THE IMPACT OF OIL ON NIGERIA’S

ECONOMIC POLICY FORMULATION

By

‘Biodun Adedipe, Ph.D. Chief Consultant, B. Adedipe Associates Limited, Victoria Island, Lagos, Nigeria.

234-1-2619984, 4740321, 4613794 baa@beta.linkserve.com

biodun_adedipe@yahoo.com Text of a paper presented at the conference on Nigeria: Maximizing Pro-poor Growth: Regenerating the Socio-economic Database, organized by Overseas Development Institute in collaboration with the Nigerian Economic Summit Group, 16th / 17th June 2004.

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THE IMPACT OF OIL ON NIGERIA’S ECONOMIC POLICY FORMULATION PREAMBLE Economic policy is the action-statement of the government pertaining to particular sectors of the economy, describing the intended objectives and how to achieve them. Ordinarily, the object of economic policy is to improve the welfare of the people, either in the short-run or the long run. However, there is always a trade-off in the benefits of economic policies, requiring that economic realities dictate policy priorities. Indeed, this is the essence of evidenced-based policy formulation and advocacy. The formulation of an economic policy involves the collection, arrangement, analysis, summary and interpretation of economic data. The quality of data input into policy formulation then becomes critical to evolving policies that will impact the macro-economy in the most desired sectors for maximum benefit to the economy – whether National, State or Local Government, under the federal structure Nigeria operates. Economic policies are normally formulated to solve identified and analyzed problems that stand between the economy and its goals over a defined period of time. This of course abstracts from the aberration of self-interest motivated economic policies, which are common with rogue governments and leaders. Within the context of this topic, economic policy could be looked at from the three planks to macro-economic policy, i.e. fiscal, monetary and commercial (or trade) policies. Alternatively, policy could be taken as specific economic programmes/policies that were formulated over the course of time. This paper adopts the latter, which allows for probing the connection between the formulation of these policies and the state of the world oil market. The focus therefore, is not the correctness or internal consistency of the policies; rather, it is probing how developments in the crude oil market could have triggered policy formulation in response or anticipation of the possible outcome of oil projections. BACKGROUND By the time Nigeria became politically independent in October 1960, agriculture was the dominant sector of the economy, contributing about 70% of the Gross Domestic Product (GDP), employing about the same percentage of the working population, and accounting for about 90% of foreign earnings and Federal Government revenue. The early period of post-independence up until mid-1970s saw a rapid growth of industrial capacity and output, as the contribution of the manufacturing sector to GDP rose from 4.8% to 8.2%. This pattern changed when oil suddenly became of strategic importance to the world economy through its supply-price nexus, as shown in Table 1.

Table 1 Nigeria: Sectoral Contribution to Gross Domestic Product (GDP)

Sector 1960 1970 1980 1990 2000 2002 Agriculture 64.1% 47.6% 30.8% 39.0% 35.7% 28.35% Manufacturing 4.8% 8.2% 8.1% 8.2% 3.4% 5.5% Crude Petroleum 0.3% 7.1% 22.0% 12.8% 47.5% 40.6% Others 30.8% 37.1% 39.1% 40.0% 13.4% 25.55% Source: Central Bank of Nigeria, Changing Structure of the Nigerian Economy (2000) and Annual

Report & Statement of Accounts (2002). Crude oil was first discovered in commercial quantities in Nigeria in 1956, while actual production started in 1958. It became the dominant resource in the mid-1970s. On-shore oil exploration accounts

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for about 65% of total production and it is found mainly in the swampy areas of the Niger Delta, while the remaining 35% represents offshore production and involves drilling for oil in the deep waters of the continental shelf. Nigeria has proven reserves of about 32 billion barrels of predominantly low sulphur light crude, which at current rate of exploitation could last another 38 years. The intention is to expand the reserves to 40 billion barrels and production capacity to 4 million barrels per day (mbd). The massive increase in oil revenue as an aftermath of the Middle-East war of 1973 created unprecedented, unexpected and unplanned wealth for Nigeria. Then began the dramatic shift of policies from a holistic approach to benchmarking them against the state of the oil sector. Now, in order to make the business environment conducive for new investments, the government began investing the newfound wealth in socio-economic infrastructure across the country, especially in the urban areas. As well, the services sector grew. The relative attractiveness of the urban centres made many able-bodied Nigerians to migrate from the hinterland, abandoning their farmlands for the cities and hoping to partake in the growing and prosperous (oil-driven) urban economy. This created social problems of congestion, pollution, unemployment and crimes. The national currency, Naira, strengthened as foreign exchange inflows outweighed outflows, and foreign reserves were built up. Up until 1985, the Naira was stronger than the US Dollar, as shown in Appendix III. This encouraged import-oriented consumption habit that soon turned Nigeria into a perennial net importer, which became a major problem when oil earnings decreased with lower international oil prices. External reserves collapsed, fiscal deficits mounted and external borrowing ensued with the “jumbo loans” taken in 1979. Most of Nigeria’s macro-economic indices became unstable and worrisome. Several policy initiatives to address the defective structure and inefficiencies were taken, but poorly implemented and sometimes contradictory (with cases of self-interest motivated reversals). These created new distortions and further weakened the inchoate institutions for policy implementation. The average Nigerian therefore, became so sensitive to petroleum oil and all the variables surrounding it, to the extent that any development in the international oil markets invites an almost instantaneous reaction from domestic economic agents and policy makers alike. This was aptly captured in the 2004 budget statement made by the current Nigerian Federal Minister of Finance (Dr./Mrs. Ngozi Okonjo-Iweala), in which she stated, inter alia:

“…We have suffered a great deal in this country from our inability or unwillingness to manage our oil resources properly. When oil prices are high like now, a great deal of optimism sets in and we tend to spend all that we earn to meet our admittedly tremendous needs…”

In essence, policy formulation appears to respond to the oil situation or attempt to take advantage of it. This usually takes the form of “expand expenditure when oil earnings increase, maintain the position when there is a dip in earnings and seek a desperate way out when there is crisis.” Chart 1 gives a vivid picture of this over the 1990s, when government expenditure was in deficit (except during 1995 to 1997) without regard to total revenue changes but optimism that future earnings will bridge the gap! Another dimension to the oil issue is to “look for opportunities in the oil sector to enhance Government revenue”. Invariably, everything points in the direction of oil.

