Wider focus: Improved governance and socioeconomic equality can aid development in the longer term

As the single most populous nation in Africa, Nigeria is widely expected to overtake South Africa as the largest economy on the continent within a matter of years. Increasingly, it is overhauling its markets – whether in electricity or rail – to improve efficiency, and growth has been robust even through the depths of the recent global slowdown. However, Nigeria still faces significant challenges, some of which stem from its geographical size and ethnic diversity, and it will be some time before the country fully realises its potential. While immensely wealthy in terms of natural resources, the country’s human development indicators, for example, still lag in comparison to other economies of its size.

ECONOMY: Following economic growth of 6.3% in 2012, Nigeria’s GDP is projected to increase by 7.2% in 2013 before slowing down to 7% in 2014, according to the IMF (see Economy chapter). According to National Bureau of Statistics (NBS) figures, at $259.5bn, the Nigerian economy was sub-Saharan Africa’s second largest after South Africa by the end of 2012, and in 2014 is expected to move further up to first place once GDP figures are re-based using 2010 dollars.

Energy is the main contributor to public finances – Nigeria is the world’s 12th-largest producer of oil and the leading producer in Africa, according to the BP “Statistical Review of World Energy 2013” (see Energy chapter). The hydrocarbons sector comprises 14% of the country’s GDP at current prices, and 95% of foreign exchange earnings in 2012 according to the NBS. Approximately 75% of government revenue comes from the oil economy, according to the NBS. Oil production capacity has remained at roughly 2.5m barrels per day (bpd) since the start of 2000 although output fell to 2.2m bpd on average in 2012, according to figures from the Department of Petroleum Resources.

Meanwhile, non-oil GDP growth was 7.8% in 2012, down slightly on 2011, with agriculture and trade, which together comprised around 75% of the non-oil economy, accounting for the bulk of growth, according to the World Bank. Additional drivers of GDP include the telecommunications sector, which has seen annual growth rates of more than 30% annually in each of the last two years, as well as real estate and construction, respectively. Telecoms, construction, trading and agriculture together accounted for 69% of 2012 output, according to the NBS (see Economy chapter).

With a number of more developed markets continuing to stagnate, Nigeria has become an attractive destination for foreign investment. Foreign portfolio inflows continue to outpace foreign direct investment (FDI), with a 76.78% share of capital inflows in the year to June 2013, according to the Central Bank of Nigeria (CBN). FDI inflows decreased from $8.9bn in 2011 to $7.03bn in 2012 (see Economy analysis). The naira, Nigeria’s currency, averaged a nominal exchange rate of about N156.19: $1 in 2012 while inflation stood near 12%.

TRADE: In 2012 Nigeria’s exports totalled $96.03bn, according to the CBN (see Economy chapter). Traditionally, the US has been the largest export market for Nigerian crude oil, and continued this trend in 2012, according to NBS data. India, the Netherlands, France, the UK and, increasingly, Brazil, are other key destinations, with India taking the lead from the US in early 2013. Leading exports included petroleum and crude oil, natural rubber, nuts and seeds, and raw cocoa. Imports to Nigeria stood at $58.3bn in 2012, according to the CBN, significantly lower than the $67.09bn posted in 2011. China is by far the main source, followed by the US and India, respectively. Top imports included machinery, gasoline, transport equipment, manufactured goods, fish, and live animals.

GEOGRAPHY: Located in West Africa on the Gulf of Guinea, Nigeria’s 853 km of coastline stretches from Benin in the west to Cameroon in the east. Inland, there are borders with Niger and Chad to the north. With a total area of 923,768 sq km, Nigeria is the world’s 32ndlargest country and almost three times the size of Germany. The Niger River flows south from the north-west through the oil-rich Delta region toward the sea. The country possesses a rich biodiversity, ranging from swamps and rainforests, woodlands and mountains, and marginal savannahs in the north. Approximately 38.97% of the landmass is arable.

