Transcript Nigeria
NS4053 Winter Term 2015 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 longstanding 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 2 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 3 Oil Problems Oil Problems • Oil exports account for more than 90% of country’s export earnings • Fund 70-80% of the federal government budge • 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 4 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 5 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 6 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 7 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 8 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 9