When did Nigeria's economic problems begin?

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Economic situation

Nigeria is the largest economy in Africa. Oil production is the country's main industry. However, Nigeria has so far not been able to use its oil wealth to improve the standard of living for the majority of the population of nearly 200 million people. 87 million Nigerians (40% of the population) still live in absolute poverty, i.e. they have less than US $ 1 a day to spend.

In 2014, Nigeria was declared the largest economy in Africa according to the National Bureau of Statistics, overtaking South Africa as the largest economy on the African continent for the first time. However, due to the global drop in oil prices, Nigeria slipped into a severe recession in 2016 that lasted until the second quarter of 2017. In 2018 the Nigerian economy grew again by 1.9% for the first time. The growth was mainly carried by the positive development of parts of the non-oil sector (agriculture, industry, trade).

Since 2020, the Nigerian economy has weakened again due to the renewed decline in the price of crude oil and the massive economic effects of the COVID-19 pandemic. The economic growth of 2.0% forecast by the World Bank for 2020 cannot be achieved with certainty. How high the economic damage will be cannot yet be estimated. Analysts expect the Nigerian economy to plunge back into recession in 2020.

Basically, Nigeria is still faced with the urgent and as yet unsolved task of diversifying its economy and reducing its dependence on oil. The accelerated development of e-mobility worldwide increases the urgency for Nigeria to expand and strengthen other economic sectors.

Economic sectors

Petroleum and natural gas sector

The largest economic sector in Nigeria is the oil and gas industry. The oil was discovered in the Niger Delta in 1958 and has been the country's most important export good since the 1970s. Nigeria is the eleventh largest oil producer in the world and the largest oil producer in Africa. Over 60% of the total federal income and 95% of the export revenues are generated from the oil business.

For Nigeria, oil is both a blessing and a curse. The Nigerian economy is one-sidedly dependent on oil and the urgently needed diversification is not being tackled. In addition, many millions of US dollars are lost each year from the revenues of the oil business in the accounts of corrupt politicians and elites, while a large part of the population still lives in poverty.

Oil production and the role of the NNPC

Until the end of 2019, the daily output was around 2 million barrels per day. In early 2020, production declined due to the effects of the coronavirus (COVID-19) and the associated drop in the price of oil. The oil is produced in joint ventures by the Nigeria National Petroleum Corporation (NNPC). The state-owned company NNPC was founded in 1977 with the aim of regulating the country's petroleum business. In joint ventures with international oil companies such as Shell, ExxonMobil, Total, Chevron / Texaco, Elf and Agip, the NNPC produces oil in the Niger Delta. Around 90% of the oil production is carried out by these international companies. Shell is the largest international player in the Niger Delta and produces around 40% of Nigeria's oil production. The role of the NNPC is controversial as it acts as both a regulator and a large commercial company. For years, the NNPC has been accused of massive corruption because millions of US dollars disappear from oil production every year and do not benefit the states as intended.

Distribution of the proceeds from oil production

The distribution of the proceeds from oil production was clearly defined in the 1999 constitution. Accordingly, the proceeds from the oil business will initially flow to the federal government in Abuja. They then distribute these to the 36 states, depending on the respective population of the states. The oil states in the Niger Delta (Akwa Ibom, Bayelsa, Delta, Edo, Rivers, Cross-River, Imo, Abia, Anambra, Ondo) receive a bonus of at least 13% in advance according to the constitution (derivation principle).

Even if the constitution clearly regulates the distribution of the proceeds from oil production, the oil states in particular are dissatisfied with the regulation and regularly criticize the fact that they receive too little proceeds even though the oil is being extracted from their areas.

Petroleum refineries and pipelines

For the transport of crude oil, a kilometer-wide pipeline network stretches from the production areas in the Niger Delta to the four refineries in the country: Port Harcourt I and II (in the southeast), Warri (in the southwest) and Kaduna (in the north) inland. The four refineries have a capacity of 445,000 barrels per day. Since the refining capacity is very small and barely sufficient to meet local demand, the country is highly dependent on imports of refined fuels. This means that Nigeria has to import a large part of the gasoline for its own use!

