Nigeria 2: Political Economy and Development

State and Economy The state was the central fixture Stunted the private sector Leaders plundered the petroleum sector The state makes decisions about extraction deployment allocation of scarce economic resources.

State and Economy Continued Rents: All money that is funneled through the state and is up to the discretion of the government officials as to how it’s spent Rents: All money that is funneled through the state and is up to the discretion of the government officials as to how it’s spent Rent-Seeking behavior: competition over politically regulated economic gains (rents) Rent-Seeking behavior: competition over politically regulated economic gains (rents) Huge informal sector accounts for large part of economy Huge informal sector accounts for large part of economy

Origins of Economic Decline In colonial periods, Nigerian economy was focused on agriculture Cocoa in the west Palm oil in the east Groundnuts and cotton in the north Self Sufficient in food production State started to focus on large scale food production 3 factors undermined the agricultural sector: Biafran War ( ) Severe drought in 1969 brought famine in Development of petroleum industry

Oil in Nigeria brought increased expenditures on education, defense, infrastructure, the university system, roads, ports, and office buildings. High external debt due to leasing oil rights High external debt due to leasing oil rights High corruption rates (especially under ) High corruption rates (especially under Babangida and Abacha administrations) Began to import petroleum Began to import petroleum

Deepening Economic Crisis Internet Scams are in top 10 of income producing Internet Scams are in top 10 of income producing Oil was both good and bad for the country Oil was both good and bad for the country Structural Adjustment: Ibrahim Babangida created the structual administration program (SAP) Endorsed by world bank and international financial institutions (IFIs) Difficulties with Balance of Payments

Deepening Economic Crisis Government created more Para-statals Privatization to generate revenue, reduce state expenditures, and improve efficiency Privatization to generate revenue, reduce state expenditures, and improve efficiency “The state strives to dictate the pace and direction of economic development, but lacks the tools and political will to deliver on its obligations” Economic planning and the NESG (Nigerian Economic Summit Group) Nigeria still faces: low investment, low capacity utilization, unreliable distribution, corruption, and overregulation.

Society & Economy Competition between north and south (led mainly by the three largest tribes: Hausa, Igbo and Yoruba) has led to conflict in the Nigerian Government

Muslim Takeover Early military governments ( ) tried to maintain religious balance Early military governments ( ) tried to maintain religious balance The Babaganda regime in the 1980’s Marked the beginning of the northern dominance in government institutions The Babaganda regime in the 1980’s Marked the beginning of the northern dominance in government institutions General Abacha’s regime favored the Hausa-Fulani General Abacha’s regime favored the Hausa-Fulani This led to unequal treatment of ethnic minorities in the southern states This led to unequal treatment of ethnic minorities in the southern states

Nigeria and the Regional Political Economy Major actor in formation of Economic Community of West African States (ECOWAS) Major actor in formation of Economic Community of West African States (ECOWAS) Contributed troops to monitoring group known as ECOMOG Contributed troops to monitoring group known as ECOMOG ECOMOG forces restored democratic government in Sierra Leone in may 1997 ECOMOG forces restored democratic government in Sierra Leone in may 1997 In 1970s, people flocked to Nigeria with the oil boom. Nowadays, Nigerians are emigrating elsewhere in the region. In 1970s, people flocked to Nigeria with the oil boom. Nowadays, Nigerians are emigrating elsewhere in the region.

Nigeria and the Political Economy of the West Global influence peaked in 1970s with the oil boom Global influence peaked in 1970s with the oil boom Over-dependent on oil revenues and western technology to explore and extract oil reserves Over-dependent on oil revenues and western technology to explore and extract oil reserves Contribute 8% of US oil imports Contribute 8% of US oil imports Nigeria adopted European style partnership for Africa’s development called NEPAD (New Partnership) Nigeria adopted European style partnership for Africa’s development called NEPAD (New Partnership)