CPED Monograph Series No. 8 THE NIGERIAN ECONOMY REFORMS, EMERGING TRENDS AND PROSPECTS Samson Edo & Augustine Ikelegbe This Publication is supported by the Think Tank Initiative Programme initiated and managed by the International Development and Research Centre (IDRC) CPED Monograph Series 2014 i Published by Centre for Population and Environmental Development (CPED) BS-1 and SM2 Ugbowo Shopping Complex, Ugbowo Housing Estate P.O. Box 10085, Ugbowo Post Office Benin City, Nigeria (C) Samson EDO and Augustine IKELEGBE First published in 2014 Series Editor: Professor Emeritus Andrew G. Onokerhoraye Executive Director, CPED, Benin City All rights reserved. This monograph is copyright and so no part of it may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, electrostatic, magnetic tape, photocopying, recording or otherwise without the express written permission of the publisher, and author who is the copyright owner. Printed in Nigeria by: #4, Otike-Odibi Avenue, Isiohor, Via Ugbowo Old Lagos Road, P.O. Box 5027, Benin City, Edo State. 052-880527 & 08074009192 CPED Monograph Series 2014 ii FORWARD This policy research monograph is part of the ongoing research of the Centre for Population and Environmental Development (CPED) on the research theme titled “ Growth and Equity in Nigeria” in the current strategic plan (2010-2014) of the Centre. The title of this monograph is quite germane to contemporary discourse on national development in Nigeria. The Nigerian economy has not experienced much consistent positive growth and the consequences for national development have been dire. The deterioration in the standards of living, public welfare, social service delivery and infrastructure has been extensive. There are recent macro-economic statistics on economic growth which raise hopes, but the larger impact on development particularly industrialization, production, employment, poverty and social services remain poor. This raises questions about the nature of growth and the level of trickle down effects on living conditions. The authors raise and seek answers to critical questions on the Nigerian economy. The work is a critical assessment of the economy and its prospects, particularly against the backdrop of recent visions, plans, reforms, policies and agenda. Its approach is simple and the breadth fairly comprehensive. It contributes hugely to understanding the peculiar challenges of managing the economy for growth and development. We are particularly grateful to the Think Tank Initiative for the Institutional support provided for CPED which has enabled the Centre to support this study and its publication in this policy monograph. Professor Emeritus Andrew G. Onokerhoraye Executive Director, CPED, Benin City. January 2014. CPED Monograph Series 2014 iii CONTENTS Forward iii Preface vii Chapter 1: Introduction 1 Chapter 2: Macroeconomic Environment 6 2.1 Structure of the Economy 6 2.2 The Rural Economy 20 2.3 Domestic and External Trade 35 Chapter 3: External Sector and the Economy 38 3.1 Export Boom and Structural Change 38 3.2 External Debt Problem 40 3.3 Global Economic Melt-down 43 3.4 Capital Inflow 45 Chapter 4: Economic Planning frameworks and Economic Reforms 49 4.1 Economic Planning Framework 49 4.2 Structural Adjustment 51 4.3 National Rolling Plan 54 4.4 National Economic Empowerment and Development Strategy 56 4.5 Vision 20:2020 Framework Development 59 4.6 Financial Sector Reforms 61 4.7 Petroleum Sector Reforms 64 4.8 Public Sector Reforms 65 4.9 Macroeconomic Policies 67 4.10 Macroeconomic Performance 70 Chapter 5: Emerging Trends 74 5.1 Development Planning and Outcomes 74 5.2 Management of the Economy 77 5.3 Consolidation of Reforms 78 5.4 Growth and Development 80 Chapter 6: Prospects of the Economy 84 6.1 Economic Outlook 2013-2016 84 6.2 Prospects of Enduring Growth 85 6.3 Current Growth Features 86 6.4 Challenges Facing the Economy 89 6.5 Policy Options 90 Chapter 7: Conclusion 92 Selected Bibliography 94 CPED Monograph Series 2014 iv LIST OF TABLES Table 1: Distribution of Farmers’ Income by Sex, Sector and Geo-political Zones (naira), 2004. ......................................................................................... 21 Table 2: Domestic and External Trade in Nigeria .................................................... 36 Table 3: Sectoral Distribution of Nigeria’s GDP (in Percentage) ............................. 39 Table 4: External Debt and Nigerian Economy ..................................................... 42 Table 5: Stock Market Indicators 2006 – 2010 ........................................................ 44 Table 6: Capital Inflow and Economic Growth in Nigeria, 1980–2003 .................... 