NATIONAL INTELLIGENCE SURVEY 50B; NIGERIA; THE ECONOMY

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• Collection: NIS
• Document Number (FOIA) /ESDN (CREST): CIA-RDP01-00707R000200100003-2
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CONFIDENTIAL
50B/GS/E
N igeria
February 1973
NATIONAL INTELLIGI
CONFIDENTIAL
NO FOB ..'IGN DISSEM
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I
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NIGERIA
CONTENTS
This General. Survey supersedes the one dated De-
cember 1969, copies of which should be destroyed.
A. Economic appraisal 1
The most important economy in black Africa;
disruption of economic activity during civil war
and recovery since early 1970; effect of petro-
leum production and exports on government
revenues and foreign exchange holdings; pros-
pects for long -range economic growth; govern-
ment policy.
B. Sectors of the economy 3
1. Agriculture, forestry, and fishing 3
a. Climate and crop zones 3
Diverse, climatic conditions re,:ult in variety
of crops.
CONFIDENTIAL No FOREIGN DISSEM
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1. Foreign trade
Domination by petroleum exportss; surplus since 1965; principal export markets
and import sources; liberal trade policies.
2. Foreign aid
Aid provided by Communist and non Communist countries.
3. Balance of payments
Effect of the civil war; easing of extenial paymeAs position after restoration
of petroleum production; responsibility for foreigi; exchange policy; authorized
exchange dealers.
ii
16
18
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b. Land use and tenure
3
Land use; pattern of land ownership.
c. Agriculture
Dependence of economy upon agriculture; low rate of productivity; pro-
4
motion of stability in prices; marketing of export crops by marketing boards.
(1) Food crops
4
Staple food crops grown on subsistence basis.
(2) Export crops
5
Major export crops; relative decline in importance of agriculture.
d. Livestock
Importance as source of animal protein, other nutrients, and hides and
6
skins; ownership mostly by nomadic tribes.
e Forestry
6
Area, reserves, and ownership of forest; exports of forest products.
f Fishing
Importrtance to the economy; size of catch, consumption of fish.
7
2. Fuels and power
7
Sources of power; importance of petroleum; petroleum ownership and policy;
location and capacity of refinery; importance of electric power and degree of
government control; size of power base, transmission system; development
programs.
3. Minerals and metals
10
Importance of mineral resources.
4. Manufacturing and construction
10
Contribution to overall economy; rate of growth; problems of expansion; gov-
ernment policy; construction decline during civil war; degree of self sufficiency
in basic construction materials.
5. Domestic trade
11
Size, direction, and organization of internal tr.-3e.
C. Role of government in the economy
12
1. Economic policy
12
First plan (1946 -54) largely ineffective; second plan (1955 -62) mainly regional
in approach; third plan (1962 -68) was first national plan; success of plan;
interruption of planning process by civil war; second national plan (1970 -74);
shortfalls in achievement.
2. Government finance
12
Finance of federal, state, public corporations, and local authorities; allocation
of federal revenue to states; federal and state budgets; influence of civil war
and petroleum on federal budgets; revenue sources; current expenditures; publi
debt.
3. Money and banking
14
Exchange rate; role of Central Bank in banking and monetary system; federal
monetary policy; number of commercial banks; gover un t policy and par-
ticipation in commercial banks; other financial institutions.
D. International economic relations
16
1. Foreign trade
Domination by petroleum exportss; surplus since 1965; principal export markets
and import sources; liberal trade policies.
2. Foreign aid
Aid provided by Communist and non Communist countries.
3. Balance of payments
Effect of the civil war; easing of extenial paymeAs position after restoration
of petroleum production; responsibility for foreigi; exchange policy; authorized
exchange dealers.
ii
16
18
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FIGURES
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age
Fig. 1
Economy activity map)
2
Fig. 2
Gross domestic product by economic sector chart
3
Fig. 3
Land use chart)
3
Fig. 4
Production of major food crops table)
4
Fig. 5
Marketing board purchases of major export crops (table)
5
Fig. 6
Timber and plywood exports table)
7
Fig. 7
Petroleum production chart)
8
Fig. 8
Petroleum's contribution to government revenue and balance
Fig. 9
of payments (chart)
Production of principal minerals (tab.'e)
8
10
Fig. 10
Federal government revenuos and expenditures table)
13
Fig. 11
Fig. 12
Public debt (chart)
Commercial banks (table)
14
Fig. 13
Composition of exports chart)
15
16
Fig. 14
Composition of imports chart)
16
Fig. 15
Balance of trade (chart)
17
Fig. 16
Direction of trade (chart)
17
Fig. 17
Balance of payments (table)
19
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The Economy
A. Economic appraisal ((J/OU)
Nigeria, with a gross domestic product (GDP) of
approximately $6.1 billion in FY71 (more than double
that of any other black African country), is the
economic giant of black Africa (Figure 1). Its
population of 58 million is the largest in all of Africa,
providing a substantial domestic market for local
industry. Extending inland about 600 miles from the
coast, the country has widely differing climatic and
terrain conditions which enables it to produce a
variety of agricultural crops for export. Nigeria is the
second largest cocoa producer in the world, the largest
producer and exporter of rubber in Africa, and one of
the world's leading exporters of peanuts and pdrn
products. It possesses most forms of primary energy in
quantities in excess of domestic requirements, and it is
the eighth largest producer of petroleum in the world.