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Chart 1

NIGERIA:FISCAL SURPLUS/(DEFICIT) AS % OF GDP

-16%

-11%

-6%

-1%1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

This paper attempts to highlight the areas of impact of oil on economic policy formulation in Nigeria, as well as the implications and indications of the possible way forward. The two major planks of the paper will be the policy trend prior to the advent of oil, the pattern since its evolution and the policy responses to its adverse effects on the macro-economy. STRUCTURE OF THE NATIONAL ECONOMY Several works have been done on the structure of the Nigerian economy, each having gaps of limited sectoral coverage (some ignored social services like education and health), scope (some dealt with only the effects of reforms on the structure) or the data relied upon for the analyses were dated. Most of them, especially the recent ones, were focused more on an assessment of the impact of reform programmes on macro-economic stability. The recent work by the Central Bank of Nigeria (CBN, 2000) puts most of the structural issues in perspective, with supporting data as evidence. The highlights of the structure of the Nigerian economy and changes therein are as follows: Nigeria is the largest geographical unit in West Africa, with land area of 923,768 square

kilometers and estimated population of 122 million, 47% of whom are below 15 years of age and another 3% aged 65 years and above. These give a dependency ratio of 1:1 as against 1:3 or less in the advanced economies.

Agriculture dominates the Gross Domestic Product (GDP), but its contribution has reduced gradually over the years since the attainment of political independence in 1960. This ratio dropped from 64.1% in 1960 to 28.35% in 2002, as detailed earlier in Table 1.

Manufacturing improved in the early post-independence years, but its contribution dipped in the 1990’s, from 4.8% in 1960 to 5.5% in 2002.

Crude petroleum became prominent, contributing to GDP 0.3% in 1960 and increased to 40.6% in 2002.

Dualistic nature in which there is mix of formal (organized) and informal (curb markets) systems. The latter is a huge sector that is difficult to measure, as it owes its existence to institutional weaknesses, policy inconsistencies and policy implementation deficiencies. Estimates often indicate it to represent between 40% and 45% of economic activities in Nigeria.

Increasing inequalities in inter-personal incomes and a widening gap between urban and rural incomes, especially since 1986.

Weak social and institutional structures in education and health. Enrolment figures show improved distribution in favour of secondary and tertiary education, but there are concerns about the quality of education regarding the dynamics of the work environment and its requirements. See Table 2.

A vibrant financial system that has had cycles of stability/prosperity and distress, the latter pronounced in the early to mid-1990’s. The improved enforcement of regulation and increasing

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commitment to corporate governance principles by the operators assure soundness of the financial system going forward.

External trade is dominated by oil, which accounted for 32.9% of the total in 1970 and 64.63% in 2002. See the trend in Table 3.

Raw materials and consumption goods in that order dominate imports. The shift between 1970 and 1996 show that these two gained over capital goods, further entrenching the Nigerian economy as import dependent and reliant on crude petroleum as the major export item.

Table 2 Nigeria: Educational Enrolment

Level 1970 1990 1996 1998

Primary 90.4% 80.8% 76.5% 76.9%

Secondary 9.2% 17.2% 20.8% 19.8%

Tertiary 0.4% 1.9% 2.7% 3.3%

Source: Central Bank of Nigeria, Changing Structure of the Nigerian Economy (2000).

Table 3 Nigeria: Visible Trade

Sector 1970 1996 1998 2000 2002

Oil 32.9% 77.3% 67.3% 72.9% 64.6%

Non-Oil 67.1% 22.7% 32.7% 27.1% 35.4%

Source: Central Bank of Nigeria, Changing Structure of the Nigerian Economy (2000) and

Annual Report & Statement of Accounts (2002). The above structural issues can be summarized as follows with respect to the oil sector in the last decade and half. It accounts for: Over 95% of export earnings (the lowest during the 1990’s was 95.47% in 1998); About 40% of GDP; About 70% of Federal Government revenue; and Above 90% of new investments

The specifics on these four items in 2002 are contained in Table 4. Yet, there are indications that the oil sector provides direct employment for less than 10% of Nigerian working population, where the upstream and gas exploration activities are largely hi-tech, while the downstream that opens more to low skill workers is a troubled sub-sector.

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Table 4 Nigeria: Oil and the Structure of the Economy (2002)

Sector Export Earnings GDP FG Revenue Investments

Oil 94.95% 40.58% 71.07% 93.33%

Non-Oil 5.05% 59.42% 28.93% 6.67%

Source: Central Bank of Nigeria, Annual Report & Statement of Accounts (2002).

STATE OF THE OIL SECTOR The Nigerian oil sector can be categorized into three main sub-sectors, namely, upstream, downstream and gas. The most problematic over the years has been the downstream sector, which is the distribution arm and connection with final consumers of refined petroleum products in the domestic economy. The incessant crisis in supply of products culminated in the decision by Government in 2003 to deregulate the downstream sub-sector. However, the manner of its implementation has been controversial because it ignores the economic realities in Nigeria. Oil production by the joint venture (JV) companies accounts for about 95% of Nigeria’s crude oil production. Shell, which operates the largest joint venture in Nigeria, with 55% Government interest (through the Nigerian National Petroleum Corporation, NNPC), produces about 50% of Nigeria’s crude oil. Exxon Mobil, Chevron Texaco, ENI/Agip and TotalfinaElf operate the other JV’s, in which the NNPC has 60% stake. The over-dependence on oil has created vulnerability to the vagaries of the international market, as observed in the preceding section that show the contribution of oil to some macro-economic variables. In particular, the place of oil in the psyche of the average Nigerian has become more profound since the “imperfect” deregulation of the downstream segment of the Nigerian oil industry in 2003. The contradiction is more glaring now with the recent rise in crude oil prices at the global markets, which meant more external earnings for Nigeria, but also increased the expense burden on imported refined petroleum products! It is such contradictions (perhaps aberrations) that make the Nigerian economy appear strange at times, as policies seem to ignore what appears obvious to do. As such, policies designed to address the deficiencies and defects in the structure end up being poorly articulated and/or implemented because of regional, political or rent-seeking selfish interests. Obviously, it is the same rent-seekers that continually sabotage the reinvigoration of the domestic refineries, making Nigeria to depend on importation of refined products to meet the domestic need. At present, Nigeria has four refineries, with a combined installed refining capacity of 445,000 barrels per day (bpd). These four refineries are: The first Port Harcourt Refinery was commissioned in 1965 with an installed capacity of 35,000

bpd and later expanded to 60,000 bpd. The Warri Refinery was commissioned in 1978 with an installed refining capacity 100,000 bpd,

and upgraded to 125,000 bpd in 1986. The Kaduna Refinery was commissioned in 1980 with an installed refining capacity of 100,000

bpd, and upgraded to 110,000 bpd in 1986. The second Port Harcourt Refinery was commissioned in1989 with 150,000 bpd processing

capacity, and designed to fulfill the dual role of supplying the domestic market and exporting its surplus.

