Nigeria

31 August 2015

Jared Cordell
Ellen Canup
Shannon Stineburg
 Pre-Colonial & Colonial History

Artifacts trace early civilizations as far back as 500 BCE

Igbo, Hausa, Fulani, and Kingdom of Benin
Began trade with European powers 15th-16th century
Became center of slave trade through 19th century
British moves against slave trade began early 1800s, with Lagos
becoming a colony in 1861
1885 Berlin Conference solidified Britains claim to Nigeria, creating
northern and southern colonies by 1901
Typical British indirect rule, favored Lagos and south over Islamic north
 Independence

Independence in 1960
Initially coalition government, parties ethnically/religiously aligned
Cycle of military coups began 1966, with 2
Civil war 1967-1970 over secession of Biafra (SW region)
Cycle of military coups, occasional civilian rule
Gradually led to regional/religious diversification of parties by late 90s
Military & unstable civilian rule suppressed economy and deeply entrenched
patronage/corruption
 Demographics

Population: 160-180 million

50/50 rural urban split, 24 cities over 100k
389 ethnic groups; Hausa, Fulani, Igbo, Yoruba
63% population under 24; median age 18 yrs
5-15 million strong diaspora, maintains strong
ties to Nigeria
Concentrated in US, UK, South Africa
Significant, well-educated & empowered middle
class, about 20% of population
Emerging consumer economy
 Oil

Oil began in 1958, independence economically hopeful

Joined OPEC in 1971
Government spending in 1970s, borrowing against oil
Dutch Disease in 1970s-1990s suppressed
economy
Economy gradually diversified; oil 14% of Nigerian
Economy, but 80% of government revenues
Oil theft thought to siphon off 100,000-500,000 bpd
Sector corrupt, with $ billions unaccounted for
Largest gas reserves in Africa, historically burned off
 Political Economy

ECOWAS founding member (1975), HQ in Abuja

West African Monetary Union, creating common
currency, Eco, among 6 countries
Club de Paris debt restructuring member, 1st country
to complete compact, repay renegotiated debt
Active UN participant since Independence
Founding member of OAU and AU, militarily engaged
Received hundreds of World Bank loans targeting
poverty reduction projects, currently 29 ongoing, $10
billion+
In good standing with IMF; regional financial anchor
state
AGOA participant, decreasing impact due to decrease
in US oil imports
Has not/Does not meet MCC compact minimums
 Democratization

Prior to 1999, 29 years of military rule vs. 10 years

civilian
1998 Gen Abubakar embarked on ambitious
constitutional democratization; election May 99
1999 Election of Obasanjo (former military dictator)
Obasanjos Peoples Democratic Party (PDP)
significant in nationalizing politics
PDP dominated politics through first 4 presidential
elections (in national elections)
National elections marked by steady improvement,
but also political violence (700 killed in 2011
election)
2015 election most successful yet, still marked by
discrepancies but little violence
Presidents informally switch back and forth
Christian/Muslim
2015 Election Pres Buhari (former military dictator),
first transition to opposition All Progressives
Congress (APC), also broad-based national party
Both partys platforms very similar, 2015 election
assessed to be poll on former administration
Problems but Progress
 Violence and Insurgencies

Boko Harem in North, tribal

insurgents in Niger river delta
Southern insurgencies date to
early 1990s, in response to oil
extraction
Previous administration paid off
militant leaders, violence
decreased
BH, 2009, active in NE
provinces, affiliated with IS
Responsible for about 20,000
deaths
Multinational efforts, February
push have met progress, but BH
still a significant threat
Buharis victory over Jonathan
attributed to failures against BH
Legatum Index: Bottom 11%
Global Competitiveness Index: Bottom 12%
 Economy I