CLIMATE: The country has two seasons: the dry season from November to March, and the wet season from April to October. The southern coastal region has an equatorial climate, with little temperature variation and two peaks of heavy rain during the wet season producing an average annual rainfall of 1500-2000 mm. The central region has a tropical climate where temperatures average above 18.5°C year round. The federal capital Abuja, located in the centre of the country, has a temperature range of 18.5-36°C with an average annual rain all of 500-1500 mm. Nigeria’s northernmost arid region can see temperatures climb to 45°C and experiences a shortened wet season producing an average of only 500 mm of annual rainfall.

NATURAL RESOURCES: Natural resources, oil and gas in particular, comprise one of the country’s key assets (see Energy chapter). Hydrocarbons reserves have traditionally attracted the vast majority of domestic and foreign investment, and Nigeria ranks as the leading oil producer in Africa, as well as holding 182trn standard cu ft of associated natural gas, the ninth largest globally, according to BP’s “Statistical Review”. However, underground riches extend beyond crude and gas – additional resources include significant reserves of coal, iron ore, zinc, tin, limestone, lead and niobium.

The large agricultural sector is another key contributor to GDP and a sizeable employer (see Agriculture chapter). The fertile soil and warm climate allow for the cultivation of a wide variety of tropical cash crops, including cassava, groundnuts, rice, cocoa, rubber and oil palm, of which it was once the largest producer. Export volumes in agricultural commodities have declined sharply since the oil boom of the 1970s, although the government is seeking to reverse that trend through a comprehensive agricultural reform plan.

POPULATION & DEVELOPMENT: Although exact figures vary, according to data from the UN Population Fund, Nigeria’s population was estimated at roughly 168.8m as of 2012. As with many emerging markets, both in Africa and elsewhere, the demographic skews young: over 60% of the population are under the age of 24. With a fertility rate of around 5.31 children per women, Nigeria’s population is predicted to reach 210m by 2020 and jump to 440m by 2050, according to a 2012 UN report. As a result, population density will rise to 228 people per sq km in 2020, up from 173 in 2010.

As the economy expanded rapidly over the last decade, Nigeria’s average GDP per capita grew from $390 in 2000 to $1630 in 2012, and is expected to climb further to $1828 by 2015, according to IMF estimates. The African Development Bank estimated the middle class, defined as those earning between $2 and $20 a day, at around 37m, or 22% of the population, in 2011. Notwithstanding these economic gains, distribution remains unequal (see Economy chapter). As per IMF numbers, inequality of wealth distribution is acute with a Gini coefficient (with 100 as the most unequal society) up from 42.9 in 2004 to 49 in 2013, albeit still below South Africa’s rate of 63. Nigeria’s human development has shown only a relatively small decrease in its poverty rate (defined as those living on less than $1.25 a day) from 64.2% of the population in 2004 to 62.6% in 2010. The unemployment rate, measured as the percentage of the working-age population employed for fewer than 40 hours a week, grew from 13.4% in 2004 to 23.9% in 2012, according to NBS figures. Nigeria ranks 153rd out of 186 countries on the UN Human Development Index. Wealth tends to be concentrated in urban areas, which was home to just over half of the population in 2012. Estimates of the population of Lagos, the country’s largest city, vary but range as high as 21m. The metropolis is set to overtake Cairo to become Africa’s most populous city before the end of the decade.

LANGUAGE & ETHNICITY: Nigeria is home to more than 250 ethno-linguistic groups, the most populous being Hausa and Fulani (29%), Yoruba (21%), and Igbo or Ibo (18%). Smaller groups include Ijaw (10%), Kanuri (4%), Ibibio (3.5%), Tiv (2.5)%, Edo (0.7%), and Nupe (0.6%), according to the CIA World Factbook.

A remnant of British colonial rule, English is the official language and lingua franca. However, the languages of the three largest ethnic groups are also widely spoken. In total, the country is home to 510 living languages, two second languages with no native speakers, and another nine languages that are believed to have died out. 29 languages are recognised as “endangered”, according to the UN Educational, Scientific and Cultural Organisation. Almost half of the population speaks a local dialect known as Nigerian Pidgin.