The combined capacities of these refineries exceed the domestic consumption of refined products, chief of which is premium motor spirit (gasoline), whose demand is estimated at 33 million litres

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daily. The refineries are however, operating far below their installed capacities, as they were more or less abandoned during the military era, skipping the routine and mandatory turnaround maintenance that made products importation inevitable. Importation notwithstanding, there have been persistent product shortages that gave strength to the argument for deregulation of the downstream oil sub-sector in Nigeria. Nigeria’s proven gas reserves are estimated at over 170 trillion standard cubic feet (scf), which is substantially larger in value than oil. Apart from this, there are several other energy sources (renewable and non-renewable) that have become key to economic policy formulation. Some gas utilization projects have been initiated in response to Government’s decision and insistence on gas flare-out in 2008. The monetization of oil revenue has been a major factor in liquidity management in Nigeria. Measuring liquidity as the narrow and broad money definitions by the CBN, the early 1990s saw increases that were dampened by 1995 up until the civilian administration came on board in 1999. The new Government maintained disciplined fiscal operations for about one year and thereafter, the floodgates were opened. Since then, the CBN has been battling to keep liquidity in check, in order to ensure that it does not create adverse effects on the three key macroeconomic prices (i.e., interest rate, exchange rate and inflation rate). The greatest challenge is when Nigeria generates more revenue from crude oil sales than it budgeted, like now. Such excesses have always been monetized, creating market distortions and inflationary pressure. The same argument goes for deficit fiscal operations in comparison to the GDP. The pattern of this ratio (as shown in Chat 1) indicates the optimism that accompanies increase in oil revenue and makes Government to engage in frivolous spending or unnecessary projects. Deficit spending invariably makes Government resort to borrowing from the Central Bank through the instrument of Ways and Means Advances, which later convert into short-term debt instruments that are quite expensive to service at market rates. This year alone, N185.8 billion or 14.3% of proposed total expenditure! In general terms, the oil sector of the Nigerian economy in the 1990ies faced (and still faces some of) the following problems:

Relatively low level of investments in the sector, compared to its potentials. The Federal Government’s delays in the payment of cash calls for its JV operations in the

upstream sub-sector, focusing more on maintenance rather than growth. High technical cost of production, due to low level of domestic technological development. Inappropriate pricing of petroleum products for domestic consumption. Restrictions imposed by crises and production disruptions caused by host communities. Environmental degradation due to the flaring of associated gas.

At this point, there is sufficient ground to examine how economic policy formulation has been impacted (perhaps induced) by petroleum oil in Nigeria. As much as possible, major economic policies since Nigeria gained political independence would be examined vis-à-vis the state of the oil sector. This should provide adequate basis for making a few specific recommendations on how to reduce the dependency. OIL AND POLICIES IN THE 1960s The nationalistic fervour that followed the attainment of independence in 1960 made Nigeria to evolve a seven-year first National Development Plan (1962-1968). The focus of that plan was to industrialize the economy quickly through the import substitution strategy. The implementation of this plan was chequered because of the political instability that eventually led to the civil war of 1967 to 1970. As such, most of the economic policies of the 1960s were targeted at prosecuting the civil war successfully. Recall that agriculture was at that time the mainstay of the Nigerian economy. Oil

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accounted for only 0.3% of the GDP and was quite insignificant in foreign earnings. This scenario was to change massively in the 1970s. OIL AND POLICIES IN THE 1970s The disruptions to economic activities by the civil war gave way to broad economic policies for reconciliation and reconstruction. This meant huge investments in infrastructure by the Federal Military Government. The command structure of the military created a strong centre and this has remained a major determinant of the nature of economic policies. As Nigeria gradually settled into normal economic activities, the first major economic policy of the 1970s was introduced. This was the Udoji Commission’s comprehensive review and evaluation of jobs in the public service, which led to new pay and benefits structure, representing the first policy impact of the oil wealth. This changed the psyche and consumption habit of the average Nigerian, considered prosperous and able to afford most of the god things of life. This was followed by the Indigenization Decree in 1974 and 1977, the latter more comprehensive and far-reaching. The policy sought to put the commanding heights of the Nigerian economy in the hands of Nigerians within the context of nationalism. Several foreign investors divested from Nigeria, not by choice, but because of the policy that made it impossible for them to own certain ventures 100%, or not more than 60% or 40% as the case may be. It was in the process of implementing this policy that oil became a major revenue earner and the policy fundamentals changed. As oil revenue ballooned in 1973/1974, the Nigerian Government embarked on several ambitious and expensive projects, having little or no economic value. There was no concrete economic programme that would do any of the two important growth triggers in Nigeria: 1. Unleash the entrepreneurial energy of the typical resilient Nigerian; 2. Small and Medium Scale Enterprises (SMEs) in the non-oil sector. By 1978, there was a downturn in oil earnings as crude oil prices dipped in the international markets and the first major economic policy, labeled Belt Tightening, was introduced by Obasanjo’s military government. Following closely in 1979, Nigeria resorted to the international capital markets to raise external loans (commonly referred to as the “jumbo loans”) to fund development projects that were hard to place. OIL AND POLICIES IN THE 1980s There were three major economic policies in the 1980s, namely: 1. The recommendations of the Onosode Commission on pay structure in Government

parastatals were adopted in 1981 and further increase salaries and benefits in several public institutions whose responsibilities were considered unique and more complex than the ordinary civil service. Again, a policy in pursuit of “capturing” legally the oil wealth.

2. The Economic Stabilization Act of 1982, which was the response of the Shagari’s civilian administration to dwindling oil earnings and major external sector imbalances.

3. The Structural Adjustment Programme (1986-1988) by Babangida’s military administration, with the active support of the World Bank. This was Nigeria’s first bold step on wide-ranging reforms in almost all the major sectors of the economy. It recorded some significant gains for the first two years, but suffered a setback when certain aspects of it were reversed and inconsistencies (internal and sectoral) became prevalent.

4. The experimentation with Perspective Planning, in which three-year rolling plans were designed to tide the economy into long-term planning. Again this was discarded almost as soon as it was initiated.