142

2010 World Bank Report:

~6.5%
25.89% of those in poverty in Africa
(Below $1.25/day) lived in Nigeria

Nearly two-thirds of Nigerians live below

poverty line
Economy II
 Economy III

*2014: Nigerias statisticians recalculated its GDP figures to take account of new
industries such as mobile telecommunications and discovered that it had become Africas
biggest economy, ahead of its main economic and geopolitical rival, South Africa.
Nigeria Inflation Rate is 9.2%
Food +10.0%, imported food +10.4%
Housing, water, electricity gas +7.3%
Clothing and footwear +9.3%
Transport prices +9.1%
Education +9.2%
Health +8.7 %
Import/Export
Exports I
Exports II
Exports III
 Imports

Nigeria ought to be Africas biggest oil

and gas producer, yet it suffers crippling
fuel shortages
 Non-oil Sector Growth

The economy is diversifying and is becoming more services-oriented, in particular

through retail and wholesale trade, real estate, information and communication.

Current Breakout of Growth:

57% services
21% agriculture
9% manufacturing

Issues:
A country that should be the regions breadbasket cannot even feed itself.
The whole country produces only as much electricity as a single medium-sized
European city.
Tourism
 Institutions I

Two Key Problems:

Corruption 129
Inability to provide basic services 144
Nestle Factory: it has to generate its own power, clean up its own water and
provide health care for its employees, and poor transport links drive up the
cost of its raw materials. Even so, it is one of the companys most efficient
factories on the globe, in part because of the benefits of scale from producing a
narrow range of products for a huge market

Improved water source, rural Improved water source, urban

(% of rural population with access) (% of urban population with access)
 Institutions II

Corruption
The World Bank estimates corruptions direct cost to Nigeria to be as high
as 12 percent of GDP.
Control of corruption, which showed significant improvement in 2003 to
2008, deteriorated when President Jonathan took office
President Buhari, elected in June, ran on a platform of anti-corruption.
Infrastructure

134
144
 Health

Characterized by:
Lack of coordination
Fragmentation of services 142
Dearth of resources including drug and supplies
Inadequate and decaying infrastructure
Inequity in resource distribution
Access to care and poor quality of care

Only 0.4 Doctors / 1000 people

Presidents Emergency Program for AIDS Relief (PEPFAR)
Adult HIV prevalence is 3.1%

Successes
Polio: No new cases since 24 July 2014
Ebola outbreak containment
Liberian man arrived by airplane into Lagos, Africa's most populous city. Died in
hospital 5 days later, set off a chain of transmission that infected a total of 19
people, of whom 7 died.
 Education

Literacy rate: 66.4%

Primary school participation, Net attendance ratio male: 72%
Primary school participation, Net attendance ratio female: 68%
Primary school participation, Survival rate to last primary grade: 79.9% 142

Primary School Enrollment Female Literacy Rate

 2012: Agricultural Transformation Agenda

Nigeria spends over $11 billion annually on imported rice and sugar

Aimed at reducing Nigerias increasing reliance on food imports

Growth Enhancement Scheme:

subsidizes the costs of such major inputs as fertilizer and seedlings
free mobile phones to farmers
provide timely information on input and crop prices
facilitate mobile banking

2013: Government claims that nearly a half million jobs were created

Agriculture could provide help mitigate decline in the oil industry

Security Issues

142
 Security Issues

Insurgency in the north-east and other parts of the country

Claimed about 20,000 lives and forced some 1.5 million people from their homes
Humanitarian situation: An increased number of both internally displaced persons
and refugees in neighboring Cameroon and Niger
Negative implications for investment
May hamper the fight against poverty
Increase crime

In February under President Buhari, an offensive against Boko Haram drove militants
from most big towns and pushed them back into a few forest and mountain hideouts.
Problems I
Problems II
 Problems III

Corruption

Major rural-urban and regional tensions

Varying natural-resource endowments
Unequal access to political power
Uneven shares of national wealth
Insufficient federal services

Infrastructure Issues:
40% of the federal primary road network is in poor condition
18% of 197,000 kilometer road system is paved
Backbone of the rail network is over 100 years old
As of 2007 only 25% of trains operational

