Nigeria was heavily dependent on agriculture, with the sector accounting for more than 40 percent of pre-1973 GDP. But in the decade up to 1983, agricultural output in Nigeria declined 1.9 percent and exports fell 7.9 percent. Agricultural imports as a share of total imports rose from 3 percent in the late 1960s to 7 percent in the early 1980s. Nigeria’s unfavorable agricultural development resulted from the loss of competitiveness among farm exports as the real value of the Nigerian naira appreciated substantially from 1970 to 1972 and from 1982 to 1983.
Thanks in large part to the overthrow of Nigeria’s second civilian administration, the Second Republic headed by President Shehu Shagari, at the end of 1983 and of the military government of General Muhammadu Buhari in 1985, the Fifth National Development Plan was postponed until 1988-92. Continuing the emphases of the SAP, the fifth plan’s objectives were to devalue the naira, remove import licenses, reduce tariffs, open the economy to foreign trade, promote no-oil exports through incentives, and achieve national self-sufficiency in food production. The drafters of the fifth plan sought to improve labor productivity through incentives, privatization of many public enterprises, and various government measures to create employment opportunities.
In late 1989, the administration of General Ibrahim Babangida abandoned the concept of a fixed five-year plan. Instead, a three-year “rolling plan” was introduced for 1990-92 in the context of more comprehensive fifteen- to twenty-year plans. A rolling plan, considered more suitable for an economy facing uncertainty and rapid change, is revised at the end of each year, at which point estimates, targets, and projects are added for an additional year. Thus, planners would revise the 1990-92 three-year rolling plan at the end of 1990, issuing a new plan for 1991-93. In effect, a plan is renewed at the end of each year, but the number of years remains the same as the plan rolls forward. In Nigeria, the objectives of the rolling plan were to reduce inflation and exchange rate instability, maintain infrastructure, achieve agricultural self-sufficiency, and reduce the burden of structural adjustment on the most vulnerable social groups.
The question was also looked at in terms of “earned” versus “unearned” income. In a market-based economy based on trade and exchange, people can obtain incomes from all manner of activities. Some of these incomes could be seen as making net additions to the national income, while others represented only a transfer of income. Some activities created new wealth, others only transferred wealth created somewhere else or appropriated wealth. Many different economic and moral arguments were made to either justify or else criticize the incomes gained from different activities, on the ground that they were “productive” or “unproductive”, “earned” or “unearned”, “wealth-creating” or “wealth-consuming”. Because the trading circuits can become very complex (for example, a good may be exported, traded and re-exported while speculators stake futures on it, stockjobbers gamble stocks in the company, and currencies fluctuate) the ultimate sources of new wealth become increasingly more difficult to identify.
In that case, the notion of “productive labour” or indeed productive activity as such seems to become increasingly irrelevant from an economic point of view, because all that really matters is whether a net income can be extracted from an activity or an asset, in whatever form. If a net income has been so extracted, then one’s activity has been “productive”. For the rest, what the costs and benefits of an activity are might be interpreted in all sorts of ways. Views may differ on the value of market-oriented reforms, but everyone agrees that the deterioration of services provided by badly managed and corruption-ridden public enterprises is a major obstacle to economic recovery. Vital state-run facilities, such as the electrical utility and public roads, have been decaying for years, causing billions of dollars in economic losses.
The state-run National Electric Power Authority (NEPA) now Power Holding Company of Nigeria (PHCN) produces below half its generating capacity of nearly 6,000 megawatts, despite a decade of town-crier’s herald for overhauling exercises. Years of neglect have pushed the power supply system to the verge of collapse, resulting in frequent and long power outages that have made NEPA the butt of jokes by its frustrated and angry customers — the authority is commonly referred to as “Never Enough Power Available” or “No Electric Power At all.” But NEPA officials say the problem is not simply one of incompetence, but mainly the lack of funds, running into billions of dollars, needed to repair faulty and ageing facilities, especially the utility’s four thermal power plants.
Private companies spend huge sums to install and maintain private electric generating plants, but this does not guarantee power either, since fuel supplies have been perennially short since 1994 till 2009. Nigeria’s four state oil refineries, with a combined capacity of 445,000 barrels per day, have in recent years produced less than half that amount due to constant breakdowns.
