As you saw at the beginning of this chapter, the Nigerian economy is in shambles. While there have been moments when the economy was growing at a respectable rate and the future seemed promising, the country has not been able to take any significant steps that would dramatically improve the living conditions of its mostly impoverished population. Moreover, its economy has declined dramatically for most of the past decade, and the signs currently point to an uncertain but also unpromising future which is fraught with political implications.

In many respects, Nigeria has a typical economy for a third world country. Most Nigerians live in utter poverty. Also, like most countries in the third world, Nigeria's economy is largely based on the export of "primary" products and the import of some food, most manufactured goods, and almost all investment capital. That pattern invariably leaves the third world vulnerable because it is so reliant on at most a few commodities whose prices fluctuate on world markets.

In Nigeria's case, the situation might not seem so bad because the commodity it exports the most is oil. Indeed, many observers expected oil revenues to turn Nigeria into one of Africa's, and perhaps even the world's, leading economic powers.

Instead, Nigeria's attempts at development have fallen flat on their face. The economy went into a tailspin in the mid-1980s from which it has yet to recover, despite having adopted the structural adjustment policies all but forced on Nigeria by the International Monetary Fund, World Bank, and other financial institutions.

In part, that failure reflects the corruption and mismanagement discussed earlier. It also reflects forces beyond the Nigerian government's control. Oil prices have not stayed anywhere near as high as they were after the price shocks of 1973 and 1979. In 1989 alone, for example, the price of oil on the spot market dropped from about $21 to $14 a barrel in on six-month period. That drop cost the Nigerian government almost a third of the export revenues it had been counting on to pay for its import bills and to finance industrial and other development projects.

When combined with all its other problems, the drop in oil prices produced a crisis of massive proportions. In the second half of the 1980s alone, plummeting oil prices led to a more than 80 per cent fall in GNP. Per capita income stood at about $1,000 year but dropped by roughly 80 percent during the course of the decade and only rebounded slightly in the 1990s.

The official value of its currency has never been a terribly good indicator of its real value, since anyone who can trades on black market in which the naira is worth quite a bit less. Nonetheless, its value dropped by about half in the 1980s, a decline that continued through the 1990s. In October 1999, the US dollar was worth 95 naira; the exchange rate was 50 naira to the dollar, when the last edition of Comparative Politics was published in 1996. The drop in the naira’s value is one of the reasons why the country's total debt had gone up by about 1,000 percent during the last twenty years.

These are not just statistical abstractions. At the every day level, the economic changes took a terrible toll on people's lives. The cost of basic foodstuffs increased by a minimum of 250 percent in the second half of the 1980s alone The price of imported goods has risen even faster.

Until the late 1980s Nigerian leaders, civilian and military alike, pursued a fairly common development strategy. In the 1960s and 1970s, they focused on developing Nigeria's industrial base so it could reduce its reliance on imported goods. That, in turn, mean relying heavily on foreign aid and loans for the investment capital for the start-up money that Nigeria could not provide on its own. Thus, right after independence, the United States government gave Nigeria a $225-million grant for roads, water supply, and education. As Nigeria's first Prime Minister Tafawa Balewa put it:

Over the years, Nigeria did receive considerable aid from both governmental and private sources, which it used to help build universities, factories, and modem urban amenities in Lagos, Abuja, and its other major cities.

Typical was the Delta steel complex in Aladja in Bendel state, which opened in 1982. Creating a locally run, integrated steel and iron industry has always been a high priority for the Nigerian or any third world government because they are components of almost all modern industrial products. The Aladja mill was to provide steel rods and other products for other factories that would produce finished "rolling" steel. The Nigerian government played a major role in this and other development projects. Normally, it was the recipient of the foreign aid or loans. Either on its own or through the more than ninety partially private and partially public organizations known as parastatals, it determined how and where those funds would be invested.

Typical, too, is the fact that the Aladja mill did not live up to expectations. It never operated at more than 20 percent of capacity, which means that other factories that depend on its products were underutilized as well. Another project, the Adjaokuta steel mill, was projected to be Africa's largest steel factory when it was conceived in the boom years of the 1970s, but it is now a decade behind schedule and could end up being more than $4 billion over budget when it is finally completed.

There are lots of reasons for the problems with the iron, steel, and most other industrial sectors. Skilled labor is in short supply. Replacement parts and repairs in general are too expensive. Nigeria's legendary corruption extends into the economic arena as well as the political. There has also been far less foreign aid than Nigerians expected, far less than the 0.7 percent of GNP annually that the OECD (Organization for Economic Cooperation and Development) countries initially pledged a generation ago.

Whatever the reasons, the bottom line is clear. Nigeria in the 1980s could not meet its own industrial demand. In iron and steel, that reached about six million metric tons in 1990, but even if all its plants that were either in operation or under construction worked at full capacity, it would only have been able to produce 1.3 million metric tons. The same basic pattern held in every other industrial sector.

There were problems with agriculture as well. As noted earlier, until colonization, the territory that became Nigeria could easily feed its people. During the colonial period. Nigeria was a major exporter of agricultural products. But after independence, Nigerian officials emphasized industrial development at the expense of agriculture. In the 1980s, agricultural products made up only 3 percent of total exports. Moreover, Nigeria also was heavily dependent on imported food. Despite the grandiose "Operation Feed the Nation" (1976-1979) and "Green Revolution" (1979-1983) schemes, most farmers still use traditional agricultural techniques.

Even though there are now more roads into farming regions, and there are more support services, irrigation, and machinery available to farmers, agricultural production has not increased appreciably. Furthermore, there is very little quality, control in what is produced and marketed. And, as with everything else in Nigerian life, corrupt trading practices take a lot of the potential profit and best produce out of the market.