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Each of these policies was reactive to developments in the international oil markets, which was depressed for much of that period and had only occasional spikes. OIL AND POLICIES IN THE 1990s This decade might be described as a period of reversals and lost opportunities. The series of reforms and reversals of the late 1980s took its toll on the real sector of the economy and the effects were transmitted to he financial system. This was also the period Nigeria experienced some windfall gains from the strong oil prices as a result of the Coalition Forces/Iraqi war of 1990. The experimentation with deregulation and liberalization was truncated in 1994 with the advent of the military administration led by late Abacha. The Federal Government re-regulated the economy, by capping exchange and interest rates. It was an obvious reaction to the high nominal interest rates that reached 78% in commercial banks and 180% p.a. in the non-bank financial services sector. These rates were themselves driven by the high rate of inflation – at 44.8% in 1992 and 57.2% in 1993. There was no clear economic strategy for the rest of the decade, and monetary policy was totally ineffective to check expansionary fiscal operations. OIL AND POLICIES IN THE 2000s Up until June 2003, there was no clear economic direction. Weak institutions and legal environment stymied the benefits that would have accrued from oil earnings, which had started to firm up. The entire scenario has changed in 2004, with the formal announcement and presentation of the Federal Government’s economic agenda, tagged the National Economic Empowerment and Development Strategy (NEEDS). NEEDS is a medium-term strategy that seeks to implement series of reforms that would lay a solid foundation for a diversified Nigerian economy by 2007. It sets specific goals in major growth indices as wealth creation, employment generation, institutional reforms and social charter. OIL AND THE EXTERNAL SECTOR POLICIES The over-dependence on petroleum oil is more vivid in the external sector trends. The penchant for imports reflects in the current account balances, whose oil component expanded by an annual average of 57.7% during 1971 to 1980, 43% in 1981-1990 and 40.3% in 1991-1998. The current account balance grew with the oil revenue trend, reflecting import expansion as oil earnings grew. In 1982, reflecting the crash in oil earnings and the tight rein on international trade through the Stabilization Act implementation, current account balances dropped by 22.7% in 1982 and further by 14.6% in 1983. The advent of the Buhari military administration enforced fiscal discipline in the public sector, but soon gave way to the Babangida military government whose softening of trade policies resulted in current account balance growth by 22.8%. The details are in Appendix I. The external debt scenario was not different. Nigeria’s debt capacity expanded with oil earnings and its future prospects. Credits of all kinds were extended to Nigerian Governments and commercial enterprises, some under Government guarantee. These culminated in burgeoning debt burden that was sustained by a combination of factors:

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High propensity to consume imports – Nigeria is reputed to be a major market for the products of certain global companies.

Strong cash flow from crude oil sale that boosted confidence of creditors in Nigeria’s capacity to service credit facilities and repay.

Fiscal indiscipline coupled with corruption, resulting in diversion and squandering of most of the funds borrowed.

Capitalization of interest payments that were past due. Debt rescheduling that multiplies the debt burden eventually.

The efforts at repayment and debt servicing have been insufficient to bring a drop in the debt stock, which ranged from $27.09 billion to $33.36 billion during 1991 to 2003. This observation made President Obasanjo to remark recently that Nigeria’s commitment to debt obligations over the years has not brought about a reduction in the debt stock and its cost implications. However, this has to do more with lack of external support in debt reduction, than with the punitive capitalization of unfulfilled interest obligations. OIL AND FISCAL FEDERALISM Federalism has been defined as the amalgam of sub-units of a national sovereign government that operate independently within a constitutionally defined sphere of functional competence (Oates, 1972). Fiscal federalism then represents the division of taxation and expenditure functions among the tiers of government in a federation and sustained by fiscal decentralization of the federating units. Thus, the units of the federation can set priorities depending on the local needs and challenges, which naturally change from time to time. Nigeria adopted the federation system in October 1954, and maintains it till date. While the country retained its federation description, it operated more as a unitary system during the military era, following the military command and hierarchy structure. The aberration of military rule brought several distortions in the fiscal federalism that Nigeria is supposed to operate. By virtue of its strength, the central government allocated more resources to itself at the expense of the federating units, as shown in Table 5. Such lopsided allocations have triggered agitations by the areas from which those resources derive. Agitations for ‘resource control’ have led to a substantial reduction in the allocation to the central government. These agitations also informed the shifts in the allocations of the Value Added Tax (VAT) proceeds, as shown in Table 6. At present, the Federal Government receives 47%, the 36 State Governments and the Federal Capital Territory (FCT) receive 24.2% and Local Governments receive 18.4% (based on the allocations for March 2004) from the Federation Account, plus respective receipts of 15%, 50% and 35% from the Value Added Tax account. This is a major shift from the position in the 1960s and 1970ies, when the Federal Government received between 60% and 70% of the total Federally Collectible Revenue (FCR).

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Table 5 NIGERIA: STATUTORY REVENUE ALLOCATION FORMULA

1960 1963-67 1980 1982 1987 1990 1993 1995-

98 Federal Government 70.0% 65.0% 55.0% 55.0% 55.0% 50.0% 48.5% 48.5%State Governments 30.0% 35.0% 34.5% 34.5% 32.5% 30.0% 24.0% 24.0%Local Governments 0.0% 0.0% 8.0% 10.0% 10.0% 20.0% 20.0% 20.0%Others_1/ 0.0% 0.0% 2.5% 0.5% 2.5% 0.0% 7.5% 7.5% Source: Approved Budgets of the Government of the Federal Republic of Nigeria Note: _1/ Include Special Funds, Federal Capital Territory, Derivation, Development of Minerals, General Ecology and Statutory Stabilization.

Table 6 NIGERIA: ALLOCATION OF VAT REVENUE

1994 1995 1996 1997 1998 19992004 Federal Government 20% 50% 35% 35% 25% 15% 15% State Governments 50% 30% 40% 40% 45% 50% 50% Local Governments 30% 20% 25% 25% 30% 35% 35% Source: Approved Budgets of the Government of the Federal Republic of Nigeria

Revenue derivation became a big policy issue in the 1990ies, and currently there is an allocation of 13% of the FCR to the oil producing areas. Although this is not being implemented to the letter, the buoyancy implications for the nine States concerned (commonly referred to as the Niger Delta region) has raised accountability questions for their State Governors. For example, in March 2004, the Niger Delta States received additional N14.45 billion from the derivation fund and N5.55 billion from the Derivation Offshore (i.e., 10.8% of total of N185.183 billion), along with their normal share from the allocation of N44.12 billion to all the 36 States and FCT. There are even agitations for higher allocations for the Derivation Fund. From Tables 5 and 6, it is observed that the allocation formula changed over time as oil became prominent in the revenue matrix and agitations for more equitable distribution of oil wealth gained popularity. Related to this is the implication of fiscal federalism for central banking. The independence of State and Local Governments in their fiscal operations allows them to raise funds from both the money and capital markets, in order to bridge funding gaps that arise when they experience a dip in their revenue. Recourse to the banking system for loans has compromised the soundness of the financial system. Many of the loans could become deficient and unrecoverable, as the assets pledged (in a few cases) are as ridiculous as Government Houses, which have no secondary market! The Central Bank of Nigeria in its policy response enjoined bankers to be professional in their credit judgments and make provision of 50% for any public sector loan, in the assumption that such loans are doubtful of collection ab initio, and 100% for those that are non-performing. This is a subtle way of directing the banks to avoid (or minimize) lending to State and Local Governments in order to encourage fiscal discipline.

