at the end of
2000, unemployment is one of the countries most pressing
problems.
Agriculture, forestry
& fishing
This
sector has suffered a relative decline because of the
dominance of oil in the economy, but it still accounts
for 33% of GDP (1997) and provides employment, both
formal and informal, for a large majority of the population.
Attempts to revive agriculture have been largely unsuccessful.
Although Nigeria previously had a strong export sector,
the range and quantity of products has declined sharply:
in the early 1990s only cocoa and some rubber and palm
products were being exported. Cash crops include cocoa,
rubber (nearly all exported), coffee, cotton and palm
kernels. The palm oil sector, which was a foreign exchange
earner in the 1970s, is being redeveloped.
Agriculture is still dominated by traditional smallholders
raising subsistence crops such as sorghum, maize, cassava,
yams, millet, rice and increasing quantities of wheat
(up to 70% of which is for their own consumption). Arable
potential has been put at 25% of total area, of which
about 12% is cultivated.
Plantations, sometimes owned by, or in partnership with,
multinational corporations, are gaining ground in producing
raw materials for company use (e.g. grain for breweries).
Irrigation schemes, higher producer prices, the expansion
of credit and improvements in the rural infrastructure
are beginning to show results. Livestock farming is
important, and poultry farming is rapidly increasing.
Industry and manufacturing
The
industrial sector contributed 4.8% to GDP in 1998 and
employed 8 % of the workforce. Emphasis has shifted
towards more low-cost, integrated, high value-added
industries which rely on local rather than imported
raw materials and capital goods, and on shifting production
away from Lagos. Although it has benefited since 1985
from lower exchange rates, industry is still vulnerable
because of the high proportion of imports among its
inputs. Manufacturing is dominated by light consumer
goods and is oriented towards import substitution. The
adverse general situation in the country and low demand
has pushed the estimated capacity utilization rate below
30%. Beverages, textiles, cigarettes, food processing
and soaps continue to account for over 60 % of total
manufacturing output.
Mining and semi-processing
Nigeria used to be one of the largest producers of tin
in the world, with production based around the highland
district of Jos. Production collapsed from an average
of 10,000 tonnes per year in the 1970s to 300 tonnes
in 1995. Tin reserves are estimated at 16,000 tonnes.
Independent estimates place iron ore reserves at 800
million tonnes, averaging 37 % metal content. Iron ore
mining began in 1984 and 1989 reported a stockpile of
over 500,000 tonnes. By 1997, it was unlikely that iron
output was more than 50,000 tonnes per year. Iron ore
deposits are being exploited with the long-term aim
of supplying the requirements of the national steel
industry. Deposits of uranium, lead, zinc, tungsten
and gold are not yet exploited. There are 65 sites in
Nigeria where gold has been located. By mid-1999, field
appraisals had recommended nine as being ready for exploitation.
The petroleum sector is the mainstay of the economy,
contributing 36% to annual GDP, 75% to government revenues
and accounting for virtually all foreign exchange earnings.
At end-1998, total oil reserves were estimated at 22.5bn
barrels, sufficient to give close to another 30 years
of output. Nigeria ranks as the sixth largest producer
in the Organization of Petroleum Exporting Countries
(OPEC) and by far the largest in Africa.
Proven and probable reserves of natural gas stood at
3.5 trillion cu metres (124 trillion cu feet) at end-1998.
Natural gas production in 1998 was 5.2bn cu metres (184.6bn
cu feet), a rise of 0.9 % on 1997 output. The US$569m
Escravos gas project became Nigeria's first gas exporter
in 1997. A West African gas pipeline, at an estimated
cost of US$260m is planned, which will supply natural
gas from the Escravos field to Togo, Benin and Ghana.
The US$4bn Nigeria Liquefied Natural Gas Scheme, Africa's
single biggest engineering project, started producing
liquefied natural gas at the plant at Bonny Island,
near Port Harcourt, in 1999, then civil unrest in the
Niger Delta region interrupted production.
Government finance and fiscal policy
In
1995 the government made a move towards deregulation
of the economy. More recently it has followed up with
earlier promises of privatization and exchange-rate
reform. The two-tier exchange rate system was abolished
by the government in January 1999 and the price of petrol
was reduced by 20%; in May 1999 a bill was passed to
pave the way for the privatization of major utilities.
The country is now undergoing substantial economic reform
under the new civilian administration, but is at a crossroads
in its economic policies, facing a choice between further
liberalization and greater reliance on the private sector,
or remaining dependent on the public sector. By 2001
Nigeria’s wide-ranging privatization scheme was behind
schedule, it had failed to reach agreed policy targets
set with the IMF, and the IMF had expressed concerns
over the expansionary 2001 budget. Opposition due to
the loss of sources of patronage is considered to be
an important factor in the slow pace of privatization.
In January 2001 the government announced a new poverty
reduction programme– the Poverty Eradication Scheme–
to which US$231m was allocated. The existing Poverty
Alleviation Programme introduced in 2000 had fallen
far short of its aim to create a total of 200,000 new
jobs.
2002 sees the government facing an ongoing struggle
to reduce the fiscal deficit and restore macroeconomic
stability.
Foreign Aid and Donors
Nigeria has a major debt problem - at the end-1997 it
stood at $28.5bn, representing 76% of GNP and 157% of
annual export earnings; at the end of March 2001 the
IMF estimated debt to have reached US$32,3bn. As part
of external debt management, there was a major clampdown
on the issue of new foreign loans by government ministries.
By December 2000, foreign reserves had reached US$9.26bn,
representing seven months of import cover.
During the course of 2000 the Paris Club agreed to reschedule
US$23.4bn of Nigeria’s debt, with effect from April
2001, on condition that the government keeps to its
agreed IMF reform programme.
