Nigeria gained its indepence from the United Kingdon in 1960. Six year later in 1966, the country plunged in political turmoil as a result of sharp cultural and political differences between the dominant ethnic groups namely Yoruba, Hausa, and Igo. Several coups and counter-coups took place due to the perceived corruption of the perceived corruption and disequilibrium in the country’s electoral process. In 1967, a civil war erupted which lasted between 1967 and 1979. Nigeria was under military rule which applied force and coercion in governing the nation. The military rule hindered economic growth and development due to the political instability evident in the country. Besides, the leaders’ greed paralyzed the implementation of well-meaning policies that would have led to Nigeria’s economic progress.
Besides political greed in Nigeria, there was also deliberate effort to inhibit foreign investment in the country’s economy. The implementation of policies such as the indigenization decrees of 1972 and 1977 led to the stripping of foreigners’ investments and giving it back to a few wealthy people in the Nigerian government. Such actions were not devoid of justifications such as reduction of the repatriation of foreign earnings. The government led its citizens to believe that they were acting in their best interest when in reality the rich kept amassing public wealth for their own gain while the rich continued lavishing in poverty. During this period, there was an oil boom that led to massive oil exports resulting in high government revenue collection. The crude oil increased the creditworthiness of Nigeria which led to the government receiving high amounts of foreign debt.Unfortunately, instead of the government utilizing these monies to improve the living standards of its inhabitants and to invest in infrastructure, it invested in economically undesirable projects that did not result in economic growth of Nigeria. The government’s indulgence and ill-conceived policies led to crowding out effects on the private sector. These poor investment and development programs that the Nigerian government indulged in led to a lengthy period of economic stagnation.
The economic stagnation in Nigeria led to the introduction of the Economic Stabilization Act of 1982. The Act provided solutions to the deteroriating economy in Nigeria such as the prohibition of some goods from importation, reduction of Basic Travel Allowances, and imposition of compulsory advance deposits for imports. However, these measures and controls were ineffective judging by its negative effect on the country’s gross domestic product (GDP). In 1984, Buhari’s Military government advanced more stringent fiscal monetary and exchange control measures and income policies designed to revamp the country’s economy. Although the new approach led to slight improvement in the economy, some underlying issues remained unresolved. Consequently, the government saw it fit to employ fundamental economic reforms to safeguard the economy from the total collapse of the economy. Hence, the International Monetary Fund (IMF)/World Bank initiated the Structural Adjustment Program (SAP) in 1986. The SAP resulted in social economic reforms that catapulted Nigeria’s economic growth and development. The various reforms and policies applied since 1986 have substantially contributed to the turn-around of Nigeria’s economy to its current state. Nigeria is now a strong middle income mixed economy and part of the world’s emerging markets. Its economy is largely driven by the oil and gas sector. Nonetheless, other fundamental industries in Nigeria are financial, telecommunications and entertainment sectors.
Discussion
Nigeria is ranked 26 th in the world on the basis of its GDP and is considered the largest economy in Africa. It is categorized as either a mexed economy, middle income and emerging market. If its economy continues to grow at its current growth rate of approximately 2%, then it will be among the 20 largest economies in the world by 2020. The main industries flourishing in Nigeria are financial services, manufacturing, communications technology, and entertainment sectors. Its manufacturing sector is the third-largest on the African continent and is responsible for meeting the high demands of goods and services in West Africa. Nigeria recently changed its economic analysis to accommodate the economic sectors that contribute more to its GDP than others including the film industry, telecommunications, and banking. Due to the rebasement of its GDP from 1990 to 2010, Nigeria’s economy experienced a 89% increase in its economic size. Consequently, the country boasts of being the largest economy in Africa.
Economic changes that took place in the 1970s set Nigeria’s economy on its course towards economic recovery. Economic prosperity was further boosted by the extraction of the oil from the numerous oil reserves in Nigeria. However, as time went by the oil industry started experiencing challenges such as soaring global oil prices initiated by the Arab Israeli crisis and the oil glut in the 1980s. Negative effects on the oil prices affected sectors like agriculture and manufacturing. Faced with capital flight, corruption, and high foreign debt, Nigeria yielded to external pressure to embrace IMF’s SAP to address its economic challenges. The return of Democracy in 1999 provided a stable political environment leading to a series of macroeconomic and fiscal reforms which led to Nigeria’s economic stability.
Conclusion
In the past, the economy of Nigeria has suffered due to the country’s political instability resulting from military rule. Civil war that took place from 1967-1979 also led to the stagnation of the economy. Reverting to Democratic Rule, the Economic Stabilization Act of 1982, and IMF’s SAP have led to the economic stability enjoyed by Nigeria today. The government also applies tight monetary and fiscal policies that have further sparked economic growth and development. In spite of the positives that the nation’s economy enjoys, it is still grappling with challenges such as volatility of crude oil prices, shifting pricing of the agricultural products, inadequate infrastructure, misappropriation of oil revenues, high public debt, insecurity, and relative political instability. However, these drawbacks are incomparable to the many accolades that the country enjoys with regards to its economy. Nigeria enjoys the title of being Africa’s giant economy and leads the other economies with its enormous human and natural resources. It also holds the title of “the fastest growing economy in Africa.” It is also among the emerging markets in the world. Nonetheless, the future of Nigeria’s economy still lies in the sustainability of the political stability, cultivating a corrupt-free society, and diversification of the economic sector such that there is no overdependence on the oil industry.
References
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