Nigeria

31 August 2015

Jared CordellEllen Canup

Shannon Stineburg

Pre-Colonial & Colonial History

• Artifacts trace early civilizations as far back as 500 BCE• Igbo, Hausa, Fulani, and Kingdom of Benin• Began trade with European powers 15th-16th century• Became center of slave trade through 19th century• British moves against slave trade began early 1800’s, with Lagos

becoming a colony in 1861• 1885 Berlin Conference solidified Britain’s claim to Nigeria, creating

northern and southern colonies by 1901• Typical British indirect rule, favored Lagos and south over Islamic north

Independence

• Independence in 1960• Initially coalition government, parties ethnically/religiously aligned• Cycle of military coups began 1966, with 2• Civil war 1967-1970 over secession of Biafra (SW region)• Cycle of military coups, occasional civilian rule• Gradually led to regional/religious diversification of parties by late ’90’s• Military & unstable civilian rule suppressed economy and deeply entrenched

patronage/corruption

Demographics

• Population: 160-180 million• 50/50 rural urban split, 24 cities over 100k• 389 ethnic groups; Hausa, Fulani, Igbo, Yoruba • 63% population under 24; median age 18 yrs• 5-15 million strong diaspora, maintains strong

ties to Nigeria• Concentrated in US, UK, South Africa• Significant, well-educated & empowered middle

class, about 20% of population• Emerging consumer economy

Oil

• Oil began in 1958, independence economically hopeful• Joined OPEC in 1971• Government spending in 1970’s, borrowing against oil• “Dutch Disease” in 1970’s-1990’s suppressed

economy• Economy gradually diversified; oil 14% of Nigerian

Economy, but 80% of government revenues• Oil theft thought to siphon off 100,000-500,000 bpd• Sector corrupt, with $ billions unaccounted for• Largest gas reserves in Africa, historically burned off

Political Economy

• ECOWAS founding member (1975), HQ in Abuja• West African Monetary Union, creating common

currency, Eco, among 6 countries• Club de Paris debt restructuring member, 1st country to

complete compact, repay renegotiated debt• Active UN participant since Independence• Founding member of OAU and AU, militarily engaged• Received hundreds of World Bank loans targeting

poverty reduction projects, currently 29 ongoing, $10 billion+

• In good standing with IMF; regional financial anchor state

• AGOA participant, decreasing impact due to decrease in US oil imports

• Has not/Does not meet MCC compact minimums

Democratization

• Prior to 1999, 29 years of military rule vs. 10 years civilian

• 1998 Gen Abubakar embarked on ambitious constitutional democratization; election May ‘99

• 1999 Election of Obasanjo (former military dictator)• Obasanjo’s People’s Democratic Party (PDP) significant

in nationalizing politics• PDP dominated politics through first 4 presidential

elections (in national elections)• National elections marked by steady improvement, but

also political violence (700 killed in 2011 election)• 2015 election most successful yet, still marked by

discrepancies but little violence• Presidents informally switch back and forth

Christian/Muslim• 2015 Election Pres Buhari (former military dictator), first

transition to opposition All Progressive’s Congress (APC), also broad-based national party

• Both party’s platforms very similar, 2015 election assessed to be poll on former administration

• Problems but Progress…

Violence and Insurgencies

• Boko Harem in North, tribal insurgents in Niger river delta

• Southern insurgencies date to early 1990’s, in response to oil extraction

• Previous administration paid off militant leaders, violence decreased

• BH, 2009, active in NE provinces, affiliated with IS

• Responsible for about 20,000 deaths

• Multinational efforts, February push have met progress, but BH still a significant threat

• Buhari’s victory over Jonathan attributed to failures against BH

Legatum Index: Bottom 11%

Global Competitiveness Index: Bottom 12%

Economy I

142

2010 World Bank Report:

• 25.89% of those in poverty in Africa (Below $1.25/day) lived in Nigeria

• Nearly two-thirds of Nigerians live below poverty line

~6.5%

Economy II

Economy III

*2014: Nigeria’s statisticians recalculated its GDP figures to take account of new industries such as mobile telecommunications and discovered that it had become Africa’s biggest economy, ahead of its main economic and geopolitical rival, South Africa.

