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Winter Term 2015
Nigeria: Current
Problems and Progress
Overview I
• Robert Looney, “Nigeria Faces the Abyss”, Milken
Institute Review, Second Quarter 2015
• Currently little good news coming out of Nigeria
• Country no longer has the luxury of ignoring some longstanding problems – exacerbated by the drop in oil prices
• Government budgetary cutbacks
• Infrastructure gap, especially in transportation and
• High youth unemployment
• Large regional income gaps between richer Christian
South and poorer Muslim North
• Boko Haram insurgency gaining momentum
• Pervasive corruption
Challenges Ahead I
• Each factor will present a challenge to next government
• U.S. National Intelligence Council (NIC) has questioned
the country’s ability to sustain long-term viability 9th most
likely for state failure before 2030
• Previously when Nigeria faced a severe crisis 1967-1970 - oil came to the rescue
• Now survival will depend on whether Nigeria
• Has societal strength to rein in corruption
• Can invest wisely in development infrastructure and
• Manage ethnic and religious strife
Oil Problems
Oil Problems
• Oil exports account for more than 90% of country’s
export earnings
• Fund 70-80% of the federal government budge
• Problems
• Can’t increase production for years—little recent exploration or
• Currency has had a massive devaluation
• Currently austerity program choking investment
• Had built up cash reserves of $9bn in December 2012
• By end of 2014 down to $4bn – much transferred to state
governors prior to election
• Had not passed a Petroleum Industry Bill that might have
stimulated investment in the sector
Infrastructure Problems
• One of biggest casualties of falling oil revenues is the
country’s infrastructure
• Much has not been repaired/upgraded or expanded since
the 1970s
• Transport and energy short-falls major impediment to
economic growth
• One option is borrowing from China – proposal for $18bn
in borrowing from China
• Problem debt low now – but could be difficult with
continued depressed oil markets and falling currency
Corruption Problems
• World bank estimates corruption costs to country at 12%
of GDP
• Much in construction, contracting
• Improvements between 2003 and 2008 but
• Trend not good
• In 2008 ranked in the 21st percentile
• By 2013 had fallen to the 9th percentile
• Recently head of the central bank fired because pointed
out that $20bn in oil revenues was “missing”
• Corruption contributes to fact that in 2010 two-thirds of
Nigerians lived below the poverty line
Regional Problems
• In recent years economic development has favored the
Christian south over the Muslim north
• Poverty and unemployment especially severe in the
Northeast where Boko Harm insurgency based
• Here poverty rates up to 70% of population
• Much also due to climate change and destruction of
• Not hard to see falling oil revenues, infrastructure
deficits, corruption and chronic poverty and the
insurgency might lead to a vicious circle creating a failed
Positive Developments I
• Some new programs showing promise
• Agriculture has one fifth of GDP and nearly one third of
• Agricultural Transformation Agenda
• Series of initiatives at reducing Nigeria’s reliance on food imports
• Program targets agricultural productivity by subsidizing costs of
major inputs
• Other innovations – expanded credit
• In 2013 nearly half million jobs created
Positive Developments II
• State began a program of raising tax revenues and
putting them back into improvements – better transport,
• Government accountable and a virtuous circle has
started with improved governance leading to better
growth, more revenues and further investments
• Because of better governance Lagos has been able to
work out public private partnerships – private firms
investing and constructing infrastructure
• Hopefully the Lagos model will spread to other states in a
ground up development process that
• Improves governance and
• Puts pressure on the Federal government to become more
responsive to the country’s needs