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The Economy of Nigeria – Nigeria is a middle revenue, mixed economy, and evolving market, with expanding financial, service, communications, knowledge and entertainment sectors. It is ranked as the 21st largest economy in the world in terms of nominal GDP, and the 20th biggest in terms of Purchasing Power Parity.
It is the biggest economy in Africa; its re-emergent, though presently underperforming, the manufacturing segment is the third-largest on the continent and produces a large proportion of goods and chattels and services for the West African sub-region. Nigeria lately changed its economic analysis to account for rapidly growing funders to its GDP, such as telecommunications, finance, and its film industry.
Previously hindered by years of misconduct, economic reforms of the past decade have put Nigeria back on track towards attaining its full economic potential. Nigerian GDP at obtaining power parity (PPP) has almost tripled from $170 billion in 2000 to $451 billion in 2012, though approximations of the size of the informal sector put the actual records closer to $630 billion. Similarly, the GDP per capita doubled from $1400 per person in 2000 to an expected $2,800 per person in 2012. (Population enlarged from 120 million in 2000 to 160 million in 2010).
These figures are to be reviewed upwards by as much as 80% when metrics are recalculated consequent to the rebasing of its economy in April 2014.
The Economy of Nigeria is pugnacious to leverage the country’s vast fortune in fossil fuels in order to displace the poverty that marks about 33% of its population. Economists refer to the coexistence of vast fortune in natural resources and extreme personal scarcity in developing countries like Nigeria as the “resource course”, although “resource curse” is more widely understood to mean a richness of natural resources which fuels official corruption resulting in a violent opposition for the resource by the citizens of the nation.
Nigeria’s trades of oil and natural gas—at a stage of peak prices—have enabled the country to post merchandise trade and current account excesses in recent years. Reportedly, 80% of Nigeria’s energy revenues flow to the government, 16% covers operational costs, and the residual 4% go to investors. However, the World Bank has estimated that as an outcome of corruption 80% of energy revenues benefit only 1% of the population.
In 2005, Nigeria achieved a milestone covenant with the Paris Club of lending nations to disregard all of its bilateral external debt. Under the agreement, the financiers will forgive most of the debt, and Nigeria will pay off the remainder with a portion of its energy profits. Outside of the energy sector, Nigeria’s economy is highly inefficient. Moreover, human capital is underdeveloped—Nigeria ranked 151 out of states in the United Nations Development Index in 2004—and non-energy-related infrastructure is inadequate.
- Agriculture – Nigeria lines sixth worldwide and first in Africa in farm output.
Agriculture has suffered from years of mismanagement, uneven and poorly conceived government policies, disregard and the lack of basic infrastructure. Still, the sector accounts for over 26.8% of GDP and two-thirds of service. Nigeria has 19 million head of cattle, the largest in Africa. Nigeria is no longer a main exporter of cocoa, groundnuts (peanuts), rubber, and palm oil. Cocoa production, mostly from outdated varieties and overage trees, has nevertheless enlarged from around 180,000 tons annually to 350,000 tons.
A histrionic decline in groundnut and palm oil manufacture also has taken place. Once the biggest poultry producer in Africa, business poultry output has been slashed from 40 million birds annually to about 18 million. Import constraints limit the accessibility of many agricultural and food dispensation inputs for poultry and other sectors. Fisheries are poorly managed. Most perilous for the country’s future, Nigeria’s land tenure system does not encourage long-term investment in equipment or modern production systems and does not inspire the availability of rural credit.
2. OIL – The oil flourish of the 1970s led Nigeria to abandon it’s strong agricultural and light manufacturing bases in favor of a harmful dependence on crude oil. In 2000, oil and gas ships accounted for more than 98% of export earnings and about 83% of national government revenue. New oil wealth, the coexisting decline of other economic sectors, and a motion toward a statist economic model fueled enormous migration to the cities and led to increasingly widespread poverty, especially in rural areas.
A collapse of basic organisation and social amenities since the early 1980s accompanied this trend. By 2000, Nigeria’s per capita revenue had plunged to about one-quarter of its mid-1970s high, below the level of independence. Along with the endemic condition of Nigeria’s non-oil sectors, the economy continues to witness massive growth of “informal sector” economic events, estimated by some to be as great as 75% of the total economy.
