Oil and Economic Development Of Nigeria

Between 1970 and 1980 the share contributed by oil to government revenue rose from one-fourth to over three-fourths and accounted for well over 95 per cent of total export earnings around mid-1980s. An idea of increase in domestic investment is provided by Nigeria's The Guidelines to the Third plan which stipulated in 1973 that there would be a 1.0.7 billion Naira total investment during the 1975-80 plan period. In March 1975, the total investment was projected at 30 billion Naira i.e., a three-fold increase during the same -period. A revision in 1976 increased the public sector spending for investment alone to 26.5 billion Naira.

The Fourth Development Plan (1981-85) assumed that oil revenues would increase from $20 billion in 1980 to $40 billion in 1985. Steel, petrochemicals, fertilizers and cement were the favoured sectors for development during this period.

The time periods of the various National Development Plans were as follows: First Plan (1962-68); Second Plan (1970-74); Third Plan (1975-80) and Fourth Plan (1981-85). The formulation and launching of Fifth Plan was deferred in 1985 due to the economic crisis engulfing Nigeria. However, in mid-1986, the Nigerian Government unveiled a Structural Adjustment Programme (SAP) which has to run from July 1986 to June 1988.

For instance, infrastructural (power, transport, communication and education) sector accounted for 42 per cent of the actual investment during 1975-78 as against total allocated share of 40 per cent in the Third Plan Period, (1975-80). Similarly, the manufacturing sector absorbed 14 per cent of actual investment as against an allocated share of 19 per cent during the same period. For details see Henry Bienen, “Oil Revenues and policy Choices in Nigeria,” World Bank Staff Working Papers No. 592 (Washington, DC), Table 9, p. 54.

In 1985, the Federal Government set out the following five year targets for minimum levels of local raw material sourcing; soft drinks and breweries 100 per cent; agro-food industries 80 per cent; agricultural’ processing industries 70 per cent; petrochemicals 50 per cent; machine tools 50 per cent and chemicals 60 per cent. Despite these targets, there are practical difficulties to surmount as and when imported inputs are replaced by domestic substitutes. For instance, technical demands are difficult and there is inadequate research into Nigerian substitutes. Heavy production costs tend to make locally sourced materials more expensive than imported counterparts and hence industrial units’ dependence on imports continues unabated. Presently, an estimated 60 per cent of all raw materials used by local industry are imported. The car assembly plants depend on imports for about 95 per cent of their inputs.

Starting its operations in 1981, a West German-built direct reduction steel plant has been operating at about 20 per cent of its installed capacity. The Delta Steel Company runs three rolling mills which are heavily import-dependent and have operated at less than a third of their capacity.

Akinnifesi E.O. , “Unemployment and Economic Development in Nigeria - Analysis and Policy Implications,” Economic and Financial Review, (Lagos, Nigeria), vol.24, No. 2, June 1986, p. 61.

Economist Intelligence Unit, Nigeria, Country Profile 1987-88 (London), pp. 32–33.

Henry Bienen , n. 4, Table 16, p. 61. If we take rural per capita product as a percentage of urban per capita product, we find the same fell from 32.3 in 1966-67 to 18.3 in 1973-74 and 10.7 in 1975-76.

The Kuznets ratio (labour productivity in the industrial and service sectors divided by labour productivity in agriculture) rose from 2 in 1966 to 2.4 in 1970 and a high 6.2 in 1975 in Nigeria. See for details, Diejomaoh V.P. , and Anusionwu E.C. , “The Structure of Income Inequality in Nigeria: A Macro Analysis,” in Henry Bienen and V.P. Diejomaoh (Eds.), The Political Economy of Income Distribution in Nigeria (New York, 1981), pp. 100–115.

Ibid.

Henry Bienen , n. 4, p. 17.

Osakwe James O. , and Ojo M.O. , “An Appraisal of Public Sector Financing of Agricultural Development in Africa with Particular Reference to Nigeria,” Economic and Financial Review Vol. 24, no. 2, June 1986, p. 37. An estimate suggests that between 1970 and 1982, annual production of Nigeria's principal cash crops fell sharply; cocoa by 43 per cent; rubber by 29 per cent; cotton by 65 per cent and groundnuts by 64 per cent. See for details, World Development Report 1986 (Washington D.C.), p. 72.

Outflows on account of investment income from Nigeria continuously maintained an upward trend, e.g., from 693 million Naira in 1983 to 932 million Naira in 1984 and 1354 million Naira in 1985.

Osakwe James O. , and Ojo M.O. , n. 13, pp. 38–9.