Economy of Nigeria
The petroleum-based economy of Nigeria,
long hobbled by political instability, corrup-
tion, and poor macroeconomic management,
is undergoing substantial economic reform
under the new civilian administration. Niger-
ia’s former military rulers failed to diversify
the economy. The economy has overdepend-
ence on the capital-intensive oil sector, which
provides 20% of GDP, 95% of foreign ex-
change earnings, and about 65% of govern-
ment revenues. The largely subsistence agri-
cultural sector has not kept up with rapid
population growth, and Nigeria, once a large
net exporter of food, now imports some of its
food products. In 2006, Nigeria successfully
convinced the Paris Club to let it buy back
the bulk of its debts owed to the Paris Club
for a cash payment of roughly $12 billion
(USD)[1].
Overview
Nigeria’s economy is struggling to leverage
the country’s vast wealth in fossil fuels in or-
der to displace the crushing poverty that af-
fects about 57 percent of its population.
Economists refer to the coexistence of vast
wealth in natural resources and extreme per-
sonal poverty in developing countries like Ni-
geria as the “resource curse”. Nigeria’s ex-
ports of oil and natural gas—at a time of peak
prices—have enabled the country to post
merchandise trade and current account sur-
pluses in recent years. Reportedly, 80 per-
cent of Nigeria’s energy revenues flow to the
government, 16 percent cover operational
costs, and the remaining 4 percent go to in-
vestors. However, the World Bank has estim-
ated that as a result of corruption 80 percent
of energy revenues benefit only 1 percent of
the
population.
During
2005 Nigeria
achieved a milestone agreement with the
Paris Club of lending nations to eliminate all
of
its bilateral external debt. Under the
agreement, the lenders will forgive most of
the debt, and Nigeria will pay off the re-
mainder with a portion of its energy reven-
ues. Outside of the energy sector, Nigeria’s
economy is highly inefficient. Moreover, hu-
man capital
is
underdeveloped—