• Nigeria:
• Economy

Nigeria - Economy

Overview: Nigeria is very vulnerable to fluctuations in international prices and demand for oil, which accounts for more than 95% of export earnings and up to 80% of federal revenue. During many years of military rule, economic management was generally weak. When oil prices were high, the revenues flowed into increased public spending and conspicuous consumption, and imports soared. GDP grew by 1.6% p.a. 1980–90.

Some public investment went into prestige industrial projects which were generally a burden on the economy, failing to generate profits, depending on imported components or materials and increasing external debt. But the development of non-oil industries that relied on local raw materials and would generate employment and exports was not encouraged and the consistently overvalued currency deterred exports.

By 1997–98 the economy was in a critical condition. Once self-sufficient in food, the country had become a major food importer. Development aid and foreign loans and investment had decreased dramatically. From May 1999, with the support of the IMF, the World Bank and the international community, the civilian government committed itself to reforming policies, including privatisation of state enterprises and modernisation of agriculture, with the public sector concentrating on infrastructure and education and the private sector leading economic growth.

But reversing the many years of weak and corrupt economic management was a daunting challenge and progress was slow. Nevertheless, in a climate of stronger international oil prices GDP growth picked up in 2000 and rose above 10% in 2003, continuing at more than 6% p.a. in 2004 and 2005, but growth of imports accelerated and inflation which had fallen from a peak of 73% in 1995 to single figures in 1999 and 2000 rose again to 19% in 2001 and remained above 10% p.a. during 2002–05.

Trade: Exports of goods and services account for 55% of GDP and manufactured exports for around 2% of total merchandise exports (2004). Principal export is petroleum (over 95%); while principal imports are machinery, transport equipment, chemicals, manufactured goods, food and live animals. Main export partners are the USA (54%), Brazil, Spain and France. Main import partners are China, the UK, France and the USA.

Oil and gas: Nigerian oil has a low sulphur content and known oil reserves were 31 billion barrels, or 35 years’ output, in 2004. Production in 2005 was at the rate of about 2.4 million barrels a day.

Known gas reserves were 3.5 trillion cubic metres in 2006 and are among the largest in the world. Exports of liquefied natural gas began in 1999 and grew rapidly. The establishment of the West African Gas Pipeline is set to provide a secure basis for future gas exports.