Nigeria’s failure to diversify its economy has devalued the citizens and weakened her small and insular private sector. Few local entrepreneurs have drawn on the international market in ways producers in some other developing countries have done. At less than one per cent, the share of manufacturing in Nigeria’s exports is minuscule. Most industries are merely struggling to survive.
Industries using local inputs, such as breweries, cement, soap and textiles, tend to perform better than those highly dependent on imports, like electronics and vehicle assembly. But the manufacturing sector as a whole has been on the decline in recent years, marked by an average growth rate in 2003-07 of minus 10.2 per cent.
According to Nigeria’s Federal Office of Statistics, the national unemployment rate rose from an average of 10.9 per cent in 2005 to an estimated 54.5 per cent at end of 2008.
However, these figures grossly understate the slack in the labour market in a country where there are few, if any, incentives for jobless people to register with the authorities. With a workforce estimated at 800,000, Nigeria’s bloated public sector is in no position to accommodate more workers. With hundreds of small companies forced to close in recent years by the deterioration in economic conditions, especially inadequate credit, rising production costs and diminishing consumer demand, the capacity of the economy to provide full-time employment has diminished. One vital challenge facing the new government, therefore, will be to stimulate new businesses and support the development of the many small enterprises that exist in the informal sector, which accounts for most employment but lacks capital investment.
It is difficult to estimate the size of Nigeria’s informal sector, since virtually all of its activities are unrecorded, but a walk through the streets of any Nigerian city reveals people busy scratching a livelihood from micro-and small-scale enterprises. The apparent resilience of this sector, which provides a wide range of services and goods for the poor and the pauperized middle class, sharply contrasts with the fragility of the formal sector.
According to the International Labour Organization, small and medium-scale enterprises and particularly informal sector undertakings account for over 60 per cent of economic activities in Nigeria and over 35 per cent of urban employment.
In addition to technical and other forms of assistance, such businesses will need access to appropriate sources of credit. Though interest rates have stabilized in recent years, many banks are still reluctant to extend credit to small and medium-scale producers and prefer to lend to big businesses and engage in foreign-exchange related transactions. The Central Bank of Nigeria has said that the large spread between bank deposits and average lending rates has discouraged savings and borrowing to the detriment of the economy. Moreover, few banks operate in the rural areas, with most concentrating their activities in Lagos and other urban centres. In 1997, three-quarters of the 2,472 branches of commercial and merchant banks in Nigeria were in the cities and towns. Community banks operate throughout the country, but many of these small institutions – set up under licence from the government to provide limited financial services to the rural poor – have run into trouble recently with many of them losing their licences.
If everyone on Earth were to consume petroleum at the per capita rate of industrialized countries, it would require a fivefold increase in current oil production to meet the demand. If, by 2060, the world’s population reaches the expected 11 billion mark and all were to consume as much energy as the average Australian does now, annual worldwide oil production would need to be increased about 30 times.
By the year 2060, if the world maintained a mere 3 percent annual economic growth rate and the entire world’s people were to benefit equally, world economic output would have to increase to 80 times its current rate. These limits-to-growth themes have been debated in academic circles for more than 30 years, but they almost never appear in the mass media.
What kind of labour can contribute to increasing Nigeria’s wealth? Right now, Nigerian government should regard human labour as the mainspring of wealth; and the economical use of labour as highly important. Within Nigerian enterprise circuit, for example, there are many tasks which have to be performed, such as cleaning, record and bookkeeping or repairs, which do not directly contribute to producing and increasing wealth. There are also whole occupations such as domestic servants, soldiers, schoolteachers etc., which, although necessary, do not seem "productive" in the sense of increasing the material wealth of a society. A large part of the Nigerian population consumes wealth but does not create it. To maximize economic growth, therefore, "unproductive costs", which consume part of the total national income rather than adding to it, should be minimized; productive labour has to be maximized.
By the euphoria of the 1974 oil price boom, the Ministry of Economic Development approved and added numerous projects for other ministries not supported by a proper appraisal of technical feasibility, costs and benefits, or the technical and administrative arrangements required to establish and operate the projects.
According to Sayre P. Schatz, who advised the Ministry of Transport while it prepared feasibility studies for the plan in 1974, "economic reasoning gave way before economic enthusiasm," and the necessary coordination and implementation were ignored.
Inflationary minimum wage and administrative salary increases after October 1974, in combination with the slowing of the economy, made budget shortfalls inevitable.
In June 1975, several state and local governments did not receive their monthly subsidies from the Federal Government. Just before the July 29, 1975, coup in which head of state, General Yakubu Gowon, was toppled, government workers in several areas threatened to impair vital services unless their June wages were paid.
In March 1976, in response to an economy overheated by demands for new programmes and higher wages, General Olusegun Obasanjo, then head of state, pointed out that petroleum revenue was not a cure-all. Many projects had to be postponed, scaled down, or cancelled when oil-revenue-based projections made in 1974-75 later proved too optimistic. Projects tended to be retained for political reasons, not because they were considered socially or economically useful by the Central Planning Office of the Supreme Military Council.
The civilian government that took office on October 1, 1979, postponed the beginning of the Fourth Plan (1981-85) for nine months. Whereas the plan’s guidelines indicated that local governments were to be involved in planning and execution, such involvement was not feasible because local governments lacked the staff and expertise to accept this responsibility. The plan was also threatened by falling oil revenues and an increased need for imported food that had resulted from delays in agricultural modernization. Projected to rise 12.1 per cent annually, exports actually fell 5.9 per cent yearly during the plan, as a recession among the nations of the Organisation for Economic Co-operation and Development reduced demand for Third World imports. As exports declined, the capacity to import construction materials and related capital goods also fell, reducing growth in the construction, transport, communications, utilities, and housing sectors.
Nigeria was heavily dependent on agriculture, with the sector accounting for more than 40 percent of pre-1973 GDP. But in the decade up to 1983, agricultural output in Nigeria declined 1.9 per cent and exports fell 7.9 per cent. Agricultural imports as a share of total imports rose from 3 percent in the late 1960s to 7 percent in the early 1980s. Nigeria’s unfavorable agricultural development resulted from the loss of competitiveness among farm exports as the real value of the Nigerian naira appreciated substantially from 1970 to 1972 and from 1982 to 1983.
Thanks in large part to the overthrow of Nigeria’s second civilian administration, the Second Republic headed by President Shehu Shagari, at the end of 1983 and of the military government of General Muhammadu Buhari in 1985, the Fifth National Development Plan was postponed until 1988-92. Continuing the emphases of the SAP, the fifth plan’s objectives were to devalue the naira, remove import licences, reduce tariffs, open the economy to foreign trade, promote non-oil exports through incentives, and achieve national self-sufficiency in food production. The drafters of the fifth plan sought to improve labour productivity through incentives, privatization of many public enterprises, and various government measures to create employment opportunities.