***Most Nigerian roads, refineries, railways, airports, power plants and water/ sanitation
utilities date to the oil boom in the 1970s
 2015 Outlook

Moderate growth of 5%, due to vulnerability to

slow global economic recovery
oil-price volatility

The low oil price will lead to a sharp decline in fiscal revenues

Overall impact on non-oil sector GDP will be relatively muted

Oil sector is expected to remain the main driver of growth over the medium term and,
in the light of the recent macroeconomic challenges, the government has adopted an
adjustment strategy that hinges on tightening government spending and shoring up
non-oil revenues to compensate for dwindling oil revenues.
 Beyond 2015

A New Dawn?
- Governance
- Security
- Infrastructure
- Economy
 Beyond: Governance

Public enemy #1: CORRUPTIONbut its the only thing that works

This is not a country that is morally convinced about [the evils of] corruption: corruption is
the only thing that works.
Bishop Matthew Kukah, leading religious figure and moral authority in Nigeria.

Patrimonialism
Neopatrimonialism
Clientelism
Weak Institutions
Legislature
Judiciary
Rule of Law
Elections (2015 Success)
Security
Police
Military
Insurgents
 Beyond: Security

Boko Haram in the North

Prison De-radicalization
Economic Development
Infrastructure

Police and Military

Build Trust with Communities
Training & Joint Operations
Infrastructure

Rebel Payments
 Beyond: Infrastructure

Electricity
Currently 185/189 infrastructure 67/217 for output
1300 4800 MW (Production at given time) -
24.87 Billion kWh (Output in 2015)
257.9 Billion kWh (South Africa)
4099 Billion kWh (United States)

Transportation
Rail = of 1960s level
Road = 20% paved
Inefficient Supply Chain & Poor Link to Market

Ports
No Deep Water capability
Burdensome Customs
Traffic in Lagos
 Beyond: Economy

Global Competitiveness Index

127/144 Pretty Low
Stage 1 Factor-Driven Economy
Areas Needing Most Improvement
Institutions (Basic)
Corruption, Trust, Bribes/Graft, Waste, Cost of Violence
Infrastructure (Basic)
Roads, Rail, Ports, Electricity
Health and Primary Education (Basic)
Malaria, Infant Mortality, Life Expectancy, Primary Enrollment
Goods Market Efficiency (Efficiency Enhancer)
Trade barriers, Customs Procedures, Import-Heavy

Until the Basics are Met, Nigeria Cannot Transition to a Stage 2 Economy
 Beyond: Economy

Resource Curse

Mechanism of the Resource Curse The Fix

Economic Instability Tied to Market Volatility Stability Fund

Government Income Direct Treasury Allotment

Long-Term Economic Growth Future Generations Fund

Poverty Alleviation Priority Sectors Fund (Education, Health, Rural

Development, Infrastructure, Environment)
Indigenous Considerations Oil-Producing Region Compensation Fund

Behavior Mechanisms (Rent-Seeking, Corruption) State, Independent Watchdogs (Access & Overlap)

Institutions Capacity Building Projects (Tech Assist and

Training to Nigerias Oil Workers)

Diversify New Revenue Streams

Services (50% Revenue) New Tax Schemes
Nollywood Reduced Corruption (Plugging Leaks)
Agriculture Stop Subsidies (Petrol Fuel/Kerosene)
Manufacturing
 Beyond: Economy

Protectionism (Mercantilism) Makes construction very expensive

Cement
Dangote Cement (Connected) - 60% Margin
Lafarge (French firm) = Competition
Resulted in reduced construction costs by 40%
Resulted in Increased construction
Textiles
Until 2010, ban on imports to spur local economy
Resulted in underdeveloped retail Industry
Automobiles
Heavy import Tariff
Imports down 2/3
Benin (Neighbor) up 3x
Resulted in flourishing black market

The Market Will Find a Way