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OIL AND THE MACRO-ECONOMIC PRICES The trends in interest, exchange and inflation rates in Nigeria reflect the monetization of oil revenue, which causes increase in money supply. This is exacerbated by the cash orientation of Nigerians and the penchant for carrying (and making payments with) lots of cash. As such, movements in these rates have been erratic at times, but observed (not statistically proved though) to correlate with oil revenue pattern. Charts 2 to 4 show the trends in exchange, bank lending and inflation rates since 1991, based on official statistics up to 2002 and 2003 data for obtained from primary market sources. The first half of the 1990s was the military era when the management of oil revenue and the macro-economy was haphazard, translating into macro-economic instability. The exchange value of the Nigerian currency (Naira) depreciated significantly from US$0.1010/N in 1991 to $0.0123/N in 1995, by which time the Government had adopted what it termed “guided deregulation”. This brought artificial stability that subsisted up until the democratic dispensation that commenced in May 1999. Since then, the domestic currency has depreciated by 29%, exchanging now at $0.0076/N.

Chart 2

NIGERIA: EXCHANGE RATE ($/N)

0.0000

0.0200

0.0400

0.0600

0.0800

0.1000

0.1200

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Bank lending rates have been persistently above 20% p.a. Indeed, spot checks in the money market in 1993 revealed the highest bank lending rate in the history of Nigerian banking at 78% p.a., at a time the non-bank financial institutions were doing up to 15% flat (i.e., 180% p.a.)! This was the period of the second experiment of Nigeria with the deregulation of interest rates. While the banking system still lends above 20% and up to about 32% (effective), the near collapse of the non-bank sub-sector of the financial system in the 1990s has tempered the rates available in that segment. Interest rates remain sticky downwards because the cost of funds and other determinants are adverse.

Chart 3

NIGERIA: BANK LENDING RATES (p.a.)

20%

25%

30%

35%

40%

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

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Commodity prices in Nigeria are generally more sensitive to exchange rate movements than they are to changes in interest rates. The trends in inflation rate, as shown in Chart 4, correlate with the following: Increase in oil revenue and its immediate monetization. The excess is rarely devoted to building

up reserves or committed to specific and strategic projects. Growth of money supply. Movements in exchange rates. Increases in prices of refined petroleum products.

Chart 4

NIGERIA: INFLATION RATE

0%10%20%30%40%50%60%70%80%

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

The major challenge that petroleum oil has posed to monetary policy in Nigeria is with respect to liquidity management. The penchant of Nigerian Governments for monetization of oil receipts tasked the management of the apex bank, torn between administrative and market-based instruments. In the years of economic buoyancy, triggered by robust oil earnings, the Central Bank relied more on administrative tools that included: Fixing of interest rates; Reserve requirements that had little relevance to liquidity management because they remained

fixed over long intervals; Credit allocation on sectoral basis and designation of preferred sectors; Foreign exchange allocation through import licensing; and Dual exchange rate mechanism.

These policies created distortions as well as strange business opportunities that rent seekers found easy to exploit. The collapse of crude prices in the early 1980’s started a process of rethink of monetary policy in Nigeria, in line with the reforms that were launched in 1986. Oil and the Exchange Rate There is virtually no exchange rate system that Nigeria has not tried in order to find the “realistic” exchange value for the Naira. The difficulty is simply that of Nigeria being a net importer, whose external earnings derive largely from one product – crude petroleum oil. The different exchange rate regimes in Nigeria can be classified into different epochs relating to the vagaries of the international oil market.

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The Post Independence Era (1960-1971) The Nigerian Pound was pegged at par to the British Pound Sterling (GBP), using administrative measures to sustain the parity. The devaluation of the GBP in 1967 made Nigeria to adopt the US Dollar, which was deemed better able to support Nigeria’s import substitution industries that depended heavily on imported inputs. Throughout this period, the Nigerian Pound was over valued, inhibiting optimal growth in agriculture and production for export. This was however, in consonance with other fundamentals such that fiscal operations were in surplus for most of these years, inflation rate averaged about 5% and there was no fear over the economy. The Oil Boom Era (1972-1986) During this period, the exchange rate mirrored movements in oil prices and the Naira remained over valued as a result of the huge increase in foreign exchange earnings. The currency was anchored to the GBP until 1972 when the GBP was floated, and then pegged to the US Dollar. However, in 1978, the Naira was anchored on a basket of 12 currencies of Nigeria’s major trading partners. This was again jettisoned in 1985 and the Naira reverted to quotation against the US Dollar. The Post-SAP Era (From 1986) This marked the period of economic liberalization and market competitiveness. The Naira was subjected to the managed float system, in the continuing effort to restructure the economy away from oil dependency. The policy of deregulation of the foreign exchange market in September 1986 was aimed at establishing the true exchange value of the Naira, with a view to boosting non-oil exports. This was hoped to reduce the dependence on crude petroleum oil. Thus, from N0.8938/US$ at end-1985, the exchange rate weakened to N2.0206/$ at end-1986. This deliberate policy of weakening the Naira in expectation of strengthening non-oil exports was pushed further in March 1992, with a devaluation of 44.4% that made the rate to close that year at N17.2984/$. At every turn that the Naira was devalued, the non-oil export argument has been the reference but other supporting (export promotion) policies were not implemented properly. Appendix III details the trend of exchange rates from 1970 to 2003. The dual exchange rate system was introduced in 1986, where the official foreign exchange market was in two tiers for transactions received by the CBN before floatation and for prevailing transactions in the economy. This has since been discontinued to make for more efficient utilization of resources, eliminate rent-seeking activities and enhance competitiveness. Devaluation of the Naira has however, not produced the desired outcome because Nigeria’s export earnings are dominated by oil, whose price is determined internationally and thus vitiate the devaluation outcome-price elasticity. Oil and Interest Rates Bank lending rates remained single digit up until 1981, which marked the end of the self-declared oil prosperity. For the period between 1970 and 1981, the rates ranged between 6% and 7.75% p.a. With the exception of 1985, the rate has been double digit since then. See Appendix IV. In the attempt to further liberalize the economy, interest rates were partially deregulated in April 1987 and subsequently fully deregulated in August of the same year. Between then and now, Nigeria has twice pegged lending rates at 21% p.a. (in 1991/92 and 1994) but failed to achieve the objective of macroeconomic stability. At the moment, the rates are fully deregulated, with the Central Bank relying more on the reserve requirements of minimum rediscount rate (MRR), minimum liquidity ratio and cash reserve ratio for banks as well as moral suasion. Another important tool is the Open Market Operation (OMO) to complement the MRR, in which CBN uses intermediate targets such as monetary aggregates of M1 and M2 in order to impact the

