Nigeria Briefing Paper

Political economy nigeria has become dependent upon

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Unformatted text preview: remains a predominantly rural and agricultural society, and since the extended family is a fundamental building block of Nigerian (and, more generally, African) society. Political Economy Nigeria has become dependent upon its oil reserves for its sustenance and for feeding a system of corruption that has mired the country in relative poverty amidst the opulence and wealth of the few. Even though the country is predominantly agricultural, the export earnings received from this sector represent a small fraction of the total earnings. At independence, Nigeria was well positioned to be an economic leader on the continent. In addition to the oil reserves discovered during the 1950s, the country was self-sufficient in food, it had a relatively developed transportation infrastructure, and it produced and exported a wide variety of agricultural products, including palm oil and cocoa. When the price of oil surged in the 1970s, the Nigerian oil exports grew quickly along with the domestic economy, resulting in a rapid increase in government revenue. As a leading OPEC member, Nigerian oil income grew from $400 million in 1965 to $26 billion in 1980. Throughout the 1970s, the Nigerian government invested large sums of money in large-scale industrial Nigeria Briefing Paper Copyright © 2005 by College Board. All rights reserved. Available at apcentral.collegeboard.com. 28 development plans, paying scant attention to agricultural production and other sectors that would have further diversified and strengthened the economy. Also, the government did not sufficiently invest in maintaining and improving public services (including water, electricity, and telephones), the transportation system, education, and health care. Given the lack of political transparency due to frequent, extraconstitutional alternations of power, and due to the lack of institutional capacity to suddenly manage such economic largesse, corruption quickly emerged as a major problem in the country. When the price of oil plummeted on the world market during the 1980s, Nigeria was unprepared. Inflation grew at an alarming pace, and government surpluses quickly became deficits. A similar process also occurred in Mexico, where the mismanagement of oil revenue from the “boom” years of the 1970s resulted in endemic corruption and debt in the 1980s. While the Mexican debt was, for the most part, owed to private U.S. banks, Nigeria owed much of its money to multilateral lending agencies such as the World Bank and International Monetary Fund. In 1985, the Babangida regime planned to implement a set of severe austerity measures recommended by the IMF, some of which included the privatization of government-held firms, reductions in government subsidies of basic goods and services, and a reduction in the size of bloated government bureaucracies. Despite the economic logic of these recommendations, the social cost to most of the Nigerian people was unbearable. As a result, Babangida slowed the pace of economic reform, with his successor Abacha ending this process during the early years of his rule. The current...
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This document was uploaded on 04/02/2013.

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