To remedy this problem, an agreement was signed between the Nigerian Aliko Dangote, the richest man in Africa, and the Nigerian government to build another refinery worth fifteen billion US dollars. The country's heavy reliance on imports of gasoline and diesel will be significantly reduced when the refinery is completed in 2021. The construction is supported by the World Bank.

natural gas

In addition to oil, Nigeria also has the ninth largest natural gas reserves in the world. Nigerian natural gas is of central importance for the African and international market.

A West Africa pipeline from Nigeria to Benin, Togo and Ghana was completed in 2007 and has been supplying Benin, Togo and Ghana with Nigerian natural gas ever since.

To supply the European market, the construction of a trans-Sahara pipeline via Niger and Algeria to Europe was agreed with the Russian Gazprom Group in 2009. However, this has not yet been implemented because Gazprom believes the Sahel zone is currently too unsafe.

At the end of 2016, King Mohammed VI of Morocco and the incumbent President Muhammadu Buhari agreed to jointly build an additional pipeline through West Africa.

Other natural resources

In addition to the oil and natural gas deposits, Nigeria has extensive natural resources (e.g. tin, iron, lead and zinc ore, coal, lime, rocks and phosphate), which are of little economic importance.

Agricultural sector

Nigeria is an agricultural country, but its focus on oil and gas has led to the neglect of agriculture. Over 70% of the working population work in agriculture. The sector generated around 25% of gross domestic product (GDP) in 2019. In the south of the country mainly arable farming is practiced, in the north cattle breeding dominates.

Over 95% of agricultural production comes from small cultivated areas. Nigeria is the world's largest producer of yams and cassava and the fourth largest cocoa producer in the world.

In addition to millions of small farmers, there are large farms. In recent years, this sector has grown at an above-average rate of 10%, because the promotion of agriculture by means of financial and technical incentives (productivity increase using fertilizers and expansion of infrastructure) was the focus of government economic reforms.

Local agriculture cannot meet its food needs, so Nigeria still has to import food from abroad. Every year, for example, the country spends around 22 billion US dollars on the import of food.

Industrial, energy and telecommunications sectors

The industrial sector (steel, cement, fertilizer) accounts for around 22% of Nigeria's gross domestic product (GDP) in 2019. In addition to the processing of petroleum products, food and luxury goods, paints, cleaning agents, textiles, fuels, metals and building materials are also produced.

The main obstacle to the country's industrial development is the inadequate infrastructure supply (energy and transport). Of the total of 200,000 kilometers of road across the country, around 50% are in need of repair. The Lagos-Kano railway line (approx. 1,300 km) was modernized in 2013 with Chinese help (see also section "Transport routes" in the subject area "Overview").

While the industrial sector is exposed to major crises, the telecommunications sector has been booming for several years. Thanks to the privatization policy of the Obasanjo administration (1999-2007), Nigeria now has one of the most dynamic telecommunications markets in the world. In 2015, the telecommunications sector contributed around 9% to the country's total economic output. The mobile phone market is leading the way: in April 2017 there were already more than 150 million mobile phone connections in Nigeria.

During a visit to Lagos in September 2016, Facebook founder Mark Zuckerberg confirmed the great potential of Nigerians in the field of internet and social media. He even referred to Nigeria as "the future Silicon Valley" due to its pronounced entrepreneurial culture of innovation and development.

In the energy supply sector, economic success is still a long way off. Although the original state energy authority, the "National Electric Power Authority (NEPA)" (ironic by Nigerians "Never Expect Power Always" called), was privatized between 1999 and 2003 and is now called "Power Holding Company of Nigeria" (PHCN) (by Nigerians "Please Hold Candle Near " called), millions of households, just like the authorities, suffer from constant power outages. So far, only about 25% of the Nigerian population has any access to electricity through electricity. The constant power failures are cushioned by the use of diesel generators.

The reason for the constant failures is the low production capacity of the gas and hydropower plants. Nigeria is currently only able to generate a total of 4,000 megawatts of electricity; 70% by gas turbine plants and 30% by hydropower plants.

Nigeria is now relying on Chinese aid to expand capacity. In April 2012, SIEMENS AG also received the order to build a gas turbine plant. In addition, the government has been trying for a number of years to generate part of the electricity demand from renewable energies. At the beginning of 2014, the first photovoltaic factory in Nigeria went into operation. The municipality of Lagos is also trying to generate electricity by incinerating waste.