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target variables. The apex bank does not have a direct influence on the intermediate target; it needs another variable (termed operating target) such as the monetary base, non-borrowing reserves, treasury bills rate and high-powered money. This is illustrated schematically below: CBN’s → Operating Target → Intermediate Target → Goal Tools i.e. increase in treasury bill

rate which is indexed to the MRR

i.e. decrease in money supply defined by M2

i.e. to check liquidity in the system

The intermediate target of M1 or M2 is preferred by the CBN because of their real impact on nominal GDP, which is easier to trace than that of interest rates. The monetization of oil receipts during the oil boom (1970ies) increased the demand for money for speculative purposes, pushed up the prices of stocks and kept interest rates down. Commodity prices adjusted upwards and yet, there was no real economic growth. In recent years, the CBN has become more pro-active in mopping up excess liquidity in the system; through the OMO and monetary policy generally became more restrictive. OIL AND EMPLOYMENT/EDUCATION POLICY The Nigerian labour market has been characterized by high rate of unemployment, low wage and poor working conditions. This unwholesome situation evolved after the oil boom of the 1970s and remained so till date. Prior to the oil boom, the Nigerian economy was largely agrarian and about 70% of the working population was engaged in agricultural activities in the rural areas. Wage rates were also comparable to international standards and the average Nigerian worker could afford decent living. In the 1960ies, the emphasis of employment policies was that of shifting labour from the agricultural sector to the manufacturing sector. This appeared to be the natural path of economic growth and development, following the experienced of the developed countries. However, the Nigerian peculiarities of land tenure system, tenancy and the very rudimentary processes of farming made it extremely difficult to deploy substantially advance technology in the sector. Moreover, at that time economic policies concentrated more on the development of the manufacturing sector, under the much touted “import-substitution strategy”. Rather, labour moved from the agricultural sector to the services sector, with little productivity gains. Both agriculture and manufacturing lost out. The oil boom started the rural-urban drift of the population, depleting the rural population and adversely affecting agricultural output. Rising revenue profile of Governments created the illusion that job creation is a primary function of the public sector. The civil service became bloated, jobs created without tangible value being added to government services but just as long as the bill was affordable! There were series of wage reviews – the Morgan Commission in 1963, Udoji Commission in 1975 and several others seeking to reconcile the public and private sector salary structure or carry out internal realignment. As oil fortunes dwindled, the reality of unaffordable head count and a private sector that lacked capacity to absorb all the new entrants into the labour market dawned on the policy makers. The private sector had been emasculated by unfriendly (to business) Government policies and crowded out of the loans market by the public sector. It was only in the late 1990ies that the need for partnership became popular and some attention began to be paid to self-employment. As such, unemployment grew gradually, especially in the urban areas. Depreciating Naira and inflationary pressures made real incomes decline and triggered a vicious cycle of poverty. The period of easy money (through monetization of oil revenue) was beneficial to the educational system. Nigerian Governments embarked on ambitious expansion programmes in secondary and tertiary education. Quality research could be conducted, as adequate funding support was available. Education was strictly treated as a social service, which should be provided at little or no cost to the

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beneficiaries as a matter of right. This mindset precipitated the crisis of 1978, when the Federal Government introduced tuition fees in its universities. The decrease in oil revenue affected funding of tertiary education, necessitating a policy shift that has been difficult for the operators of the system to come to terms with. Attempts to raise fees are being resisted, while the private sector funding support that could lessen the burden is not forthcoming. In particular, the curriculum design of many of the institutions is dated and not so relevant to the needs of prospective employers. Most of the products therefore, end up in the labour market and have difficulty securing jobs because they need further training to be able to fit properly into the corporate world. The weak economy itself choked out several business enterprises and curtailed employment opportunities. Staff retrenchment became pervasive, starting first in the private sector and later the public sector. As noted in an earlier section, the unemployment was more problematic in the urban areas, as shown in the following chart. One major factor that has been identified in job creation in Nigeria is power supply. Many business organizations, especially the Small and Medium Scale Enterprises (SME’s) that are reputed as growth engines, are disadvantaged because they have to invest in providing infrastructure (chief of which is power generation) for their operations. The entrepreneurial spirit in Nigerians is sufficient to drive the Government’s policy on job creation if power improves to support a vibrant SME sector.

Chart 5

URBAN AND RURAL UNEMPLOYMENT IN NIGERIA

0

2

4

6

8

10

12

YEAR19

7619

8019

8419

8519

8619

8719

8819

8919

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

00

UN

EMPL

OYM

ENT

URBAN RURAL NATIONAL

After the oil boom, economic realities changed policy focus. There was the need to improve all the sectors simultaneously, but dwindling government revenue made the goal of economic diversification difficult. Nigeria is yet to find the rhythm of enhanced agricultural and manufacturing output, in spite of tax and infrastructure incentives. DEREGULATION OF THE DOWNSTREAM OIL SECTOR This paper will be incomplete without some remarks on the touchy issue of the deregulation of the downstream sector of the Nigerian petroleum industry. Its design and implementation have invited labour strikes, costing the economy losses of several man-hours and growth opportunities. What then are the arguments involved? Deregulation, as a concept, seeks freer interplay of economic agents that enables market forces dictate prices. Whenever market prices are at unacceptable levels, stakeholders (perhaps the most responsible of them all) can only intervene through the market variables of demand

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and supply, and not administratively. Deregulation is thus expected to remove the bottlenecks in product distribution and lead to more efficient utilization of resources. At the heart of the deregulation of the downstream sub-sector is the controversy over appropriate pricing of petroleum products in Nigeria. The extremes have been whether the prices should reflect their full cost or contain subsidies, especially against obvious abuses and sharp practices in product sourcing and distribution. Conceptually, the pricing of petroleum products can be done in the following ways: 1. Market-Based Approach, in which prices are determined by the forces of demand and supply,

within the constraints of existing market imperfections. It dwells on the principle of opportunity cost, so as to eliminate arbitrage opportunities.

