NS4960 Spring Term 2017 Nigeria: Current Problems and Progress

Overview I Robert Looney, “Nigeria Faces the Abyss”, Milken Institute Review, Second Quarter 2015 Currently little good news coming out of Nigeria Country no longer has the luxury of ignoring some long-standing problems – exacerbated by the drop in oil prices Government budgetary cutbacks Infrastructure gap, especially in transportation and electricity High youth unemployment Large regional income gaps between richer Christian South and poorer Muslim North Boko Haram insurgency gaining momentum Pervasive corruption

Challenges Ahead I Each factor will present a challenge to next government U.S. National Intelligence Council (NIC) has questioned the country’s ability to sustain long-term viability 9th most likely for state failure before 2030 Previously when Nigeria faced a severe crisis 1967-1970 -- oil came to the rescue Now survival will depend on whether Nigeria Has societal strength to rein in corruption Can invest wisely in development infrastructure and Manage ethnic and religious strife

Oil Problems Oil Problems Oil exports account for more than 90% of country’s export earnings Fund 70-80% of the federal government budget Problems Can’t increase production for years—little recent exploration or development Currency has had a massive devaluation Currently austerity program choking investment Had built up cash reserves of $9bn in December 2012 By end of 2014 down to $4bn – much transferred to state governors prior to election Had not passed a Petroleum Industry Bill that might have stimulated investment in the sector

Infrastructure Problems One of biggest casualties of falling oil revenues is the country’s infrastructure Much has not been repaired/upgraded or expanded since the 1970s Transport and energy short-falls major impediment to economic growth One option is borrowing from China – proposal for $18bn in borrowing from China Problem debt low now – but could be difficult with continued depressed oil markets and falling currency

Corruption Problems Corruption World bank estimates corruption costs to country at 12% of GDP Much in construction, contracting Improvements between 2003 and 2008 but Trend not good In 2008 ranked in the 21st percentile By 2013 had fallen to the 9th percentile Recently head of the central bank fired because pointed out that $20bn in oil revenues was “missing” Corruption contributes to fact that in 2010 two-thirds of Nigerians lived below the poverty line

Regional Problems In recent years economic development has favored the Christian south over the Muslim north Poverty and unemployment especially severe in the Northeast where Boko Harm insurgency based Here poverty rates up to 70% of population Much also due to climate change and destruction of agriculture Not hard to see falling oil revenues, infrastructure deficits, corruption and chronic poverty and the insurgency might lead to a vicious circle creating a failed state

Positive Developments I Agriculture Some new programs showing promise Agriculture has one fifth of GDP and nearly one third of employment Agricultural Transformation Agenda Series of initiatives at reducing Nigeria’s reliance on food imports Program targets agricultural productivity by subsidizing costs of major inputs Other innovations – expanded credit In 2013 nearly half million jobs created

Positive Developments II Lagos State began a program of raising tax revenues and putting them back into improvements – better transport, services Government accountable and a virtuous circle has started with improved governance leading to better growth, more revenues and further investments Because of better governance Lagos has been able to work out public private partnerships – private firms investing and constructing infrastructure Hopefully the Lagos model will spread to other states in a ground up development process that Improves governance and Puts pressure on the Federal government to become more responsive to the country’s needs