Nigeria Inflation Rate is 9.2%• Food +10.0%, imported food +10.4%• Housing, water, electricity gas +7.3%• Clothing and footwear +9.3%• Transport prices +9.1%• Education +9.2% • Health +8.7 %

Import/Export

Exports I

Exports II

“Exports” III

Imports

Nigeria ought to be Africa’s biggest oil and gas producer, yet it suffers crippling fuel shortages

Non-oil Sector Growth

The economy is diversifying and is becoming more services-oriented, in particular through retail and wholesale trade, real estate, information and communication.

Current Breakout of Growth:

• 57% services

• 21% agriculture

• 9% manufacturing

Issues:

• A country that should be the region’s breadbasket cannot even feed itself.

• The whole country produces only as much electricity as a single medium-sized European city.

Tourism

Institutions I

Two Key Problems:

• Corruption

• Inability to provide basic services

Nestle Factory: it has to generate its own power, clean up its own water and provide health care for its employees, and poor transport links drive up the cost of its raw materials. Even so, it is one of the company’s most efficient factories on the globe, in part because of the benefits of scale from producing a narrow range of products for a huge market

144129

Improved water source, rural (% of rural population with access)

Improved water source, urban (% of urban population with access)

Corruption

• The World Bank estimates corruption’s direct cost to Nigeria to be as high as 12 percent of GDP.

• Control of corruption, which showed significant improvement in 2003 to 2008, deteriorated when President Jonathan took office

• President Buhari, elected in June, ran on a platform of anti-corruption.

Institutions II

Infrastructure

144134

Health

Characterized by:

• Lack of coordination

• Fragmentation of services

• Dearth of resources including drug and supplies

• Inadequate and decaying infrastructure

• Inequity in resource distribution

• Access to care and poor quality of care

Only 0.4 Doctors / 1000 people

Presidents Emergency Program for AIDS Relief (PEPFAR)

• Adult HIV prevalence is 3.1%

Successes

• Polio: No new cases since 24 July 2014

• Ebola outbreak containment• Liberian man arrived by airplane into Lagos, Africa's most populous city. Died in

hospital 5 days later, set off a chain of transmission that infected a total of 19 people, of whom 7 died.

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Education

• Literacy rate: 66.4%• Primary school participation, Net attendance ratio male: 72%• Primary school participation, Net attendance ratio female: 68%• Primary school participation, Survival rate to last primary grade: 79.9% 142

Female Literacy RatePrimary School Enrollment

2012: Agricultural Transformation Agenda

• Nigeria spends over $11 billion annually on imported rice and sugar

• Aimed at reducing Nigeria’s increasing reliance on food imports

• Growth Enhancement Scheme:

• subsidizes the costs of such major inputs as fertilizer and seedlings

• free mobile phones to farmers• provide timely information on input and crop prices• facilitate mobile banking

• 2013: Government claims that nearly a half million jobs were created

• Agriculture could provide help mitigate decline in the oil industry

Security Issues

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Security Issues

Insurgency in the north-east and other parts of the country

• Claimed about 20,000 lives and forced some 1.5 million people from their homes

• Humanitarian situation: An increased number of both internally displaced persons and refugees in neighboring Cameroon and Niger

• Negative implications for investment

• May hamper the fight against poverty

• Increase crime

In February under President Buhari, an offensive against Boko Haram drove militants from most big towns and pushed them back into a few forest and mountain hideouts.

