The economy of Nigeria

The economy of Nigeria

Table of contents
1. Introduction
2. Economy:
• Economic history; •The national income; •Agriculture; •Industry; •The internal trade or home market; •Foreign market;
3. Conclusion
Introduction
To begin my work with I should mention some non-economic common facts about the Federative Republic of Nigeria. The population of the country is the highest in Africa, nearly 1/8 of the continent. Firstly Nigeria consisted of the capitol Lagos and four administrative regions (Northern, Western, Eastern and Midwestern). But because of the political processes in 1980-s between the main peoples of the north and the south, the country divided into a lot of parts and now consists of 36 states and a new federative capitol territory – Abudga.
Speaking about the country’s economic development it should be said that Nigeria is a typical representative of the ‘third world’ though its natural resources could make the country really rich. Nonetheless, the main part of the Nigerian population still suffer from poverty that seems to be particularly striking in the context of the contemporary economic situation when oil prices grow rapidly and are unprecedentedly high, while oil is one of the key products of Nigeria.
Economy
In 1960 Nigeria became independent from The United Kingdom. But it still has a modern commodity sector which coexists with an ordinary traditional agriculture. In a modern commodity sector that appeared in the colonial period, the state and state controlled enterprises remain the main employers. A large majority of professionally prepared workers can’t find job and periodical discharges of state workers all in all staff worsen the situation at the labour market. The whole labor force of Nigeria is 57.21 million, while the unemployment rate is 2.9%.
Nearly 70% of the Nigerians are busy in agriculture, but it does not provide the needs of the country in provision. An attempt to solve the problem via enlarging the purchases abroad lead to a sharp increase of expenses on import. The absence of foreign currency and proper satisfactory financing followed the situation when all the enterprises did not work with a complete capacity. Larceny and financial swindles of the state officials promoted the deterioration of economic situation.
•Economic history
The modern economy of Nigeria started with palm oil trade that forced out slave trade at the beginning of the 19-th century and initiated the export of Nigerian raw materials in exchange for the import of British industrial goods. After the year 1853 the export of cacao and peanuts brought a greater income than the export of palm oil. In the 20-th century pat, tin, wood and skins became the most important items of Nigerian export. In 1901 the oil was found in Nigeria, but the export of crude oil began only in 1958 and in 10 years it became the main source of currency income in Nigeria. By the year 1972 the country could not supply the population with pat, palm oil and peanuts. So the government was subjected to allow the import of these goods. Soon crude oil brought a great profit to the country and since 1975 the conversion of oil became the most important branch of industry. So during the years 1970-1978 the rise of Nigerian economy formed 6% per year. After the year 1978 the economy was characterized as unstable and shaky one and the national income decreased. Nowadays 65% of oil is a light brand with a low content of sulphur. The main export brands are Bonny Light e Forcados. The Nigerian National Petroleum Company (NNPC), ExxonMobil, ChevronTexaco, ConocoPhillips, Eni, Total and transnational corporation Shell control 52% of oil mining in Nigeria. Today the oil consumption in Nigeria is 310,000 bbl/day, while the oil production is 2.451 million bbl/day.
•The national income
In 2005 the gross domestic product (GDP) of Nigeria was 132,1 billion of dollars. The GDP per capita: purchasing power parity was 1000 $. The real growth rate of GDP was 5,2%.
•Agriculture
The majority of Nigerians still work in agriculture, supplying themselves with food and growing several cultures for sale. But it is hard to note that 60 per cents of population are below poverty line. A rapid growth of the city population and the increase in rural population has led to the lack of provision not only in the cities, but on the rural territories.
The main food cultures of the South and Midwest are yam, rice and corn. Sorghum, millet and rice are grown in the North. Cattle-breeding is well developed in this part of the country. Manioc, tomatoes and bob are grown all over the country. Gardening is developed respectively near the big cities. Favorable climate of Lagos affords to pick up harvest twice a year.
• Industry
All the minerals provide the greatest part of national income in Nigeria. The first export minerals were ore and coal. After the year 1960 coal-mining decreased because cheaper and ecologically clean oil-products appeared in the country. The oilfield was found near the river Niger. The record level of oil-mining was reached in 1979. It was 114 millions of tons. Tending to increase currency income, Nigeria enlarged the amount of oil-mining, while the world prices remained at a low level. But in 1991 Nigeria holds the 8-th place among the biggest world oil-producers and its profit was 96% from export coming.
