Some of the adjectives used to describe the current state of the Nigerian economy include some of these – middle-income, emerging and mixed economy.
Over the years, Nigeria has gone through many stages of economic growth and in this post, we’d like to take a look at how this.
Economic History of Nigeria
Looking back at the pre-colonial era, particularly between 1680 and 1800, the economy of Nigeria was dominated by the Atlantic slave trade because of the growth of the Atlantic plantation system. It was during this period that the country adopted more efficient currencies which reduced the cost of doing business.
Between the mid 17th century to the mid 18th century, Britain established the Company of the Royal Adventurers which became chartered in 1660. It was during this period the British exerted a monopoly in the business of holding stocks of slaves and trading goods which led to them becoming a dominant commercial power in West Africa.
In the mid 19th century, slave trade was abolished but the British were able to successfully transition from slave trade to creating markets for its manufactured goods in Nigeria. It was at this time the palm oil trade experienced a boom.
The British further increased their dominance in Nigeria by securing the oil and ivory trade. It was able to do this by usurping the power of coastal chiefs in Nigeria. It was also during this period that the Sokoto Caliphate was formed.
The caliphate was located in Northern Nigeria as well as parts of neighbouring countries. There were Hausa merchants involved in an extensive export-trade network and Kano began the commercial capital of the Caliphate as it had the biggest manufacturing center in the region. The clothing produced in the Caliphate was exported from Kano to various parts of West Africa.
This period of prosperity led to the decision of Britain to colonize Nigeria in order to protect its trade interests in the caliphate.
Also, this move allowed the British forestall the interests of other colonial powers like France and Germany. Great Britain was able to extend its colonial territory to Lagos and the Delta region of the River Niger.
However, in 1949, pressure from the professional and commercial elites in Nigeria and there were propositions in favour of decolonization and independence. As a result, the political parties between 1951 and 1960 had begun playing leading roles in unifying and mobilizing the economic elites
Nigeria became an independent nation in 1960 and after the civil war between the 1970s and 1980s; the country began enjoying the dividends on crude oil that was discovered a few years before independence. This led to a period of economic prosperity due to the oil boom. As a matter of fact, between 1972 and 1973, crude oil accounted for a large percentage of the industrial GDP of the country.
This period of economic prosperity was applauded by many but it had also tilted the country from agriculture to become dependent on its oil production and as at 1988, petroleum accounted for 87% of export receipts and 77% of the federal government revenue.
The consequence of this was the falling oil output and prices in the 1980s that adversely affected the economy to the extent that the gross national product (GNP) per capita declined and this continued until oil prices began to rise in 1990.
The GNP per capita decreased on a yearly basis by 4.8% from 1980 to 1987. It was during this period that the World Bank classified Nigeria as a low-income country (based on the 1987 data).
Apart from the impact of falling crude oil, vices like terrorism and kidnapping have also affected the nation’s economy. For instance, Boko Haram has been responsible for over 10,000 deaths since 2011 and they have left over 2.6 million displaced Nigerians.
These attacks have also affected local businesses, government buildings, and local facilities such as schools and churches. As a result, many of the local businesses in the North have migrated to the South and over 80% of the businesses in Kano have closed down due to security challenges caused by attacks.
Also, foreign investors have withdrawn from the country because of the Boko Haram attacks and it is estimated that Boko Haram has led to the loss of over $1.33 trillion dollars in foreign investments.
Overall, in the last 50 years, the narrative of the Nigerian economy has been based on the oil and gas sector which has grown to become the fulcrum of the Nigerian economy.
As far back as the 1970s, crude oil accounted for a major percentage of the country’s GDP and it is currently responsible for over 70% of government revenue.
Between 1982 and 2017, the GDP Annual Growth Rate averaged 3.90%. It reached an all-time high of 19.17% in the fourth quarter of 2004 and a record low of -7.81 percent in the fourth quarter of 1983. This was due to the changes in the oil market due to the oil glut of 1983 which led to a fall in the price of crude oil.
Between 2000 and 2004, the GDP rate was at an all time due to the Organization of Petroleum Exporting Countries (OPEC) decision to increase the country’s production quota. During this period, the real GDP grew at an annual average rate of 4.8% and recorded particularly strong growth in 2003 at 10.9% due to a sharp increase in oil-GDP of 26.5%.
In recent times, the Nigerian economy has advanced 1.9% year-on-year. For instance, in the fourth quarter of 2017, it increased by 1.4% when compared to the previous quarter. Also, based on the National Bureau of Statistics, the total export earnings of N3.1trillion for the second quarter of 2017, oil and gas accounted for N2.43tn, while the non-oil sector accounted for the balance of N670bn.
Overall, Nigeria is said to be one of the emerging marketing in the world when it comes to manufacturing, financial, service, communications, technology and the entertainment sectors. In terms of nominal GDP, the country is ranked as the 30th-largest economy in the world while it is the largest economy in Africa.