An increasing portion of Nigeria’s wealth is produced and distributed in illegal, informal or semi-legal circuits which fail to be captured in official economic data. The techniques used here may include creative accounting, money laundering, abusive trust arrangements obscuring real ownership, tax dodging and underreporting which exploits legal loopholes, setting up company headquarters in a foreign country to dodge taxes, “cross sharing” (setting up licensing authorities abroad), transfer pricing, and numerous other practices. This situation turns our economy into grey.
But most often, assets and profits are shifted between separate legal territories to avoid and evade taxation and scrutiny. In that case again, the source of new wealth becomes obscured, and it is difficult to link productive activity anymore to the value or income it creates. In the case of services, it often becomes difficult to know – even for a statistician – what the real cost of a service is, and what the real “product” or commodity is, that is being purchased. Particularly in the case of newly emerging services, it may also take quite some time before realistic “market rates” are established.
Industry experts assumed in the past that oil resources would last 50 years, based on calculations that simply divided estimated reserves by the present annual use. But this method of prediction failed to account for an increase in Third World oil use. It seems that the oil companies and oil exporting countries have been fibbing. It is in their interest to state that remaining resources are in good shape, because their business agreements limit them to pumping and selling a proportion of their remaining resources. In fact, the rate of oil discovery is falling sharply. The world consumes 23 billion barrels a year, but the oil industry finds only 7 billion barrels a year.
Economists argue that oil scarcity will result in price increases, making it more profitable to access poorer deposits. That seems plausible only if one thinks only about dollar costs. The fact is, as an oil field ages, increasing amounts of energy must be exerted to pump the oil out. The cost of this energy must be subtracted from the total value of the energy in the oil retrieved. According to a 1992 study, these two curves actually will intersect around the year 2005. Beyond that point, the energy required to find and extract a barrel of oil will exceed the energy contained in the barrel.
There is reason to believe that the oil industry is well aware of oil field depletion. No new supertankers have been built for 20 years, while interest in squeezing oil from shale deposits seems to be growing. What, then, is the solution to our acute energy problem? There isn’t one. Natural gas resources are about as
limited as petroleum and gas use recently has been growing at a rate of 9 percent per year. Relying on nuclear energy to provide 11 billion people with First World living standards would require a system of 250,000 giant breeder reactors using around 1 million tons of plutonium.
While agriculture’s relative share of GDP was falling, manufacturing’s contribution rose from 4.4 percent in FY 1959 to 9.4 percent in 1970, before falling during the oil boom to 7.0 percent in 1973, increasing to 11.4 percent in 1981, and declining to 10.0 percent in 1988. Whereas manufacturing increased rapidly during the 1970s, tariff manipulations encouraged the expansion of assembly activities dependent on imported inputs; these activities contributed little to indigenous value added or to employment, and reduced subsequent industrial growth. The manufacturing sector produced a range of goods that included milled grain, vegetable oil, meat products, dairy products, sugar refined, soft drinks, beer, cigarettes, textiles, footwear, wood, paper products, soap, paint, pharmaceutical goods, ceramics, chemical products, tires, tubes, plastics, cement, glass, bricks, tiles, metal goods, agricultural machinery, household electrical appliances, radios, motor vehicles, and jewelry.
Businesspeople participated in economic policymaking, influencing the government’s implementation of indigenization. “Nigerianization,” in which foreigners were obligated to sell ownership shares to Nigerians, became an instrument by which a few civil servants, military leaders, businesspeople, and professionals amassed considerable wealth. In 1985 the government selectively relaxed the indigenization decrees to encourage foreign investment in neglected areas, such as large-scale agrobusiness and manufacturing that used local resources. After March 1988, foreign investors were allowed to increase their holdings in a number of other sectors.
On the other hand, if items of information and knowledge become widely known, or are displaced by other items, their economic value may quickly and suddenly fall. We can depend on the clever marketing of an idea, and guarding the conditions of access to it. Nigeria’s economy also could gain substantially if the government is able to persuade Nigerians with funds abroad to repatriate their capital to boost investment and demonstrate confidence in the new order.