Economic history of Nigeria
Encyclopedia
Colonialism
is a major feature of the economic history of Nigeria. Britain
eventually gained control of Nigerian administration. After independence, the Nigerian economy
seemed very promising. Many saw Nigeria
, with 25% of Africa
's population, as an emerging economy. However, this potential never materialized. A series of unfortunate political and economic events have stalled Nigerian growth. The country still plays an important economic role in the world, especially as a producer of fossil fuels.
n coast from about the mid-17th century to the mid-18th century was part of the wider competition for trade and empire in the Atlantic. The British
, like other newcomers to the slave trade, found they could compete with the Dutch
in West Africa only by forming national trading companies. The first such effective English enterprise was the Company of the Royal Adventurers, chartered in 1660 and succeeded in 1672 by the Royal African Company
. Only a monopoly company could afford to build and maintain the forts considered essential to hold stocks of slaves and trade goods. In the early 18th century, Britain and France
destroyed the Dutch hold on West African trade; and by the end of the French Revolution
and the subsequent Napoleonic Wars
(1799–1815), Britain had become the dominant commercial power in West Africa.
The slave trade was one of the major causes of the devastating internecine strife in southern Nigeria during the three centuries to the mid-19th century, when abolition occurred. In the 19th century, Britain was interested primarily in opening markets for its manufactured goods in West Africa and expanding commerce in palm oil
. Securing the oil and ivory trade
required that Britain usurp the power of coastal chiefs in what became Nigeria.
Formal "protection" and—eventually—colonization of Nigeria resulted not only from the desire to safeguard Britain's expanding trade interests in the Nigerian hinterland, but also from an interest in forestalling formal claims by other colonial powers, such as France and Germany
. By 1850 British trading interests were concentrating in Lagos
and the Niger River delta. British administration in Nigeria formally began in 1861, when Lagos
became a crown colony
, a step taken in response to factors such as the now-illegal activities of slave traders, the disruption of trade by the Yoruba civil wars, and fears that the French would take over Lagos. Through a series of steps designed to facilitate trade, by 1906 present-day Niger was under British control.
. During the same period, the Great Depression
and, later, World War II
, reduced Britain's investment, imports, and government spending in Nigeria.
Once the wartime colonial government assumed complete control of the local economy, it would issue trade licenses only to established firms, a practice that formalized the competitive advantage of foreign companies. In addition, wartime marketing boards pegged the prices of agricultural commodities below the world market rate, workers faced wage ceilings, traders encountered price controls, and Nigerian consumers experienced shortages of import goods.
Labor activity grew during the war in reaction to the heavy-handed policies of the colonial government. Among the expressions of labor unrest was a strike by 43,000 workers in mid-1945 that lasted more than forty days. Aspiring Nigerian entrepreneurs, deprived of new economic opportunities, and union leaders, politicized by the strike's eventual success, channeled their sense of grievance into nationalist agitation. Educated persons, whose economic opportunities were limited largely to private business and professional activity, began to demand more participation in the colonial government.
Between 1951 and 1960, the major political parties played leading roles in unifying and locally mobilizing the economic elite. Elites from majority parties in the regional assemblies who cooperated with the ruling federal coalition dispensed a wide range of rewards and sanctions, thus retaining their own positions and power and keeping the masses subordinated. Positions in government services and public corporations, licenses for market stalls, permits for agricultural export production, rights to establish enterprises, roads, electrical service, running water, and the governing group allocated scholarships to its supporters. Each major party was backed by a bank, which assisted in the transfer of substantial public funds to the party.
At all levels—local and regional after 1951 and federal after 1954—political leaders could use a range of controls, extending over local councils, district administration, police, and courts, to subdue any dissident minority, especially in the far north, where clientage was the social adhesive of the emirate system. Political superiors offered protection, patronage, and economic security in exchange for loyalty and the obedience of inferiors.
The elites attracted clients and socially inferior groups not only in the far north, where Islam
legitimized the traditional hierarchy, but even in Igboland
, an area of southeastern Nigeria where power had been widely dispersed before the 20th century. The elites of the three regions preferred to close ranks to share the fruits of office and to prevent challenges to their positions, but by the time independence was achieved in 1960, policies designed to enhance the security of one regional elite threatened the security of others.