Economic policy

Reform programs

A number of economic reforms were initiated under the Obasanjo government (1999-2007). The goals included the fight against corruption, the improvement of the economic situation in general and the creation of better incomes for the majority of the population. Measures for this included the privatization of state-owned companies and the containment of inflation. To implement the reform programs, the government presented the "Nigeria Economic Empowerment Development Strategy (NEEDS I / 2004 - 2007)" in cooperation with the IMF in 2004.

At his inauguration, Obasanjo's successor Yar`Adua (2007-2010) promised to continue the economic reforms with the follow-up program "NEEDS II / 2007-2010". Between 2007 and 2010, the Yar`Adua government made progress in privatizing the energy sector and consolidating the banking sector. Under the leadership of Goodluck Jonathan (2010 - 2015) the reform program "Vision 20: 2020" was adopted, which proclaimed the goal of positioning Nigeria among the twenty largest economies in the world.

In March 2017 - as a reaction to the economic recession in the third quarter of 2016 to the second quarter of 2017 - President Muhammadu Buhari presented a comprehensive economic plan with the "Nigeria Economic Recovery and Growth Plan (NERGP)". The plan envisages Nigeria making significant progress towards structural economic change with a more diversified and inclusive economy by 2020. According to the plan, the reform program aims to achieve the following five outcomes in particular: stable macroeconomic environment, agricultural transformation and food security, sufficient energy supply, as well as improved transport infrastructure and industrialization with a focus on small and medium-sized enterprises.

National debt

From 2004, Nigeria used the profits from oil production to pay off its debts. As part of the Obasanjo government's economic reforms in 2005, the country negotiated debt relief for $ 18 billion out of a total of $ 30 billion with the Paris Club's international creditors. In return, the Nigerian government repaid USD 12 billion. This makes Nigeria the first African country to become debt-free to the Paris Club!

Development and development policy

Millennium Development Goals and Sustainable Development Goals

Despite the immense wealth of oil, around 70% of Nigerians live below the subsistence level and have to survive on less than one US dollar a day. In 2000, all 189 member states of the United Nations (UN) committed to achieving the eight Millennium Development Goals (MDGs) by 2015. The Nigerian government endeavored to achieve these development goals with the "National Poverty Eradication Program (NAPEP)" and the poverty reduction strategy paper "Poverty Reduction Strategy Paper (PRSP) - National Economic Empowerment Development Strategy (NEEDS)".

According to the final report from 2015, Nigeria had successes in the areas of access to basic education, gender equality in education, reducing the spread of HIV diseases, and improving the health of mother and child, but ultimately failed to achieve any of the development goals set.

On September 25, 2015, the member states of the United Nations adopted the 2030 Agenda for Sustainable Development "Sustainable Development Goals (SDGs)". The agenda contains 17 goals. such as ending poverty and hunger, improving health and education and combating climate change. These goals are to be achieved by the governments that signed the agenda by 2030. The "A National Voluntary Review" report provides information on the state of implementation of the Sustainable Development Goals (SDGs) in Nigeria.

According to the “World Poverty Clock” from 2018, Nigeria will definitely not achieve SDG goal number 1 (no poverty) by 2030 to eradicate extreme poverty. According to the report, extreme poverty has even increased in recent years, leaving India and the D.R. Congo overtaken. According to this, over 80% of the approx. 190 million Nigerians live below the poverty line - and the trend is rising.

Domestic development efforts

There are programs to combat poverty both at the state level, the "State Economic Empowerment Strategy" (SEEDS), and at the local level, the "Local Economic Empowerment and Development Strategy" (LEEDS).

Numerous non-governmental organizations in the country are active in the areas of poverty reduction and sustainable development. Women's organizations, of which "Women In Nigeria (WIN)" is the best known, have always played an important role in traditional Nigerian life. The Nigerians in the diaspora are also committed to development in their homeland.

On December 6, 2010, the Nigerian environmental and human rights activist Nnimmo Bassey was awarded the Alternative Nobel Prize. The chairman of the environmental protection organization "Friends of the Earth International", who became known with the motto "Leave the oil in the soil", was recognized for his revelations on the ecological and human disasters that was triggered by the oil production in the Niger Delta, as well as for his commitment to more environmental awareness in Nigeria. For more than 20 years, Nnimmo Bassey has been fighting for better living conditions in the Niger Delta.