47 Table 7: Economic Indicators in the Period of Structural Adjustment Program/ Rolling Plan, 1986 – 1994 ......................................................................... 53 Table 8: Selected Economic Indicators of the Nigerian Economy ........................... 69 Table 9: Performance of the Nigeria Economy under NEEDS…… .................. 75 Table 10: Performance Indicators in First Implementation Plan of Vision 20:2020 (2010-2013) .............................................................................. 76 Table 11: Nigeria: Selected Economic Indicators ................................................... 81 Table 12: FDI Inflows For Next (N–11) Countries 2010 – 2012 ($’bn) ................... 82 Table 13: Nigeria’s Historical and Projected Annual Growth Rates ......................... 84 Table 14: Nigeria: Selected Development Indicators .............................................. 88 CPED Monograph Series 2014 v ACRONYMS GDP Gross Domestic Product PPP Purchasing Power Parity ADP African Development Bank SMIDA Small and Medium scale Industries Development Agency RBDA River Basin Development Authorities SME Small and Medium Enterprise ECOWAS Economic Community of West African State EPZ Export Processing Zone CBN Central Bank of Nigeria CDS Clearing Delivery and Settlement ATS Automated Trading System UBE Universal Basic Education NRC Nigerian Railway Corporation ICAO International Civil Aviation Organization ITU International Telecommunication Union NITEL Nigerian Telecommunication Ltd M-TEL Mobil-Telecommunication Ltd NIPOST Nigerian Postal Service Ltd .T AFEM Autonomous Foreign Exchange Market USA United State of America DAS Dutch Auction System NGO Non Governmental Organization ROSCA Rotating Saving and Credit Association RNFA Rural Non Farm Activities FDI Foreign Direct Investment OFI Other Financial Inflows FPI Foreign Portfolio Investment SAP Structural Adjustment Programme NEEDs National Economic Empowerment Development Strategy LEEDs Local Economic Empowerment Development Strategy MDGs Millennium Development Goals NDIC Nigerian Deposit Insurance Corporation LNG Liquefied Natural Gas DMO Debt Management Office DPC Due Process Compliance BPP Bureau of Public Procurement SURE-P Subsidy Reinvestment and Empowerment-Programme PRSP Poverty Reduction Strategy Papers LCCI Lagos Chambers of Chambers and Industry CPED Monograph Series 2014 vi PREFACE A study of the Nigerian economy poses several challenges to scholars, because of its peculiar structure, characteristics and outcomes and the contradictions inherent therein. After witnessing a shift from agriculture to crude oil and gas, as the central driver of growth by the late 1960s, all efforts to diversify the economy and provide a better basis for broad, stable and productive growth have met with very limited success. Huge oil revenues since the late 1960s, have not translated into prosperity and development, and the country still ranks among the poorest in the world in terms of major indicators of development. In spite of the numerous plans, policy frameworks and reforms, economic growth remains epileptic, lacking sustained or consistent growth and subjected to the vagaries of crude oil and gas prices. Each plan, programme, vision and reforms generates much hopes but actually produces little impact while mismanagement, corruption and poor performance continue to underline economic management. While the majority of Nigerians reel under the yokes of poverty, disease and misery, the ruling elite has not demonstrated serious commitment, discipline and sacrifice in driving growth and progress. Economic inequality remains deep as 10 percent of the poorest in Nigeria have only 1.9 percent of national income while the richest 10 percent have 33 percent (The Guardian 5/08/2010). Though there is currently growth, economic performance remains weak, and the manufacturing and social service sectors have experienced little substantive growth. More critically, current growth is neither broad nor inclusive and is not driving human development, employment, production and wealth. These conditions, paradoxes and challenges raise numerous questions. Can there be real growth without production? Given the current distortions and weaknesses, CPED Monograph Series 2014 vii can growth be consistent and sustained in the long term? How appropriate are current policies for driving economic growth with development? What policy and implementation deficits, societal challenges and governance weaknesses underpin weak economic performance? Given the character of the ruling class, governance and democratic practice, can efficient resource management, transparent and accountable governance, and the mainstreaming of public welfare and public interests required to drive sustainable development be