Nigeria can be said to be a middle-income, mixed economy. Also, the country has been tagged as one of the emerging marketing in the world with expanding manufacturing, financial, service, communications, technology and 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. The history of the Nigeria’s economy can be traced to the pre-colonial era when agriculture was the mainstay of the economy.
In this post, we’ll take a look at the structure of the Nigerian economy and how it has evolved from the pre-colonial times to the present day Nigeria.
Let’s dive right in.
From 1680 to 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.
During this period, slaves were bought from African countries like Nigeria and taken to various parts of Europe and America. At that time, one of the most prominent slave traders was the Portuguese. These Europeans used these imported slaves to grow and cultivate the plantations in the Madeira Islands.
From the mid 17th century to the mid 18th century, Britain established the Company of the Royal Adventurers which became chartered in 1660. At this time, the British exerted a monopoly in the business of holding stocks of slaves and trading goods which led to Britain 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. The Great Britain was able to extend its colonial territory to Lagos and the Delta region of the River Niger.
However, in 1949, pressure had begun to build among 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
Eventually, Nigeria became an independent nation in 1960. After the civil war between 1970s and 1980s, Nigeria started reaping the rewards of crude oil which it has earlier discovered in 1956. 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.
Unfortunately, this had 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 that the falling oil output and prices in the 1980s affected the economy to the extent that the per capita real gross national product 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).
Another interesting aspect of the Nigerian economy was the increase in government expenditure which rose from 9% in 1962 to 44% in 1979. It was during this period that the government increased jobs. However, this led to an increase in government spending.
In 1983, the government continued to create more jobs for Nigerians which led to the expulsion of over 2 million illegal workers from the country to neighbouring countries like Ghana, Nigeria, Cameroon and Chad.
Nigeria is currently Africa’s largest population with estimates at over 200 million citizens. The economy is doing quite well as it has recently recovered from a recession and the inflation rates are nearing a single digit.
But there have been some negatives. The unemployment rate in Nigeria is still quite high. Currently, over 64 million youths are unemployed while 1.6 million are underemployed.
This has led to the high rate of crime and terrorist activities. For instance, the Boko Haram terrorist group sprung up in 2008 and they have been involved in attacking schools, mosques, churches and markets. They have also been involved in the kidnapping of secondary school students. Many of these terrorists are unemployed youths that have been recruited by the Boko Haram sect.
The economic situation in the North has been terribly affected by the Boko Haram group with left unaffected by these attacks as Boko has targeted local businesses, government buildings, and local facilities such as schools and churches.
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.
Currently, Nigeria is highly dependent on its earnings from crude oil however; the government is currently working hard to diversify the economy by using the revenue from crude oil to develop other sectors of the economy.