Another relevant feature of the Nigerian economy was a series of abrupt changes in the government's share of expenditures. As a percentage of gross domestic product, national government expenditures rose from 9 percent in 1962 to 44 percent in 1979, but fell to 17 percent in 1988. In the aftermath of the 1967-70 civil war, Nigeria's government became more centralized. The oil boom of the 1970s provided the tax revenue to strengthen the central government further. Expansion of the government's share of the economy did little to enhance its political and administrative capacity, but did increase incomes and the number of jobs that the governing elites could distribute to their clients.
The economic collapse in the late 1970s and early 1980s contributed to substantial discontent and conflict between ethnic communities and nationalities, adding to the political pressure to expel more than 2 million illegal workers (mostly from Ghana, Niger, Cameroon, and Chad) in early 1983 and May 1985.
The lower spending of the 1980s was partly the result of the structural adjustment program (SAP) in effect from 1986 to 1990, first mooted by the International Monetary Fund and carried out under the auspices of the World Bank, which emphasized privatization, market prices, and reduced government expenditures. This program was based on the principle that, as GDP per capita falls, people demand relatively fewer social goods (produced in the government sector) and relatively more private goods, which tend to be essential items such as food, clothing, and shelter.
Colonialism
Colonialism is the establishment, maintenance, acquisition and expansion of colonies in one territory by people from another territory. It is a process whereby the metropole claims sovereignty over the colony and the social structure, government, and economics of the colony are changed by...
is a major feature of the economic history of Nigeria. Britain
British Empire
The British Empire comprised the dominions, colonies, protectorates, mandates and other territories ruled or administered by the United Kingdom. It originated with the overseas colonies and trading posts established by England in the late 16th and early 17th centuries. At its height, it was the...
eventually gained control of Nigerian administration. After independence, the Nigerian economy
Economy of Nigeria
The economy of Nigeria is a middle income, mixed economy emerging market with well-developed financial, legal, communications, transport, and entertainment sectors...
seemed very promising. Many saw Nigeria
Nigeria
Nigeria , officially the Federal Republic of Nigeria, is a federal constitutional republic comprising 36 states and its Federal Capital Territory, Abuja. The country is located in West Africa and shares land borders with the Republic of Benin in the west, Chad and Cameroon in the east, and Niger in...
, with 25% of Africa
Africa
Africa is the world's second largest and second most populous continent, after Asia. At about 30.2 million km² including adjacent islands, it covers 6% of the Earth's total surface area and 20.4% of the total land area...
's population, as an emerging economy. However, this potential never materialized. A series of unfortunate political and economic events have stalled Nigerian growth. The country still plays an important economic role in the world, especially as a producer of fossil fuels.
History of tax in Nigeria
The European struggle to establish communities and trading posts on the West AfricaWest Africa
West Africa or Western Africa is the westernmost region of the African continent. Geopolitically, the UN definition of Western Africa includes the following 16 countries and an area of approximately 5 million square km:-Flags of West Africa:...
n coast from about the mid-17th century to the mid-18th century was part of the wider competition for trade and empire in the Atlantic. The British
British Empire
The British Empire comprised the dominions, colonies, protectorates, mandates and other territories ruled or administered by the United Kingdom. It originated with the overseas colonies and trading posts established by England in the late 16th and early 17th centuries. At its height, it was the...
, like other newcomers to the slave trade, found they could compete with the Dutch
Netherlands
The Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with several islands in the Caribbean. Mainland Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east, and shares maritime borders...
in West Africa only by forming national trading companies. The first such effective English enterprise was the Company of the Royal Adventurers, chartered in 1660 and succeeded in 1672 by the Royal African Company
Royal African Company
The Royal African Company was a slaving company set up by the Stuart family and London merchants once the former retook the English throne in the English Restoration of 1660...