However, such a situation is typical for a developing country when the country is basically specialized on export of natural resources. In this respect, it is possible to define Nigeria as a mono-industrial country since its economy is based on oil export.
Naturally, such a situation is extremely dangerous for Nigeria because it makes the country totally dependent on the situation on the international market of oil and, in loner terms perspective, the country will eventually exhaust its natural resources and, undoubtedly there will be time when the country has to modernize and diversify its economy.
Moreover, it is necessary to underline that event the current dominance of oil production in Nigerian export does not really contribute to stability and improvement of socio-economic situation in the country. It should be said that along with the dependence of the country on the situation in the international market, oil makes the country extremely unstable on the national level. The main reason is that the profits from oil export do not improve the position of the vast majority of the Nigerian population. In stark contrast, oil export is rather a source of enrichment to an extremely limited group of those Nigerians who have access to political and economic control of the oil production and export. As a result, Nigerians face a paradoxical situation when the country, being one of the largest oil exporters in the world, suffers from unparalleled poverty.
Unfortunately, the explanation of such a paradoxical situation is simple. The main problem of Nigeria is the lack of democracy and public control over the use of national resources. It means that people of Nigeria cannot influence the situation in the national economy because they are deprived of a possibility to really define the political future of the country. On the other hand, those who control oil industry control Nigeria and any changes of the current situation within the country may be disastrous for national economy.
As a result, many Nigerians have suffer from poverty and famine while a little part of the local population earns enormous profits from oil export. In such a situation it seems to be quite natural that often oil is simply stolen. The situation is deteriorated dramatically by the extremely high level of corruption of Nigerian government that also benefits from oil export.
However, there are also the traditional crafts are developed in Nigeria, especially weaving, pottery and carving though they do not play the defining role in the national economy. The production of Nigerian handicraftsmen (different figures, braided things, sewed clothes) is of increasing demand among the tourists and local rich people.
•The internal trade or home market
The home market of Nigeria is connected basically with foodstuff, handicrafts, industrial goods foreign and Native (home-made) production. The delivery of goods is carried out by railroads, automobile roads and water transport.
The biggest center of wholesale and retail trade is a modern market in Onich that was destroyed during the war and restored afterwards. The other important centers are Aba, Cano and Ibadan. The biggest cities have universal shops and large markets.
• Foreign market
Oil has the dominant position in the export structure. As a result when the world oil prices fall, the currency income decrease, the country cannot afford to pay for the import of necessary goods. At the same time, it should be pointed out that the situation in the in the contemporary international economic relations Nigeria can benefit from high prices on oil since its income from export of oil increased significantly.
Provisions, different goods, industrial raw materials, machines and equipment, transport facilities dominate in the structure of import. Great Britain remains the main commercial partner of Nigeria, but does not but oil, the main consumer of which is the United States. The next import partners are China 9.4%, UK 7.8%, Netherlands 5.9%, France 5.4%, Germany 4.8%, Italy 4%.
• Finance
The emission of the Nigerian currency, naira, is realized by The Central bank of Nigeria. In 1992 120 banks functioned in the country and 20 of them were controlled by the state.
The federal government pays for all expenses of the Nigerian states. In 1992 the budgets of completely all the states consisted of the receipt from the federal budget. The state income was divided I such a way: 55% were directed to the federal budget, 30%- to the state budgets and 15%- to the local budgets.
The main sources of receipt into the federal budget was the income from the export of industrial materials, raw materials, foodstuff and at last the direct taxes including foreign import and export duties and excise dues.
So the main items of federal expenses are the service of external debt and maintenance of federal management system. When the oil boom had finished, the external debt increased (from 5 milliards of dollars in 1981 to 40 milliards of dollars in 1998). As a result the payment of these per cents according to this huge debt and budget deficit affects negatively the development of the country and prevents the normal rate of modernization of the country.
Conclusion
To sum everything said before I should repeat a little, that Nigeria, being a federative republic with the highest population in Africa has a very good perspective for the future. As it is nearly a newly-born independent country the ways of its development are uncountable. Under the proper conditions and circumstances Nigeria will be able to become a constant member of the trade market. The development of oil-mining and other industries will double the gross domestic product, all in all will enlarge the state income. And that is why there will be no unemployment and the majority of population won’t be dependent on agriculture and oil export as one of the leading industries.
Bibliography
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3. The Economy of Nigeria. www.scholars.nus.edu.sg/post/nigeria/econ.html
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