2. Exhaustible Resource Theory, which originated from the intellectual work of Hotelling (1931). It recognizes that oil and other exhaustible resources are only temporarily available, and as such its price should be treated as user cost or depletion charge, which compensates future generations for a denial of access to the product.

3. Capital Replacement Approach (CRA) is based on the principle of cost recovery, covering production and refining. At the minimum, the price is expected to be consistent with the cost of replacing capital in the production process.

Nigeria at present uses the market-based approach (of export parity), which so far has meant increases in the prices of refined products along with the rise in world crude prices. Excess Crude Oil Revenue, Petroleum Products Pricing and Subsidy The crude price assumption for the Federal Government budget 2004 is US$25/bbl, which has been surpassed by market prices since the beginning of the year. As such the phenomenon of “excess crude oil revenue” reoccurred. Nigerians are especially sensitive to this because the report of a probe into a similar occurrence during the military government presided over by General Babangida got missing and there is no way to reproduce it! The popular thinking now is that Government has to come out and state what it intends to do with the windfall gain, given the penchant of Governments at all three tiers to engage in frivolous spending whenever more revenue is available. As noted earlier, the domestic refineries are not working efficiently, when they do at all! The turnaround maintenance of the refineries is poorly done (without sanction on the contractors) or being sabotaged by those interested in maintaining the status quo. The bulk of the supply of refined petroleum products to the domestic market is through importation. The costing of imported products is reported to be fraudulent, as the cost template includes some dubious items. Unfortunately, some multinational firms involved in oil importation were suspect to be in collusion with NNPC officials that did the scam. The June 10th 2004 editorial of The Punch newspaper puts it this way:

“…A committee that probed the high cost of demurrage on imported fuel cargoes and N=16 billion unpaid debt of major marketers, found that some NNPC officials deliberately delayed the discharge of the cargoes and falsified the bill of laden. The officials colluded with multinational firms that import fuel to create artificial delays and accumulated false port demurrage, which was creamed into private pockets.”

All of these are factored into the market prices of the products, creating artificial “subsidy” which the Government is always eager to remove. Indeed, between January 1966 and May 2004, the pump-head price of petrol (gasoline) has changed 21 times, 15 of which were increases. The failed promises regarding projects that the revenue from subsidy removal would be invested in, along with the poor workers’ salaries/wages, fuel the resistance to the policy of deregulation of the downstream oil sector.

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CONCLUSION AND WAY FORWARD There is no doubt that the upstream sector of the oil industry in Nigeria is the most developed, and it has attracted considerable foreign capital inflows. The investment yield has also been very good. The same can be said for the gas sub-sector. The revenue spin-off from these sub-sectors should provide the needed capital to jump-start other sectors of the economy, especially those that have the greatest socio-economic impact. The policy recommendations and directions for emphasis are: 1. Sell the domestic refineries as they are and assessed to be worth. 2. Supply crude petroleum to the domestic refineries at less than the international price, which

already includes a profit margin for the joint ventures. 3. For now, utilize the excess revenue from crude oil to keep pump-head prices at about

N40/litre for petrol. This seeming arbitrary figure might be derived as an index to the cost of living or real income through researching into the fuel component of the household budget of the average Nigerian family.

4. Return to agriculture by providing technical input and financial support (perhaps through guaranteed prices for preferred crops). This will require an overhaul of the land tenure system to facilitate easy access.

5. Strengthen manufacturing through tax incentives and infrastructure development by way of public-private sector partnership. Non-tariff barriers to support domestic manufacturing should be tenured and targeted.

6. Accountability, corporate governance and responsibility should be cultivated as core values by all the stakeholders in the sector.

Economic policy should be designed in such manner that Government intervenes in the market with crude oil reserves (for domestic refining) to keep the prices of refined petroleum products within bands that will enhance growth of the domestic economy. The present policy cocktail appears focused more on revenue generation and gives little attention to their pervasive adverse effects on productive activities. There is clear need for external support in several ways: 1. Debt reduction. 2. New investments in growth inducing sectors. 3. Policy advocacy. 4. Grants for research and collaboration with the likes of the Nigerian Economic Summit Group,

which has played a major role since its establishment in 1993.

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Appendix I NIGERIA: BALANCE OF PAYMENT - OIL AND NON-OIL

Current Account Capital Account Oil Non- Oil Total Oil Non-Oil Total

Changes in

Reserves 1970 383.6 -433.6 -50.0 -130.4 179.6 49.2 -46.61971 600.6 -830.0 -229.4 4.0 289.4 293.4 -177.61972 612.3 -935.0 -322.7 195.8 73.4 269.2 -57.21973 1,338.8 -1,286.1 52.7 64.5 80.3 144.8 -192.01974 5,057.1 -385.6 4,671.5 135.8 -141.7 -5.9 -3,102.21975 4,069.0 -4,026.4 42.6 121.4 19.7 141.1 -157.51976 5,280.4 -5,538.8 -258.4 -42.0 -8.6 -50.6 339.01977 6,468.0 -7,115.5 -647.5 147.5 2.9 150.4 527.21978 5,649.8 -6,807.2 -1,157.4 92.1 1,019.8 1,111.9 -1,293.61979 8,987.9 439.4 9,427.3 -4.4 817.6 813.2 -1,868.91980 12,814.2 243.7 13,057.9 -541.8 -639.2 97.4 -2,402.21981 10,067.2 3.1 10,070.3 149.0 780.5 929.5 3,020.81982 7,777.7 203.2 7,980.9 135.7 3,335.2 3,470.9 1,398.31983 6,639.6 112.7 6,752.3 146.1 2,589.6 2,735.7 301.31984 8,152.3 82.0 8,234.3 -402.2 574.1 171.9 -354.91985 10,401.4 337.5 10,738.9 -13,610.0 -1,194.0 -2,555.0 -349.11986 7,454.5 552.1 8,006.6 1,740.1 -3,641.0 -1,900.9 784.31987 28,208.6 -11,070.4 17,138.2 -4,405.2 -12,338.1 -16,743.3 -159.21988 28,435.4 3,150.7 31,586.1 28,435.4 3,150.7 31,586.1 2,294.11989 54,989.8 4,122.2 59,112.0 -4,525.1 -25,696.8 -30,221.9 -8,727.81990 106,626.5 -26,816.4 79,810.1 -26,651.5 -22,593.8 -49,245.3 -18,498.21991 109,063.9 -57,094.1 51,969.8 -16,687.6 -10,795.0 -27,482.9 -5,959.61992 181,823.3 -88,142.8 93,680.5 -75,174.1 -63,581.5 -138,755.6 -65,271.81993 `115,533.2 -149,947.9 -34,414.7 -6,041.4 -17,019.2 -23,060.6 -13,615.91994 104,095.1 -156,399.4 -52,304.3 104,095.1 -156,399.4 -52,304.3 -7,194.91995 412,844.4 -598,929.0 -186,084.6 -121,807.8 118,553.8 -3,254.0 15,325.11996 670,158.3 -429,978.3 240,180.0 -256,583.0 -33,617.5 -290,200.5 -183,950.61997 664,016.9 -627,983.3 36,033.6 -85,294.3 54,803.8 -30,490.5 -251,593.01998 278,853.1 -608,961.8 -330,108.7 70,258.6 45,145.1 115,403.7 36,960.3

