Economic history of Nigeria

Colonialism is a major feature of the economic history of Nigeria. Britain eventually gained control of Nigerian administration. After independence, the Nigerian economy seemed very promising. Many saw Nigeria, with 25% of Africa's population, as an emerging economy. However, this potential never materialized. A series of unfortunate political and economic events have stalled Nigerian growth. The country still plays an important economic role in the world, especially as a producer of fossil fuels.

Early British Imperialism

The European struggle to establish communities and trading posts on the West African coast from about the mid-1600s to the mid-1700s was part of the wider competition for trade and empire in the Atlantic. The British, like other newcomers to the slave trade, found they could compete with the Dutch in West Africa only by forming national trading companies. The first such effective English enterprise was the Company of the Royal Adventurers, chartered in 1660 and succeeded in 1672 by the Royal African Company. Only a monopoly company could afford to build and maintain the forts considered essential to hold stocks of slaves and trade goods. In the early eighteenth century, Britain and France destroyed the Dutch hold on West African trade; and by the end of the French Revolution and the subsequent Napoleonic Wars (1799-1815), Britain had become the dominant commercial power in West Africa.

The slave trade was one of the major causes of the devastating internecine strife in southern Nigeria during the three centuries to the mid-1800s, when abolition occurred. In the nineteenth century, Britain was interested primarily in opening markets for its manufactured goods in West Africa and expanding commerce in palm oil. Securing the oil and ivory trade required that Britain usurp the power of coastal chiefs in what became Nigeria.

Formal "protection" and--eventually--colonization of Nigeria resulted not only from the desire to safeguard Britain's expanding trade interests in the Nigerian hinterland, but also from an interest in forestalling formal claims by other colonial powers, such as France and Germany. By 1850 British trading interests were concentrating in Lagos and the Niger River delta. British administration in Nigeria formally began in 1861, when Lagos became a crown colony, a step taken in response to factors such as the now-illegal activities of slave traders, the disruption of trade by the Yoruba civil wars, and fears that the French would take over Lagos. Through a series of steps designed to facilitate trade, by 1906 present-day Niger was under British control.

The Colonial Period

Colonies such as Nigeria became part of British imperial expansion that focused on exploiting raw materials, minerals, and foodstuffs important to Western industrial development. Britain tried to encourage tropical export crops in Nigeria and to stimulate demand there for British manufactured goods. The colonies built a railroad network between the 1890s and World War II, and constructed roads at an accelerating rate after the 1930s. These developments, along with the introduction of the pound sterling as the universal medium of exchange, encouraged export trade in tin, cotton, cocoa, groundnuts, and palm oil. Britain maintained its economic hegemony over the colonies through military power, strategic alliances, and the collaboration of indigenous rulers.

Development of National Economic Interests to World War II

British rule exacerbated differences of class, region, and community in Nigeria. The emergent nationalist movement in the 1930s was spearheaded by a new elite of business people and professionals and promoted mainly by persons who expected to gain economically and politically from independence. The movement first became multiethnic--although limited to the south--between 1930 and 1944, when the real incomes of many participants in Nigeria's money economy fell as a result of a deterioration in the net barter terms of trade. During the same period, the Great Depression and, later, World War II, reduced Britain's investment, imports, and government spending in Nigeria.

Once the wartime colonial government assumed complete control of the local economy, it would issue trade licenses only to established firms, a practice that formalized the competitive advantage of foreign companies. Also, wartime marketing boards pegged the prices of agricultural commodities below the world market rate, workers faced wage ceilings, traders encountered price controls, and Nigerian consumers experienced shortages of import goods.

Labor activity grew during the war in reaction to the heavyhanded policies of the colonial government. Among the expressions of labor unrest was a strike by 43,000 workers in mid-1945 that lasted more than forty days. Aspiring Nigerian entrepreneurs, deprived of new economic opportunities, and union leaders, politicized by the strike's eventual success, channeled their sense of grievance into nationalist agitation. Educated persons, whose economic opportunities were limited largely to private business and professional activity, began to demand more participation in the colonial government.

National Economic Interests in the Postwar Period

Starting in 1949, when Nigerian's recently emergent labor, commercial, and professional elites were first consulted by the British as part of a constitutional review, the peoples of Nigeria engaged in ongoing debate over the pressure of decolonization, independence, and modernization. The two coups d'état of 1966 and the civil war of 1967-70 reflected economic as well as political elements.

Between 1951 and 1960, the major political parties played leading roles in unifying and locally mobilizing the economic elite. Elites from majority parties in the regional assemblies who cooperated with the ruling federal coalition dispensed a wide range of rewards and sanctions, thus retaining their own positions and power and keeping the masses subordinated. Positions in government services and public corporations, licenses for market stalls, permits for agricultural export production, rights to establish enterprises, roads, electrical service, running water, and scholarships were allocated by the governing group to its supporters. Each major party was backed by a bank, which assisted in the transfer of substantial public funds to the party.

At all levels--local and regional after 1951 and federal after 1954--political leaders could use a range of controls, extending over local councils, district administration, police, and courts, to subdue any dissident minority, especially in the far north, where clientage was the social adhesive of the emirate system. Political superiors offered protection, patronage, and economic security in exchange for loyalty and the obedience of inferiors.

The elites attracted clients and socially inferior groups not only in the far north, where Islam legitimized the traditional hierarchy, but even in Igboland, an area of southeastern Nigeria where power had been widely dispersed before the twentieth century. The elites of the three regions preferred to close ranks to share the fruits of office and to prevent challenges to their positions, but by the time independence was achieved in 1960, policies designed to enhance the security of one regional elite threatened the security of others.

1970s-1980s

A major feature of Nigeria's economy in the 1980s, as in the 1970s, was its dependence on petroleum, which accounted for 87 percent of export receipts and 77 percent of the federal government's current revenue in 1988. Falling oil output and prices contributed to another noteworthy aspect of the economy in the 1980s--the decline in per capita real gross national product, which persisted until oil prices began to rise in 1990. Indeed, GNP per capita per year decreased 4.8 percent from 1980 to 1987, which led in 1989 to Nigeria's classification by the World Bank as a low-income country (based on 1987 data) for the first time since the annual World Development Report was instituted in 1978. In 1989 the World Bank also declared Nigeria poor enough to be eligible (along with countries such as Bangladesh, Ethiopia, Chad, and Mali) for concessional aid from an affiliate, the International Development Association (IDA).

Another relevant feature of the Nigerian economy was a series of abrupt changes in the government's share of expenditures. As a percentage of gross domestic product, national government expenditures rose from 9 percent in 1962 to 44 percent in 1979, but fell to 17 percent in 1988. In the aftermath of the 1967-70 civil war, Nigeria's government became more centralized. The oil boom of the 1970s provided the tax revenue to strengthen the central government further. Expansion of the government's share of the economy did little to enhance its political and administrative capacity, but did increase incomes and the number of jobs that the governing elites could distribute to their clients.

The economic collapse in the late 1970s and early 1980s contributed to substantial discontent and conflict between ethnic communities and nationalities, adding to the political pressure to expel more than 2 million illegal workers (mostly from Ghana, Niger, Cameroon, and Chad) in early 1983 and May 1985.

The lower spending of the 1980s was partly the result of the structural adjustment program (SAP) in effect from 1986 to 1990, first mooted by the International Monetary Fund and carried out under the auspices of the World Bank, which emphasized privatization, market prices, and reduced government expenditures. This program was based on the principle that, as GDP per capita falls, people demand relatively fewer social goods (produced in the government sector) and relatively more private goods, which tend to be essential items such as food, clothing, and shelter.

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