. Only a monopoly company could afford to build and maintain the forts considered essential to hold stocks of slaves and trade goods. In the early 18th century, Britain and France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
destroyed the Dutch hold on West African trade; and by the end of the French Revolution
French Revolution
The French Revolution , sometimes distinguished as the 'Great French Revolution' , was a period of radical social and political upheaval in France and Europe. The absolute monarchy that had ruled France for centuries collapsed in three years...
and the subsequent Napoleonic Wars
Napoleonic Wars
The Napoleonic Wars were a series of wars declared against Napoleon's French Empire by opposing coalitions that ran from 1803 to 1815. As a continuation of the wars sparked by the French Revolution of 1789, they revolutionised European armies and played out on an unprecedented scale, mainly due to...
(1799–1815), Britain had become the dominant commercial power in West Africa.
The slave trade was one of the major causes of the devastating internecine strife in southern Nigeria during the three centuries to the mid-19th century, when abolition occurred. In the 19th century, Britain was interested primarily in opening markets for its manufactured goods in West Africa and expanding commerce in palm oil
Palm oil
Palm oil, coconut oil and palm kernel oil are edible plant oils derived from the fruits of palm trees. Palm oil is extracted from the pulp of the fruit of the oil palm Elaeis guineensis; palm kernel oil is derived from the kernel of the oil palm and coconut oil is derived from the kernel of the...
. Securing the oil and ivory trade
Ivory trade
The ivory trade is the commercial, often illegal trade in the ivory tusks of the hippopotamus, walrus, narwhal, mammoth, and most commonly, Asian and African elephants....
required that Britain usurp the power of coastal chiefs in what became Nigeria.
Formal "protection" and—eventually—colonization of Nigeria resulted not only from the desire to safeguard Britain's expanding trade interests in the Nigerian hinterland, but also from an interest in forestalling formal claims by other colonial powers, such as France and Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
. By 1850 British trading interests were concentrating in Lagos
Lagos
Lagos is a port and the most populous conurbation in Nigeria. With a population of 7,937,932, it is currently the third most populous city in Africa after Cairo and Kinshasa, and currently estimated to be the second fastest growing city in Africa...
and the Niger River delta. British administration in Nigeria formally began in 1861, when Lagos
Lagos Colony
Lagos Colony was a British colonial possession centered on the port of Lagos in what is now southern Nigeria. Lagos was annexed on 6 August 1861 and declared a colony on 5 March 1862....
became a crown colony
Crown colony
A Crown colony, also known in the 17th century as royal colony, was a type of colonial administration of the English and later British Empire....
, a step taken in response to factors such as the now-illegal activities of slave traders, the disruption of trade by the Yoruba civil wars, and fears that the French would take over Lagos. Through a series of steps designed to facilitate trade, by 1906 present-day Niger was under British control.
Development of National Economic Interests to World War II
British rule exacerbated differences of class, region, and community in Nigeria. The emergent nationalist movement in the 1930s was spearheaded by a new elite of business people and professionals and promoted mainly by persons who expected to gain economically and politically from independence. The movement first became multiethnic—although limited to the south—between 1930 and 1944, when the real incomes of many participants in Nigeria's money economy fell because of deterioration in the net barter terms of tradeTerms of trade
In international economics and international trade, terms of trade or TOT is /. In layman's terms it means what quantity of imports can be purchased through the sale of a fixed quantity of exports...
. During the same period, the Great Depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...
and, later, World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
, reduced Britain's investment, imports, and government spending in Nigeria.
Once the wartime colonial government assumed complete control of the local economy, it would issue trade licenses only to established firms, a practice that formalized the competitive advantage of foreign companies. In addition, wartime marketing boards pegged the prices of agricultural commodities below the world market rate, workers faced wage ceilings, traders encountered price controls, and Nigerian consumers experienced shortages of import goods.
Labor activity grew during the war in reaction to the heavy-handed policies of the colonial government. Among the expressions of labor unrest was a strike by 43,000 workers in mid-1945 that lasted more than forty days. Aspiring Nigerian entrepreneurs, deprived of new economic opportunities, and union leaders, politicized by the strike's eventual success, channeled their sense of grievance into nationalist agitation. Educated persons, whose economic opportunities were limited largely to private business and professional activity, began to demand more participation in the colonial government.