RELIGION: Roughly 94% of Nigerian respondents in a 2008 Pew Research survey noted religion as being “very important” to their lives. The Nigerian National Census does not request religious identification, and estimates of the breakdown of faith vary significantly. Many estimates claim that 50% of the population is Muslim, while a 2011 Pew survey suggested 50.8% is Christian, although the CIA World Factbook pegs the figure at closer to 40% of the population. The remaining population is divided among indigenous beliefs, other religions, or else are non-practising. Among the Christian community, a wide range of Catholic, Protestant and Evangelical churches attract followers. The Muslim community is also equally diverse in belief and practice. Sharia-based provisions are in place in nine majority-Muslim states in the north, although only covering criminal law and applying to Muslims. It also serves as an influence on the civil code in three additional states.

CULTURE: Nigerian art and culture is among the most celebrated in Africa and regularly earns international accolades. This is thanks, in part, to the large Nigerian film industry, known as Nollywood, which is the world’s second largest in terms of annual output, behind Bollywood, and enjoys a large following throughout West Africa, the UK and the US. In the literary world, Chinua Achebe’s “Things Fall Apart” is one of the most widely read African novels, while Nigeria was the birthplace of Afrobeat music, pioneered by Fela Kuti in the 1970s.

GOVERNMENT: Nigeria adopted its fourth constitution on May 29, 1999, and transferred power to a democratically elected government, commencing its longest period of civilian rule to date. Modelled on a federal system similar to the US, Nigeria is a republic with 36 states. The current president, Goodluck Jonathan, served as vice-president under his predecessor’s administration and came to power in 2010, when the former president died in office. Jonathan won a four-year term in his own right in the 2011 national elections.

The National Assembly, Nigeria’s bicameral legislature, is comprised of the House of Representatives, with 360 seats awarded according to each state’s population, and the Senate, with 109 seats – three from each state and one from the federal capital, Abuja.

Nigeria’s judicial branch operates separately and independently of the executive and legislature. Federal courts include a Supreme Court, a Court of Appeal, a Constitutional Court and the Federal High Court. The president appoints judges, with input from the National Judicial Council, subject to confirmation by the Senate. Courts on the state level follow a similar structure. On the federal level and in some states, a percentage of justices must be trained in sharia.

Funding is allocated according to a federal format, with states able to raise their own revenues but also able to receive a designated disbursement from the national government on a monthly basis. The bulk of the public sector’s revenues come from hydrocarbons production, making the allocation of oil income a potentially delicate topic. The current distribution of oil revenues was set out in the 1999 constitution, which allowed for 13% of the revenues from onshore production to accrue directly to the Niger Delta’s nine oil-producing states. The remaining share of onshore revenue is divided between the federal government (47.2%), the state governments (31.1%), the local councils (15.2%) and the National Priorities Service Fund (6.5%).

Federal funding levels vary from state to state, depending on population. Nigeria’s census has always been controversial: the final tallies in 1962 were nullified, with an extra 9m people appearing in the northern states during a recount, while the replacement 1963 census was itself heavily disputed. The 1973 census was never released. The most recent 2006 census showed that Kano was Nigeria’s most populous state, with 9.4m people, with Lagos just behind, with 9m people. The results prompted the then-governor of Lagos, Bola Tinubu, to claim the figures were falsified, saying a survey conducted by Lagos in conjunction with the National Population Commission put the state’s population at over 17.5m, much closer to UN estimates of 18m.

The centralisation of revenue has prompted states to explore other fund-raising options. While most rely on federal funding for more than 80% of their revenue, state governments have also been making increasing use of their ability to raise funds independently. State governments have the capacity to raise personal income taxes, along with various household and corporate taxes. At least eight states have also started to turn to the debt markets as a means of raising funds.

HISTORY: Nigeria gained independence on October 1, 1960 after nearly a century of British colonial rule. The country’s first political parties largely reflected historically rooted ethnic and regional identities, pushing the Northern Hausas, Eastern Igbos and Western Yorubas into electoral competition. By 1966, the government entered a period of various military coups and the country dissolved into civil war when three eastern states succeeded to form the Republic of Biafra in 1967.