Nigeria’s verified oil reserves are expected to be 35 billion barrels (5.6×109 m3); natural gas reserves are well over 100 trillion cubic feet (2,800 km3). Nigeria is an affiliate of the Organization of Petroleum Exporting Countries (OPEC). The kinds of crude oil exported by Nigeria are Bonny light oil,Forcados crude oil, Qua Ibo crude oil and Brass River crude oil. Poor company relations with indigenous communities, vandalism of oil infrastructure, severe ecological damage, and personal safety problems throughout the Niger Delta oil-producing region
continue to wave Nigeria’s oil sector.
The pump price of P.M.S. in Nigeria presently stands at 87 naira, but some fueling stations in Nigeria, especially in towns far from the state funds, tend to sell the manufactured goods at a much higher price, ranging from 110 naira to 140 naira. An initial growth in the price of Petrol (Premium Motor Spirit) prompted by the removal of fuel subsidies on January 1, 2012, prompted a total strike and massive protests across the country.
price to 97 naira. The pump price was further reduced by 10 naira to 87 naira in the run-up to the 2015 general elections. The government cited a drop in costs due to the total fall in the crude oil price.
As the fall in oil prices in 2015 and 2016, the government exchange rate strategy has a limited devaluation of the naira due to rise concerns by the President Muhammadu Buhari.
3. SERVICES – Nigeria ranks 63rd global and fifth in Africa in services’ output. Low power group has crippled the evolution of this sector.
Since undergoing severe suffering in the mid-1990s, Nigeria’s banking sector has witnessed momentous growth over the last insufficient years as new banks enter the financial market. Harsh monetary policies implemented by the Central Bank of Nigeria to absorb extra Naira liquidity in the economy has made life more difficult for banks, some of whom engage in exchange arbitrage (round-tripping) activities that generally fall outside legal banking machinery.
Secluded sector-led economic growth remains obstructed by the high cost of doing business in Nigeria, including the need to duplicate essential organization, the threat of crime and connected need for security countermeasures, the lack of effective due process, and nontransparent monetary decision making, especially in government contracting. While corrupt practices are pervasive, they are generally less blatant than during military rule, and there are signs of improvement.
Meanwhile, since 1999 the Nigerian Stock Exchange has adored
strong performance, although equity as a means to foster corporate growth is being more operated by Nigeria’s private sector.
4. TRANSPORTATION – Nigeria’s freely owned transportation substructure is a major constraint to economic development. Principal docks are at Lagos (Apapa and Tin Can Island), Port Harcourt (Onne), and Calabar. Of the 80,500 kilometers (50,000 mi.) of roads, above 15,000 kilometers (10,000 mi.) are officially titled, but many remain in poor shape.
Extensive road repairs and new structure activities are gradually being instigated as state governments, in particular, spend their portions of enhanced administration revenue allocations. The government execution of 100% destination inspection of all goods entering Nigeria has ensued in long delays in defrayal goods for importers and created new bases of corruption since the ports lack suitable facilities to carry out
5. TEXTILE AND CLOTHING – Textiles have been formed in Nigeria by the traditional methods now for several years, but the industrial activity used in the manufacture of textile is comparatively much more recent. The sector has now developed to incorporate carpet production, dyeing, embroidery markings, fibre production, lace, spinning, weaving, knitting, printing, and finishing. The sector produces a variation of fabrics ranging from African prints, shirting, embroideries, etc. to Guinea brocades, wax prints, jute and other products.
The textile sector of Nigeria mainly encompasses of the Cotton Textile and Synthetic Fabrics and remains to account for a momentous proportion of the overall growth of manufacturing production. The synthetic fiber section of the textile industry has recorded a substantial amount of growth over the past years.
6. MINING – The quarrying of minerals accounts for only 0.3% of its GDP. The mining industry is underdeveloped thus Nigeria needs to import minerals which it could mine internally. The ownership rights for the exploring, mining and selling of mineral possessions are held by the Nigerian government.
The mineral possessions of Nigeria include coal, iron, gold, uranium and tantalum.
The coal properties are spread over fifteen states. The Nigerian Coal Corporation is one of the in charges for most of the coal mines present in the region. The coal section of the Nigerian economy is slowly being denationalized.
Iron ore is mostly mined at the Itakpe which has an annual volume of 5.5Mt per year. The state-owned National Iron Ore Company operates in this region.The Western region of Nigeria is famous for the gold deposits; the locations for quarrying are Maru, Anka, Malele, Tsohon Birnin Gwari-Kwaga, Gurmana, Bin Yauri, Okolom-Dogondaji, and Iperindo in Kwara State.
Uranium is initiated in 6 of the 36 states in Nigeria.