In keeping with its general policy of import substitution, the Shagari government introduced higher tariffs in 1982 and other policies that would make imports more expensive and thus give a boost to domestic producers. Economic conditions did not improve, which was one of the reasons why the military stepped in the next year.

The new Buhari administration strengthened the existing import restrictions and offered businesses a few new incentives to encourage them to buy needed goods domestically. Government spending was cut and new projects frozen, which led to the forced layoffs of thousands of workers. Meanwhile, the price of oil continued to plummet. As it did, the country's debt spiraled upward at which point, the international financial institutions that "owned" the debt stepped in. The Buhari govemment had to apply to the International Monetary Fund's Extended Fund Facility for a loan to cover its immediate problems and restructure its long-term debt. The IMF only agreed to grant the money and negotiate new terms for the outstanding loans if the government agreed to a very different set of macroeconomic policies, conditions that have come to be known as conditionality. The IMF's conditions were part of the reason for Babangida's 1985 coup, leading the new government to declare an economic state of emergency that October. A massive public debate ensued. Ultimately, the government decided to reject the IMF loans under the proposed terms, but it did agree to do whatever was necessary to restructure Nigeria's economy in a more profitable direction, which, in the end, meant acceding to Northern demands.

Late that year, Babangida announced a two-year structural adjustment program, which has been extended in one form or another ever since. Its goal was to expand exports other than oil, reduce the import of goods that could be manufactured locally, achieve self-sufficiency in food production, and, most notably, increase the role of the private sector. Strategically, Babangida sought to reduce the state's economic involvement. Tariffs were reduced and import-license procedures simplified and, in some cases, eliminated altogether. In 1986 alone, seventeen parastatals were privatized, and by 1990, sixteen more had been as well. Plans were in the works to sell off another thirty or so.

So far, structural adjustment's record is mixed. There is more investment capital around, including $170 million from the private wing of the World Bank to help fund the development of a natural gas field.

On balance, however, the transition has been difficult. The debt remains high, and debt service continues to eat up about a third of the government's annual budget. The official inflation rate increased from 12 percent in 1987 to nearly 50 percent in 1989 before it began to level off. Unemployment is estimated to be at least 30 percent. The federal government is deeply in debt. With the drop in world oil prices in the late 1990s, the government has less than $3 billion in cash reserves.

Nigeria has opened its economy up to more outside investment. For instance, it is now possible for foreign investors to own a 50-percent share of existing enterprises and a controlling ownership or, in some cases, even total ownership of new ones. Whatever the other benefits of structural adjustment, economic control is likely to shift either outside the country altogether or to a small, increasingly wealthy domestic elite. Economic inequalities are likely to increase, and there are going to be few, if any incentives for the beneficiaries of economic growth to deal with poverty and other social problems.

The situation as of this writing is rather confusing. Obasanjo has pledged to continue the structural adjustment policies. Thus, parts of the Nigerian National Petroleum Corporation will be privatized. He has also appointed a new chief executive officer for the company as a first step in trying to rid it of the corruption that has marked its dealings with the multinationals who have invested in Nigeria. On the other hand, his close links with officials from the Babangida government give many observers pause on this front as well.

At this point you might well be asking a question that has lurked below the surface throughout this chapter. Why should there even be a Nigeria! After all, Nigeria as we know it, began as an artificial creation of the colonial powers, and its history has at best been a rocky one ever since. It has never come close to creating an effective government or a modern economy despite all the human and natural resources Achebe alluded to in the statement that begins this chapter. In other words, it may well be the case that the Nigerian people would be better off if the country split up into at least three parts representing the main geographical and ethnic divisions of the First Republic.

That question is well worth asking of many other countries, which are also suffering from the combined effects of ethnic strife, corruption, military rule, underdevelopment, environmental decay, and the like. But all the signs are that it is a question that is not likely to be asked by the people who will be determining the future of Nigeria and similar countries.

For good or ill, most modern nation states and their boundaries seem set in stone for the foreseeable future, especially in Africa. In short, whatever scenarios might seem more plausible to outside observers, Nigerians and Liberians and Kenyans and South Africans probably do not have the Soviet or Yugoslavian option. They are stuck with each other and seem consigned to trying to find workable solutions within the limits imposed by existing national boundaries.

Critical Thinking Exercises

1. Much has changed in the world since this book was finished in late 1999. Does the analysis of Nigeria presented in this chapter still make sense? In what ways? Why (not)?

2. Public opinion pollsters routinely ask questions about whether people think the country is headed in the "right direction" or is "on the wrong track. If you were asked such a question about Nigeria, what would your answer be? Why did you reach that conclusion!

3. How have ethnic differences made the establishment of a stable democracy so difficult in Nigeria? What could be done about that?

4. Leftist scholars often argue that outside forces dating from at least the colonial period are more responsible for the problems a country like Nigeria faces than its own domestic political forces are. Do you agree? Why (not)?

5. Despite the repeated military coups, the Nigerian army has not been able to establish a state that is anywhere near as strong as eitther Iraq under Saddam Hussein or the Soviet Union before Mikhail Gorbachev. Why do you think that is the case?

Useful Web Sites

Africans have less access to the Internet than residents of any other continent. Nonetheless, there are a number of good sites for students of comparative politics.

Perhaps the most important of these offer news about Nigeria, which is rarely covered in the western press. The best include the Post Express newspaper’s on line service plus Nigeria.com and Emporg:

http://www.postexpresswired.com

http://www.nigeria.com

http://emporg.com

The World History Archives has material on the origins and evolution of Nigeria’s military regimes:

http://www.hartford-hwp.com/archives/34a/index.html

All the best academic and other sources are housed at the University of Pennsylvania’s Center for African Studies

http://www.sas.upenn/edu/African_Studies/Country_Specific/Nigeria.html

Selected Reading