Problems I

Problems II

Problems III

Corruption

Major rural-urban and regional tensions

• Varying natural-resource endowments

• Unequal access to political power

• Uneven shares of national wealth

• Insufficient federal services

Infrastructure Issues:

• 40% of the federal primary road network is in poor condition

• 18% of 197,000 kilometer road system is paved

• Backbone of the rail network is over 100 years old

• As of 2007 only 25% of trains operational

***Most Nigerian roads, refineries, railways, airports, power plants and water/ sanitation utilities date to the oil boom in the 1970s

2015 Outlook

• Moderate growth of 5%, due to vulnerability to

• slow global economic recovery

• oil-price volatility

• The low oil price will lead to a sharp decline in fiscal revenues

• Overall impact on non-oil sector GDP will be relatively muted

• Oil sector is expected to remain the main driver of growth over the medium term and, in the light of the recent macroeconomic challenges, the government has adopted an adjustment strategy that hinges on tightening government spending and shoring up non-oil revenues to compensate for dwindling oil revenues.

Beyond 2015

A New Dawn?- Governance- Security- Infrastructure- Economy

Beyond: Governance

• Public enemy #1: CORRUPTION…but it’s the only thing that works

“This is not a country that is morally convinced about [the evils of] corruption: corruption is the only thing that works.”

– Bishop Matthew Kukah, leading religious figure and moral authority in Nigeria.

• Weak Institutions

• Legislature

• Judiciary

• Rule of Law

• Elections (2015 Success)• Security

• Police

• Military

• Insurgents

PatrimonialismNeopatrimonialism

Clientelism

Beyond: Security

• Boko Haram in the North

• Prison De-radicalization

• Economic Development

• Infrastructure

• Police and Military

• Build Trust with Communities

• Training & Joint Operations

• Infrastructure

• Rebel Payments

• Electricity

• Currently 185/189 infrastructure – 67/217 for output

• 1300 – 4800 MW (Production at given time) -

• 24.87 Billion kWh (Output in 2015)

• 257.9 Billion kWh (South Africa)

• 4099 Billion kWh (United States)

• Transportation

• Rail = ¼ of 1960s level

• Road = 20% paved

• Inefficient Supply Chain & Poor Link to Market

• Ports

• No Deep Water capability

• Burdensome Customs

• Traffic in Lagos

Beyond: Infrastructure

Beyond: Economy

• Global Competitiveness Index

• 127/144 – Pretty Low

• Stage 1 – Factor-Driven Economy

• Areas Needing Most Improvement• Institutions (Basic)

• Corruption, Trust, Bribes/Graft, Waste, Cost of Violence

• Infrastructure (Basic)• Roads, Rail, Ports, Electricity

• Health and Primary Education (Basic)• Malaria, Infant Mortality, Life Expectancy, Primary Enrollment

• Goods Market Efficiency (Efficiency Enhancer)• Trade barriers, Customs Procedures, Import-Heavy

• Until the Basics are Met, Nigeria Cannot Transition to a Stage 2 Economy

Mechanism of the Resource Curse The Fix

Economic Instability Tied to Market Volatility Stability Fund

Government Income Direct Treasury Allotment

Long-Term Economic Growth Future Generations Fund

Poverty Alleviation Priority Sectors Fund (Education, Health, Rural Development, Infrastructure, Environment)

Indigenous Considerations Oil-Producing Region Compensation Fund

Behavior Mechanisms (Rent-Seeking, Corruption) State, Independent Watchdogs (Access & Overlap)

Institutions Capacity Building Projects (Tech Assist and Training to Nigeria’s Oil Workers)

Beyond: Economy

• Resource Curse

• Diversify

• Services (50% Revenue)

• Nollywood

• Agriculture

• Manufacturing

• New Revenue Streams

• New Tax Schemes

• Reduced Corruption (Plugging Leaks)

• Stop Subsidies (Petrol – Fuel/Kerosene)

Beyond: Economy

• Protectionism (Mercantilism) – Makes construction very expensive

• Cement• Dangote Cement (Connected) - 60% Margin• Lafarge (French firm) = Competition• Resulted in reduced construction costs by 40%• Resulted in Increased construction

• Textiles• Until 2010, ban on imports to spur local economy• Resulted in underdeveloped retail Industry

• Automobiles• Heavy import Tariff• Imports down 2/3• Benin (Neighbor) up 3x• Resulted in flourishing black market

• The Market Will Find a Way