When Nigeria, the most populous African nation gained independence in 1960, her GDP was $4.20B and per capita income was $93.
At independence, Nigeria had a strong undiversified economy. To remedy the defect of this; it had to diversify its economy. So the Nigerian state invested heavily on education, which led to a reduction in the rate of illiteracy and ensured that the people gained requisite skills and human resources to drive the development of the new nation.
It also expanded roads, and communication networks to allow for inroads into unchartered territories. But in order to create new employment opportunities, secondary industries and automobile plants were established. Although, the government funded most of these developments, with foreign help, in forms of loans, from countries such as Britain and the United States.
Agriculture accounted for over 75% of foreign exchange earnings, 68% of GDP, and created employment opportunities for about 65% of the population. As oil exploration got profitable in the 70s, agriculture began to lose its prized position. By 1969, a period when the nation was just beginning to tilt towards oil dependency, the oil sector accounted for less than 3% of GDP and $370 million in exports (42% of total exports); per capita income was $130.
Diversifying into oil led to the growth of an industrial sector from the early 1970s. This led to employment of foreign capital in the domestic production of goods which rippled into increased levels of industrialisation, employment, and economic growth.
By 1980, oil accounted for about 30% of GDP, while oil exports accounted for $25 billion (96% of total exports); per capita income exceeded $1,100. Also, the exchange rate was on a steady appreciating curve from the 70s. However, focus on oil led to a steady erosion of the competitiveness of non-oil tradable goods, reflected in a substantial decline of agricultural exports. But even as oil revenue increased, the government failed to strengthen public finances.
Public expenditure grew from an average of 13% of GDP during 1970-1973 to 25% in 1974-1980, this moved the fiscal balance from its small surplus to a deficit, averaging 2.5% of GDP a year. This led to a rapid growth and a sharp increase in inflation.
The buoyancy of the oil sector meant that the Nation could sustain an average current account surplus of 1.5% of its GDP, while its gross international reserves averaged the equivalent of almost seven months of imports. In 1980, Nigeria’s external debt was only $4.1 billion, 5% of GDP, while debt-service ratio was 3.7%.
But the nation’s lack of a proper economic master plan meant that it was ill prepared for the oil price collapse in the first half of the 80s. Most of its public investment was costly infrastructure projects with questionable rates of return and sizable recurrent cost implication.
Also, its industrial policy at the time was inward looking, with huge government control and interference, meaning its manufacturing sector was uncompetitive.
To reverse the worsening economic fortunes as regards declining growth, increasing unemployment, over-the-top inflation rates, high poverty rates, increasing national debt and unsustainable fiscal deficits, the government embarked on austerity measures in 1982. By 1986, it implemented an extensive structural adjustment programme which placed an emphasis on expenditure reduction and expenditure-switching policies to improve the private sector and the nation’s economic growth. This led to little benefits that did not trickle down to the poor.
Prior to 1986, a medium-term “development plan” was the song of the government. The plan gave adequate priority to agriculture and industrial development, and training of personnel. But the nation plunged into a civil war between 1967 to 1970, halting what was a promising economy.
From 1970 to 1974, another development plan was in play. This time, an indigenisation decree in 1972 and 1974 ensured that Nigerians were in control of their economic fate. However, from 1975 to 1980, there was a third development plan. The collapse of oil prices affected the plan between 1981 to 1985.
In 1982, the government introduced an Economic Stabilisation Act to cushion the effect of the reduction in oil revenue. It aimed to reduce government expenditure and conserve foreign reserves. But it wasn’t enough, so in 1986, the Nigerian government accepted an IMF-sponsored Structural Adjustment Programme (SAP).
SAP’s aim was to remove unnecessary administrative controls and create market friendly environments. Though, initially, it recorded some measure of success. But whatever gain it made was later eroded by fluctuating economic policies between 1988 and 1989. SAP failed to realise the goal of creating wealth and promoting sound economic development.
Frequent military coups in Nigeria ensured that there was little or no continuity in economic plans. By 1992, inflation was at 48.8%. Since 1999, Nigeria has morphed into a trading outpost for goods produced in other regions of the world.
Finally, aside from the early signs of its great potential in the 60s, the Nigerian economy is yet to experience remarkable transformation. As most of the growth that the Nigerian Economy has attained has been accidental, and not deliberate, and that is because of the lack of political will and massive corruption.
Although it remains the most populated nation and the largest economy on the continent, the Nigerian economy continues to be mismanaged and plundered like a dead man’s property.
This article conveys the views of the author and not necessarily that of Ominira Initiative.