Foreign development efforts

Nigeria's largest foreign donor nations and organizations include the World Bank, the European Union, the USA, Great Britain, Germany, Canada and France.

Other international organizations such as the International Monetary Fund (IMF), the United Nations Development Program (UNDP), the Organization for Economic Cooperation and Development (OECD) and the Commonwealth of Nations make an important contribution to the development of the country through their cooperation with Nigeria .

There is also intensive cooperation between Nigeria and regional organizations such as the "African Development Bank Group", the "African Union (AU)", the "New Partnership for Africa's Development" (NEPAD) "and the" Economic Community of West African States (ECOWAS) ".As part of the African Peer Review Mechanism (APRM) - a core element of the NEPAD program - Nigeria successfully completed the four-stage review process in 2008.

German development and aid organizations

The Nigerian Civil War from 1967 to 1970 sparked one of the largest humanitarian relief efforts since World War II. The UN estimates that the humanitarian aid has saved the lives of around one million children. From today's perspective, the situation at that time is the hour of birth of humanitarian aid.

Since 1999 - thanks to its democratic development during the term of office of President Obasanjo - Nigeria has once again become an official partner country of German development cooperation. In previous years, the cooperation had been discontinued due to the undemocratic government under Abacha. Since the resumption of development cooperation, there have been numerous German government cooperation projects.

The German government development cooperation programs are implemented by the German Society for International Cooperation (GIZ) and the Reconstruction Loan Corporation (KfW) in the form of technical and financial cooperation. Bilateral development cooperation focuses in particular on "Sustainable Economic Development" (SEDIN) and "Energy Policy Advice", especially in the areas of renewable energies, energy efficiency and rural electrification. In addition, GIZ supports the improvement of vocational training in the particularly labor-intensive areas of agriculture and construction.

The German political foundations are also active in the field of development cooperation in Nigeria. The Friedrich-Ebert-Stiftung (FES) works primarily in the areas of “strengthening democracy and freedom of the press” and “promoting trade unions”, while the Konrad-Adenauer-Stiftung (KAS) is particularly committed to “strengthening political participation ”, such as being involved in elections. The Heinrich Böll Foundation (HBS) works mainly in the areas of “democracy” and “good governance”, “women's rights and empowerment of women” and “crisis prevention and conflict management”.

Church organizations such as the Christian Blind Mission (CBM), AGIAMONDO, Misereor and Caritas International are primarily involved in rural development, in interreligious dialogue and in work with internally displaced persons.

In addition, the German Bundeswehr is also involved in social projects in Nigeria. The advisory group of the Bundeswehr is involved, for example, in setting up training centers for vocational training and thus promotes the training of mechatronic engineers. In the north of the country, the German Armed Forces are also building a rehabilitation center in a military hospital, in which the injured from the fighting against Boko Haram can be treated in the future.

In the media sector, Deutsche Welle is active in Nigeria. As part of the training program, Nigerian journalists are placed every year for internships at Deutsche Welle. In 2017, Deutsche Welle also held a media dialogue in Lagos, where young German and Nigerian journalists exchanged views on the topics of digitization, start-up culture and new media. In addition, Deutsche Welle has been offering a Hausa radio program - a language spoken by around half of the Nigerian population - for more than 50 years.

The Goethe-Institut in Nigeria is active in the field of culture and language and promotes cultural exchange between Germany and Nigeria. For example, the Goethe-Institut initiates film series, exhibitions, concerts, seminars and festivals.

A large number of other organizations, e.g. from the economic sector, non-governmental organizations or private associations such as the association of associations and hospital doctors, which financed the Noma Hospital in Sokoto (in northern Nigeria), among others, should also be mentioned. Individuals and organizations such as the German Leprosy and Tuberculosis Aid (DAHW), SOS Children's Villages, Plan International and Doctors Without Borders (Médecins Sans Frontières - MSF)are active in various country-specific activities.

In a partnership between the German state of Saxony-Anhalt and the Nigerian state of Osun, specialists and young professionals in the field of agriculture have been trained since 2000 under the title "Osun-Germany Agricultural Cooperation". The project aims to learn from each other by training interns and students in soil laboratories and "best practice farms" and to make agriculture attractive to young people.

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