7. TOURISM – Nigeria is a lovely country having scenic rain forests, savannahs, falls, national parks (Old Oyo,Yankari and Cross River National Park) etc. The great point of tourism in the region is the cultural events such as the Durbar festival, held by the several ethnic groups. The revenue from Tourism and Travel in Nigeria was about 10Bn USD in 2007, and appraised to about 6% of GDP.
The industry, unluckily, suffers from the country’s poor electricity, roads, and water quality.
- Five of Nigeria’s airports—Lagos, Kano, Port Harcourt, Enugu, and Abuja—presently receive international flights. Government-owned Nigeria Airways finished operations in December 2002. Virgin Nigeria Airways started operations in 2005 as an auxiliary and serves domestic and international paths. Also, The Nigerian Airforce commenced a new airline called United Nigeria, with a Boeing 737-500 in 2013.
There are some domestic private Nigerian carriers, and air facility among Nigeria’s cities is generally dependable. The maintenance ethos of Nigeria’s domestic airlines is not up to globally accepted standards.
- FOREIGN ECONOMIC RELATIONS – Nigeria’s foreign economic kindred revolve around its role in providing the world economy with oil and natural gas, even as the country seeks to expand its exports, harmonize tariffs in line with a potential customs union wanted by the Economic Community of West African States (ECOWAS), and encourage inflows of foreign portfolio and straight investment. In October 2005, Nigeria instigated the ECOWAS common external tariff, which abridged the number of tariff bands.
Prior to this alteration, tariffs founded Nigeria’s second-largest source of revenue after oil exports. In 2005 Nigeria achieved a major revolution when it reached an agreement with the Paris Club to eliminate its bilateral duty through a mixture of write-downs and buybacks.
Nigeria joined the Organization of the Petroleum Exporting Countries in July 1971 and the World Trade Organization in January 1995.
- EXTERNAL TRADE – In 2005, Nigeria displayed a US$26 billion trade surplus, conforming to almost 20% of the gross domestic product. In 2005, Nigeria achieved an optimistic current account balance of US$9.6 billion. The Nigerian money is the naira (NGN). As of mid-June 2006, the exchange amount was about US$1=NGN128.4. In recent years, Nigeria has expanded its trade relations with other emerging countries such as India. Nigeria is the largest African crude oil supplier to India — it annually ships 400,000 barrels per day (64,000 m3/d) to India
valued at US$10 billion yearly.
India is the largest purchaser of Nigeria’s oil which achieves 20% to 25% of India’s native oil demand. Indian oil companies are also involved in oil piercing operations in Nigeria and have strategies to set up refineries there.
The trade capacity between Nigeria and the United Kingdom rose by 35% as of USD6.3 billion in 2010 to USD8.5 billion in 2011.
- EXTERNAL DEBT – In 2012, Nigeria’s external debt was an estimated $5.9 billion and N5.6 trillion domestic – putting total debt at $44 billion.
In April 2006, Nigeria became the first African country to fully pay off its debt owed to the Paris Club. This was organized as a debt write-off of approximately $18 billion and a cash payment of approximately $12 billion.
- FOREIGN INVESTMENT – In 2012, Nigeria established a net inflow of US$85.73 billion of foreign direct investment (FDI), much of which came from Nigerians in the diaspora. Most FDI is focused toward the energy and banking sectors. Any public designed to encourage the inflow of foreign investment is capable of generating service opportunities within the domestic economy.
The Nigerian Enterprises Promotion (NEP) Decree of 1972 (revised in 1977) was proposed to reduce foreign investment in the Nigerian economy. This type of policy is not pertinent in an economy with a rapidly growing force in Nigeria.
Although one may accept the rationale for the declaration of that decree at that time example to promote indigenous entrepreneurship. But the decree or any exchange control strategy that has the potential to discourage foreign investment will not be relevant under the present economic indulgences. The abrogation of the NEP decree was, therefore, a step in the right course.
Likewise, another reason for the low level of imported deal in Nigeria is political instability. The various achievements and counter coups since 1966, the disapproval and politically motivated riots following the
long-drawn and uncertain radical engineering of the Babaginda Military Administration, all combined to create an environment not beneficial to foreign deal. Foreign direct investment (FDI) is possibly an
important source of employment opportunities for emerging countries like Nigeria. As a concern, it is imperative that the federal government promotes a healthy private segment that can earn a sensible rate
of return. Developing countries that wish to attract FDI flows should contemplate measures such as establishing a clear legal framework that does not discriminate between local and foreign investors;
espousing liberal foreign exchange command (e.g., a regime without large gaps between official and market rates); creating modest, investor-friendly regulations and institutions and effectively managing
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