Countries of the World/COUNTRYS.BIN/dp/0263/02631.txt

Text File | 1991-06-25 | 32KB | 496 lines

$Unique_ID{COW02631}
$Pretitle{357}
$Title{Nigeria
Chapter 3A.   The Economy}
$Subtitle{}
$Author{Robert Rinehart}
$Affiliation{HQ, Department of the Army}
$Subject{land
government
percent
foreign
plan
agricultural
development
oil
nigerian
sector}
$Date{1981}
$Log{Bronze Head of Olokun*0263101.scf
}
Country:     Nigeria
Book:        Nigeria, A Country Study
Author:      Robert Rinehart
Affiliation: HQ, Department of the Army
Date:        1981

Chapter 3A.   The Economy

[See Bronze Head of Olokun: Ife bronze head said to represent Olokun, god of
sea and wealth]

     Oil revenues and the dominant role of the government in economic
development were the most immediately outstanding features of the Nigerian
economy in the early 1980s. Toward the mid-1970s the growth of oil revenues to
massive proportions transformed Nigeria from a developing country whose
economy was constantly in deficit to one having a large or potentially large
surplus. Large-scale use of this surplus to acquire majority or major equity
holdings in the productive sectors (except for agriculture), to implement
public sector productive projects, and to expand the country's infrastructure
had quickly propelled the government into preeminence in the economic arena.
Strikingly, by 1981 the government's broad participation had not materially
changed the free enterprise character of the economy that marked it at
independence. Private enterprise flourished and was encouraged, and
socialization was not a proclaimed government goal. But transfer of control
and ownership of resources and productive facilities from foreign to Nigerian
hands was such a goal. Nevertheless limited foreign ownership was still
welcome, and for the medium-term-while Nigerians prepared themselves to take
over-foreign management was acceptable.

     Nigeria's oil wealth directly affects only a very few people.
Employment in the highly capital-intensive oil sector is limited, and only
through the development made possible by oil revenues has the benefit from
this natural resource provided any broad improvements in standards of
living. Oil, however, is a nonrenewable resource; thus the principal reason
given for the government's large-scale acquisition of equity in productive
enterprises and its capital investment in fully state-owned facilities has
been to provide future sources of earnings for continued economic expansion.

     The high level of economic activity generated by oil revenues has not
concealed significant weaknesses in the economy. In 1981 Nigeria had
essentially a monoeconomy and was dependent on the vagaries of world oil
production and prices for achieving economic viability in other sectors. The
government understood this well, and its plans for the rest of the decade
envisioned a conscious effort to widen the base of public revenues and
export earnings through diversification away from the oil sector.
Manufacturing and agriculture were the principal target areas. Agriculture,
the mainstay of a large majority of the population, had declined in the
1970s to the point that it did not meet overall domestic food needs,
and Nigeria had become a major net food importer. In the case of
manufacturing, marked expansion had taken place since independence. But
growth had been from a narrow base, and the sector still remained a
comparatively small contributor to the economy.

     An overriding problem was the shortage of skilled and professional
manpower, which perhaps constituted the most crucial restraint on economic
development. Shortages in practically all occupations and sectors had
reduced effective management of the government's investment programs
throughout the 1970s. Despite stepped-up efforts to increase the supply,
the greatly enlarged development activities projected for the 1980s created
even heavier demand for manpower, and the government anticipated the practical
need to facilitate the free inflow of qualified foreign personnel,
particularly in scientific and technical occupations.

Economic Development and Income Distribution

     When Nigeria became independent in 1960, its economy was engaged almost
exclusively in the production of food for the population and commodities for
export. Minerals were of only moderate significance-the petroleum industry
was just starting-and manufacturing consisted largely of traditional crafts
and some modern enterprises, most of which were engaged in the assembly of
imported materials rather than true manufacturing. The colonial government had
initiated a five-year economic development plan in 1955 that was later
extended to 1962. This plan, however, consisted of three separate
programs-one for each region-having differing goals. In 1962 the new
government introduced the First National Development Plan (1962-68). The
private sector was expected to provide about one-third of the total planned
capital investment, and encouragement was offered to the sector in the form
of various tax, profit repatriation, and other incentives. The economic
climate at the time was also very attractive, and private investment, of which
a substantial amount came from abroad, greatly exceeded expectations. In
contrast actual governmental investment was far below plan, and although
major government projects were completed (among them the country's first oil
refinery, paper and sugar mills, and the Kainji Dam and hydroelectric
station), the significant progress achieved toward industrialization and
overall plan goals was attributable largely to the private sector's
performance. The civil war played some part in the failure of the public
sector to attain its aims, but important deficiencies in planning, shortages
of qualified management staff, and major shortfalls in the induction of
foreign capital also contributed. The government's relatively limited
effort to improve agriculture during the First Plan period has been considered
a factor in the failure of agricultural production to keep pace with
population growth from the early 1970s.

     The Second National Development Plan (1970-74), which did not get under
way until October 1970, was aimed primarily at the reconstruction of
facilities damaged by the war. General economic rehabilitation and recovery
had already started and continued at a high rate through 1971, stimulated
mainly by widespread demands that had built up during the war. Although
by 1972 government investment under the plan had grown, the economy was set
back from 1972 to early 1974 by major drops in agricultural production
caused by a serious drought in the northern part of the country and by
significant damage to crops in the south resulting from an overly long dry
season. Public capital expenditure continued to grow through the remainder of
the period but at a rate below that planned. In part to permit completion of
ongoing projects and in part to allow time for better preparation of the next
plan, the Second Plan was extended to the end of fiscal year (FY-see Glossary)
1974-75. Government investment during the period was concentrated largely in
the areas of infrastructure and administration. As in the First Plan
expenditure on agriculture was seriously inadequate and was a major cause of
stagnation in output and growing food deficits.

     Before the end of the Second Plan the dramatic rise in world oil prices
presented Nigeria with sudden wealth. This was reflected in a highly
optimistic Third National Development Plan (1975-80) containing a massive
public investment program that was eventually set at 26.5 billion naira (for
value of the naira-N-see Glossary). This was eleven time greater than the
government's actual capital expenditures on the Second Plan. Planners
programmed a greatly increased role for the public sector-from approximately
equal public and private sector expenditures in the Second Plan to two-thirds
by the public sector during the Third Plan. Ambitious goals were established
for transportation, heavy industry, and education. Although greater funding
was provided for agricultural development, th