National Economic Interests in the Postwar Period
Starting in 1949, when Nigerian's recently emergent labor, commercial, and professional elites were first consulted by the British as part of a constitutional review, the peoples of Nigeria engaged in ongoing debate over the pressure of decolonization, independence, and modernization. The two coup d'états of 1966 and the civil war of 1967-70 reflected economic as well as political elements.Between 1951 and 1960, the major political parties played leading roles in unifying and locally mobilizing the economic elite. Elites from majority parties in the regional assemblies who cooperated with the ruling federal coalition dispensed a wide range of rewards and sanctions, thus retaining their own positions and power and keeping the masses subordinated. Positions in government services and public corporations, licenses for market stalls, permits for agricultural export production, rights to establish enterprises, roads, electrical service, running water, and the governing group allocated scholarships to its supporters. Each major party was backed by a bank, which assisted in the transfer of substantial public funds to the party.
At all levels—local and regional after 1951 and federal after 1954—political leaders could use a range of controls, extending over local councils, district administration, police, and courts, to subdue any dissident minority, especially in the far north, where clientage was the social adhesive of the emirate system. Political superiors offered protection, patronage, and economic security in exchange for loyalty and the obedience of inferiors.
The elites attracted clients and socially inferior groups not only in the far north, where Islam
Islam
Islam . The most common are and . : Arabic pronunciation varies regionally. The first vowel ranges from ~~. The second vowel ranges from ~~~...
legitimized the traditional hierarchy, but even in Igboland
Igboland
Igboland, or Igbo land , also known as the Ibo, Ebo, and Heebo Country, is a cultural region in Nigeria that includes the indigenous territory and cultural reach of the Igbo people...
, an area of southeastern Nigeria where power had been widely dispersed before the 20th century. The elites of the three regions preferred to close ranks to share the fruits of office and to prevent challenges to their positions, but by the time independence was achieved in 1960, policies designed to enhance the security of one regional elite threatened the security of others.
1970s-1980s
A major feature of Nigeria's economy in the 1980s, as in the 1970s, was its dependence on petroleum, which accounted for 87 percent of export receipts and 77 percent of the federal government's current revenue in 1988. Falling oil output and prices contributed to another noteworthy aspect of the economy in the 1980s—the decline in per capita real gross national product, which persisted until oil prices began to rise in 1990. Indeed, GNP per capita per year decreased 4.8 percent from 1980 to 1987, which led in 1989 to Nigeria's classification by the World Bank as a low-income country (based on 1987 data) for the first time since the annual World Development Report was instituted in 1978. In 1989 the World Bank also declared Nigeria poor enough to be eligible (along with countries such as Bangladesh, Ethiopia, Chad, and Mali) for concessional aid from an affiliate, the International Development Association (IDA).Another relevant feature of the Nigerian economy was a series of abrupt changes in the government's share of expenditures. As a percentage of gross domestic product, national government expenditures rose from 9 percent in 1962 to 44 percent in 1979, but fell to 17 percent in 1988. In the aftermath of the 1967-70 civil war, Nigeria's government became more centralized. The oil boom of the 1970s provided the tax revenue to strengthen the central government further. Expansion of the government's share of the economy did little to enhance its political and administrative capacity, but did increase incomes and the number of jobs that the governing elites could distribute to their clients.
The economic collapse in the late 1970s and early 1980s contributed to substantial discontent and conflict between ethnic communities and nationalities, adding to the political pressure to expel more than 2 million illegal workers (mostly from Ghana, Niger, Cameroon, and Chad) in early 1983 and May 1985.
The lower spending of the 1980s was partly the result of the structural adjustment program (SAP) in effect from 1986 to 1990, first mooted by the International Monetary Fund and carried out under the auspices of the World Bank, which emphasized privatization, market prices, and reduced government expenditures. This program was based on the principle that, as GDP per capita falls, people demand relatively fewer social goods (produced in the government sector) and relatively more private goods, which tend to be essential items such as food, clothing, and shelter.