Nigeria-THE ROLE OF GOVERNMENT

Mechanized farm in northern Nigeria Young farmers making vegetable beds at Esa-Oke agricultural settlement
Courtesy Embassy of Nigeria, Washington

Young farmers making vegetable beds at Esa-Oke agricultural settlement
Courtesy Embassy of Nigeria, Washington

Some of Nigeria's political leaders have advocated African socialism, an ideology that does not necessarily coincide with the Western socialist concept of the ownership of most capital and land by the state. Instead, the African variety usually has included the following: a substantial level of state ownership in modern industry, transportation, and commerce; a penchant for public control of resource allocation in key sectors; a priority on production for domestic consumption; and an emphasis on the rapid Africanization of high-level jobs. Despite the socialist rhetoric of some politicians, in practice Nigeria worked toward a mixed economy, with the directly productive sector dominated by private enterprise, the state investing in infrastructure as a foundation for private activity, and government providing programs and policies to stimulate private (especially indigenous) enterprise.

None of the major Nigerian political parties controlling national or regional governments from 1951 to 1966 (or 1979 to 1983) was a socialist party or a party strongly committed to egalitarianism. Even the Action Group, led during the first republic by the ostensibly anticapitalist Chief Obafemi Awolowo, had as its foundation the rising new class of professionals, businesspeople, and traders.

After Nigeria's 1967-70 civil war, petroleum output and prices increased rapidly. The government's control of the extraction, refining, and distribution of oil meant that, the state became the dominant source of capital. By the mid-1970s, petroleum accounted for about three-fourths of total federal revenue. To the most vigorous, resourceful, and well-connected venture capitalists (often politicians, bureaucrats, army officers, and their clients), productive economic activity lost appeal. Manipulating government spending became the means to fortune. Because of the rapid growth of the state bureaucracy and the establishment of numerous federally funded parastatals, the size of the government sector relative to the rest of the national economy hit a peak in the late 1970s.

In an effort that culminated in the 1970s, the Nigerian government gradually expanded its controls over the private sector, levying differential taxes and subsidies, increasing industrial prices relative to farm prices, favoring investment in key sectors, providing tariff and tax incentives to vital sectors, protecting favored industrial establishments from foreign competition, awarding import licenses to selected firms and industries, and providing foreign exchange to priority enterprises at below-market exchange rates. While the ostensible reasons for this policy of favoritism were to transfer resources to modern industry, expand high-priority businesses and sectors, encourage profitable enterprises, and discourage unprofitable ones, in practice the government often favored urban areas by promoting production that used socially expensive inputs of capital, foreign exchange, and high technology. Market intervention helped political and bureaucratic leaders protect their positions, expand their power, and implement their policies. Project- or enterprise-based policies (unlike reliance on the market) allowed benefits to be apportioned selectively, for maximum political advantage. Government made it in the private interest of numerous individuals to cooperate in programs that were harmful to the interests of producers as a whole. However, market-clearing prices (for farm commodities or foreign exchange), whose benefits were distributed indiscriminately, inspired little or no political support among farmers and businesspeople.

Beginning in 1979, the policy prescription of the World Bank (and IMF) was for African countries to refrain from interfering in foreign exchange and interest rates, wages, and farm prices; to privatize state-owned enterprises (especially agro-processing, farm input distribution, insurance, and retail and wholesale trade); to relax restrictions on foreign capital; and to encourage indigenous business ventures. By the early 1980s, Nigeria faced substantial international payments deficits in the midst of declining export prices and rising import prices, rising external debt payments, and negative economic growth. The government consequently undertook an its own SAP that was patterned along World Bank guidelines in 1986, with World Bank conditions including devaluation of the naira (for value of the naira--see Glossary), reductions in real government spending, abolition of official agricultural marketing boards, the sale of public enterprises, liberalized trade, and reduced quotas and licenses (see Planning , this ch.).

Data as of June 1991