Source: Central Bank of Nigeria, Statistical Bulletin, Vol. 11.No 2 (2000)

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Appendix II UNEMPLOYMENT RATES IN NIGERIA

Year Urban Rural National 1976 - - 4.3 1980 - - 6.4 1984 7.9 4.4 6.2 1985 9.8 5.2 6.1 1986 9.1 4.6 5.3 1987 9.8 6.1 7.0 1988 7.8 4.8 5.3 1989 8.1 3.7 4.5 1990 5.9 3.0 3.5 1991 4.9 2.7 3.1 1992 4.6 3.2 3.4 1993 3.8 2.5 2.7 1994 3.2 1.7 2.0 1995 3.9 1.6 1.8 1996 6.1 2.8 3.4 1997 6.0 2.6 3.2 1998 4.9 2.8 3.2 1999 5.5 2.5 3.0 2000 7.2 3.7 4.7 2001 5.4 3.1 3.6

Sources: Federal Office Of Statistics. Central Bank of Nigeria

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Appendix III NIGERIA: EXCHANGE RATES

Year N/$ N/GBP

1970 0.0714 1.7114 1971 0.6955 1.7156 1972 0.6579 1.6289 1973 0.6579 1.6289 1974 0.6299 1.4795 1975 0.6159 1.3618 1976 0.6265 1.1317 1977 0.6460 1.1671 1978 1.6060 1.2238 1979 0.5957 1.2628 1980 0.5464 1.2647 1981 0.6100 1.2495 1982 0.6729 1.1734 1983 0.7241 1.1216 1984 0.7649 1.0765 1985 0.8938 1.1999 1986 2.0206 2.5554 1987 4.0179 6.5929 1988 4.5367 8.0895 1989 7.3916 12.0695 1990 8.0378 16.2419 1991 9.9095 17.4955 1992 17.2984 27.8684 1993 22.3268 33.2522 1994 21.8861 33.4252 1995 21.8861 34.5240 1996 21.8861 34.1229 1997 21.8861 35.7698 1998 21.8860 36.6368 1999 91.8000 148.3888 2000 101.7000 164.7994 2001 111.9000 174.3003 2002 120.5000 214.3236

Sources: 1. Central Bank of Nigeria, Statistical Bulletin (2000) and Annual Report & Statement of

Accounts (2001 and 2002). 2. eXchangeRate.com for the British Pound, 1999 to 2003.

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Appendix IV NIGERIA: INTEREST RATES

Prime Year MRR Lending Deposit (90-D) Savings

1970 4.50% 7.00% 3.00% 3.00% 1971 4.50% 7.00% 3.00% 3.00% 1972 4.50% 7.00% 3.00% 3.00% 1973 4.50% 7.00% 3.00% 3.00% 1974 4.50% 7.00% 3.00% 3.00% 1975 4.5% - 3.5% 8.00% 3.00% 4.00% 1976 3.50% 6.00% 3.0% - 2.5% 4.00% 1977 4.00% 6.00% 3.5% - 3.0% 4.00% 1978 5.00% 7.00% 2.0% - 4.75% 4.0% - 5.0% 1979 5.00% 7.50% 4.75% 5.00% 1980 6.00% 7.75% 5.75% 6.00% 1981 6.00% 10.25% 5.50% 6.00% 1982 8.00% 10.00% 7.25% 7.50% 1983 8.00% 12.50% 7.25% 7.50% 1984 10.00% 9.25% 9.75% 9.50% 1985 10.00% 10.50% 9.25% 9.50% 1986 10.00% 17.50% 9.25% 9.50% 1987 12.75% 16.50% 14.90% 14.00% 1988 12.75% 26.80% 13.40% 14.50% 1989 18.50% 25.50% 18.90% 16.40% 1990 18.50% 20.01% 19.60% 18.80% 1991 14.50% 29.80% 15.71% 14.29% 1992 17.50% 36.09% 20.80% 16.10% 1993 26.00% 21.00% 23.60% 16.66% 1994 13.50% 20.18% 15.00% 13.50% 1995 13.50% 19.74% 13.62% 12.61% 1996 13.50% 13.54% 12.94% 11.69% 1997 13.50% 20.46% 7.04% 4.80% 1998 19.25% 19.95% 13.07% 5.75% 1999 18.00% 21.32% 12.68% 5.33% 2000 14.00% 21.33% 10.47% 4.88% 2001 20.50% 26.00% 17.90% 5.00% 2002 16.50% 20.60% 13.80% 3.70%

Source: Central Bank of Nigeria, Statistical Bulletin (2000) and Annual Report & Statement of

Accounts (2001 and 2002).

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SELECTED REFERENCES

1. Nnanna O.J., S.O. Alade and F.O. Odoko (ed.), Contemporary Economic Policy Issues in

Nigeria, (Central Bank of Nigeria; 2003).

2. Central Bank of Nigeria, The Changing Structure of the Nigerian Economy (2000).

3. Ajakaiye Olu, Economic Development in Nigeria: A Review of Recent Experience,

Proceedings of the First Annual Monetary Policy Conference (Central Bank of Nigeria;

2001), pp. 12-36.

4. Main Report of the Vision 2010 Committee (September 1997).

5. Reports on the Nigerian Economic Summit, 1995 to 2003.