While the leaders of Biafra surrendered and the states were reintegrated into Nigeria in 1970, a period of military rule, coups and counter-coups lasted for the following 30 years, with only a brief return to democracy under the Second Republic (1979-83). During the subsequent rule of General Sani Abacha, the EU imposed sanctions on Nigeria and the Commonwealth suspended the country’s membership following violent repression and human rights abuses.

Abacha’s successor established a military-run Provisional Ruling Council that conducted elections in 1998 and established Nigeria’s current constitution in 1999. Olusegun Obasanjo, a former military head of state, was elected president for the first of two terms, before being succeeded by Umaru Yar’Adua, a former governor of Katsina State who was elected in 2008.

POLITICS: Nigeria has a dynamic multiparty system. According to the country’s Independent National Electoral Commission, there are 25 registered political parties of varying ideological stripes. Yet, while political ideologies from across the spectrum are represented in the arena of elections, their emergence as autonomous democratic organisations is still a relatively recent development. In the run-up to the aborted Third Republic, Nigeria had only two legal political parties, which were similar to one another in terms of appearance and substance. The parties were controlled by the state, which repeatedly interfered in internal party machinations and provided all funding to the two groups.

Notwithstanding these challenges, the country has come a long way over the past 20 years, with over 17 different candidates vying for the presidential nomination alone in 2007. The People’s Democratic Party (PDP) has held Nigeria’s presidency and dominated the legislature since the first elections in 1999. Although President Jonathan is expected to run for a second term in 2015, the election is widely seen as likely to offer the greatest challenge yet to PDP hegemony.

Identity in Nigeria is commonly refracted through ethnicity, region and religion, challenging the framework of simple sectarian politics. Much of the country’s political tension and the ensuing violence stem from debates around the distribution of and access to Nigeria’s vast hydrocarbons revenue (see analysis).

TACKLING CORRUPTION: During his swearing-in ceremony in 1999, former President Obasanjo stated that corruption was “the greatest single bane of our society”, a message echoed by his successors. The issue has remained a blemish on domestic politics since the 1960s, when bureaucrats were often nicknamed “10 percenters”, in reference to the amount they pocketed through government contracts. The Obasanjo and Yar’Adua administrations took action to address the issue, and President Yar’Adua was the first president to declare all of his assets upon being sworn into office. Among the most critical steps in the campaign against corruption was the establishment of the Economic and Financial Crimes Commission (EFCC), in 2003.

Tackling everything from money laundering to bribery, the EFCC has launched investigations into several suspicious transactions. The body exposed a range of incidents of graft and bribery, involving state governors, serving senators and the former ministers of health and aviation, as well as corporate executives and lower-level bureaucrats. At one point 31 of Nigeria’s 36 state governors were under investigation, as was the chief of the PDP. As of July 2013, the EFCC declared that it had uncovered more than $9bn in stolen assets and secured 400 convictions, as well as reporting that Nigeria had been removed from the blacklist of non-cooperative countries by the Financial Action Task Force.

Nonetheless, much remains to be done. In early 2013, John Magbadelo, the deputy director in charge of reforms at the Ministry of Petroleum Resources, said that roughly $400bn had been illegally siphoned out of the economy between 1966 and 1999. Further, a report published in September 2013 by London-based think-tank Chatham House noted that 100,000 barrels per day of oil, or 5% of Nigeria’s total output, “vanished from facilities on land, in swamps and in shallow water in the first quarter of 2013” (see Energy chapter).

A MULTILEVEL CHALLENGE: Notwithstanding recent revelations, the federal government’s commitment to tackling corruption is being replicated at the local level by a number of states, which are implementing pilot programmes, some of which are already showing results. Pre-trial waiting times fell from 30 months to less than 12 months between 2002 and 2007, whereas the number of court officials asking for bribes to accelerate court cases fell from 40% in 2002 to less than 10% in 2007. Furthermore, the introduction of e-governance is also encouraging greater efficiency and transparency in financial transactions, as well as increasing the amount of interaction between citizens and the government.