By Ajay Kannan

The Federal Republic of Nigeria

Political and Economic Change

Causes for Nigeria’s present day political and economic situation can be found in its history

Three time periods in Nigerian history Pre-colonial era (800 CE – 1860) Colonial era (1860 – 1960) Modern era (1960 – present)

Overview

Sokoto Caliphate (1808-1900) Muslim state in north

Slave trade started in south – 16th century to early 20th century Africans fought wars to

obtain slaves to sell Driven by demand for

western goods Outlawed in 1936

Source: activehistory.ca

Pre-colonial Era

Britain imposed indirect rule – trained natives to fill the European-style government the British installed

British influence was strongest in the south (Islamic hierarchies were already established in the north)

Introduction of western-style schools Christian missionaries set up many schools Created a relatively literate population, but

reinforced cleavages – rich & poor, south & north

Colonial Era

Mercantilism Nigeria exported raw materials to Britain Imported finished goods from Britain Contributed to modern day troubles in industry and service

sectors Nigerians wanted independence

They saw other African countries preparing for independence

English values, such as freedom and justice, were taught in their Western education

Peaceful, slow transition to autonomous rule, while the British prepared Nigeria for independence on October 1st 1960

Colonial Era

1960-1966: 1st Republic – parliamentary system 1966-1998: Instability

Military dictatorships prevalent, with many coups and assassinations

2nd and 3rd republics unsuccessful 1999 – present: Presidential Democracy

1999, 2003, and 2007 elections are marked by violence and fraud, but it has satisfied the 3 election rule, suggesting that Nigeria will maintain its democratic constitution

People’s Democratic Party (right-wing) has won all three elections

Modern Era

1967-1970 – Biafran war (south wanted to secede)

2000 – rebellions against Sharia law

Oil profits are split between federal and state governments leads to poorer conditions in the north

Source: http://nigeriansabroadlive.com/wp-content/uploads/2010/12/NigeriaMap_resources.jpg

Source: http://www.movements.org

Rentier state: a state that derives much of its revenue from its resources

Largest exports: Oil & natural gas make up ~90% of export profits and ~80% of government revenue

Largest imports: machinery Agriculture 31.9%, industry 32.9%, services

35.2% 32th largest GDP, but 182th GDP per capita Africans are drawn to Nigeria for economic

opportunity, but reforms must be made to improve quality of life

Nigeria’s Economy Today

Inexperienced military leaders failed to industrialize

Corruption and Inefficiency Agriculture has suffered under incoherent

government policy There is unused farmland and untapped mineral

sources Nigeria does not use oil profits to invest

infrastructure or education enough 2003-2007 – NEEDS and SEEDS

(National/State Economic Empowerment Development Strategy) attempted to address these problems with mixed success Deregulation, privatization, transparency, and

accountability Provide jobs by improving infrastructure

Economic Problems

1956 – oil discovered 1970 – Nigeria joined OPEC (Organization of

the Petroleum Exporting Countries) 1970 – oil began to be drilled 1970s – oil production increased, especially as

multinational corporations became interested in profits in Nigeria

1971 – Nigerian National Oil Corporation founded, renamed Nigerian National Petroleum Corporation in 1977, state-owned

1980 – global recession, huge drop in oil profits

2000s – GDP increased because oil prices rose

Large multinational corporations have the capital to find, claim, and drill oil reserves Royal/Dutch Shell, ChevronTexaco, Exxon

Mobile, Totalfia Elf, Agip and PanOcean Oil get 43% of the profits

Of the profits Nigeria gains, 80% profit goes to the government, 16% goes to operational costs, and 4% goes to investors

Highly susceptible to corruption, crashes in global recessions, mismanagement

Decline in the competitiveness of industry and service sectors “Dutch disease” – oil increases the demand for the Nigerian

naira, since companies must pay Nigerians in naira for their oil. The increased demand results in a higher value for their currency. Thus, the cost of goods made in Nigeria increases compared to goods made in other countries, and people stop buying Nigerian goods.

Debt troubles – lenders charge high interest rates if the industry is not doing well

Nigeria, like many developing states, gets loans from international organizations (IMF, World Bank)

2006 – Nigeria became the first African country to pay off debt to the Paris Club Nigeria worked out a plan to officially pay off debt to

Paris Club (paid $12.4 billion out of the $30 billion borrowed)

$1 billion dollars more to use in federal budgets Nigeria still owes money to international

organizations (IMF, World Bank)

Most industries nationalized in 1970s and early 1980s

1992 – Privatization of 73 medium-small government owned companies (i.e. cement, insurance, banking)

Late 1990s – 2nd and 3rd largest industries privatized National Electric Power Authority (NEPA) and Nigerian

Telecommunications (NITEL) were privatized in accordance with IMF and World Bank advising to grow its economy

Finance and banking industries are fairly developed Textile production – growing slowly with investment

from other countries

Economy is as strong as it has ever been Relatively low inflation (10 to 12%), GDP

growth ~6-9% annually – projected to become a top 30 economy

Since early 2000s, the government has increasingly focused on market-oriented reforms urged by international organizations Modernizing the banking system, curbing

inflation, providing jobs

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