Its administrative and financial institutions,
developed under British tutelage, are better developed
than those of most west African countries. In spite of
its large area and population and its fairly large
economic potential, however, Nigeria remains one of
the poorest countries in the world, with a per capita
income probably not over $100 in 1971.
Virtually all economic activity in Nigeria was
affected by the civil war (1967 -70). After achieving an
average increase in real GDP of about 5% annuallv
from independence in 1960 until the outbreak of the
war in 1967, all major components of GDP, except
manufacturing, declined in 1968 and showed little
recovery through 1969. Agriculture and nptroleum
production suffered the mast, but distribution,
construction, and transportation and communications
were also adversely affected. Furthermore, the war
had a particularly adverse impact on the government's
financial position. Defense expenditures rose sharply,
while revenues from petroleum production and high
duty consumer imports declined. Budget surpluses,
typical of the first 6 years of independence, were
replaced by growing deficits. Despite extensive
controls, Nigeria incurred balance -of- payments
deficits and experienced serious delays in its current
payments.
Much has been accomplished since the end of the
war in early 1970, and economic: growth rates have
surpassed those of prewar years. In real terms, GDP
increased 9.6% in 1970 and an estimated 12% in 1971.
Some of the expansion came from reconstruction in
the east and from increased production of cocoa,
cotton, and palm products, but the major factor was
the very large increase in petroleum production and in
manufacturing, the two fastest growing sectors of the
economy. The increase in agriculture represented to a
large extent a return to prewar production levels
following major declines in output during the war; the
increases in petroleum and manufacturing output, on
the other hand, represented major ga ?ns over prewar
prodi!-:tion.
Despite its declining share of GDP and its relativelti
siow growth rate, agriculture remains the backbone of
the economy (Figure 2). Agriculture continues to
employ over half of the labor force and provides
sufficient food for domestic needs. In addition,
agricultural products constitute a significant part of
the country's exports, although their share of total
exports declined markedly as petroleum exports rose.
Agricultural exports declined from 70% of the value of
all exports in 1965 to 551' in 1969 and 22(' in 1971,
although the absoiute value of such exports showed
little annual change.
The rapid growth in petroleum production has
made Nigeria a major world producer and, combined
with recent higher receipts per barrel because of new
price agreements, has greatly increased government
revenue. Receipts from petroleum now account for
over one -half of federal government budget revenues,
thereby providing Nigeria with adequate funds to
meet the present needs of the expanding government
sector, reduce the government internal debt, support
the military establishment, and assist the state
budgets. The increase in receipts also reduces the need
for internal and external borrowing to finance the
Second National Development Plan. Furthermore,
petroleum exports provided about 70% of Nigeria's
foreign exchange earnings in 1971 and have alleviated
a foreign exchange crisis caused by the civil war. In the
future, growth in output from existing concessions is
1
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Q s.lmtl
M farm
Mfidaotlrl
r`
Lake
,.ft-r
BftleMl
KaNyl
Dam
Bfegf
s
IMrh
s
r.
A
Lek fJ3
y
Q
aacs
L
evil
INDUSTRY
L
111111 Petroleum refinery
Plywood plant
1r Cement plant
Sugarmill
1% Hydroelectric powerplaw
Textile mill
G
bfr
MINING
AGRICULTURE
Petroleum
Peanuts
Sesame seed
Tin ore and oulumbite
Oil palm
Cotton
Coal
0 Cocoa
L Rubber
5014W 12.72
L
A Iron ore
FIGURE 1. Economic activity (U /OU)
expected to continue, but at a reduced rate, and
petroleum production by new concession holders
probably will take up the slack.
Prospects for significant long -range economic
growth in Nigeria are fairly good. The Second
National Development Plan (1970 -74), which was
launched officially in October 1970, emphasizes
increasing development in agriculture, industry, and
transportation. The plan is aimed at achieving an
overall domestic growth rate of 6.6% per year during
the plan period and anticipates investments of $4.5
billion, to be financed almost equally by the private
and public sectors. Foreign capital is expected to
finance 50% of private investments and 19% of public
investments. The plan started slowly, as the
government and much of the population were
preoccupied with postwar reconstruction and
rehabilitation. Although there has been some slippage
2
in investments during the first 2 years of the plan, the
planned growth rate has been exceeded, and financial
resources have exceeded expectations because of the
boom in petroleum production. The biggest plan
constraints now are the lack of prepared projects for
development and the limited managerial capacity of
the government.
Government policy in Nigeria actively promotes
greater economic participation by Nigerians and more
government control over the economy. The long
awaited "Nigerianization" decree was issued in early
1972, but it was considerably more moderate than
expected. Although it reserves 22 smali -scale
manufacturing and service fields for Nigerians (after
31 March 1974) and requires at least 40% Nigerian
ownership in 33 others, s about $10 million of the
$800 million in foreign investment outside the
petroleum industry appears to be affected. To date,
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US32.7 Billion LlS$5.2 Billion
1007
Mining (incl. petroleum)
C6 I A%,.Iculture, forestry. and
hing
FY 1960 FY 1970*
*Excludes easte-n states, Figures may not add
to total because of rounding.
FIGURE 2. Gross domestic product by economic
sector (U /OU)
the major government involvement has been in the
petroleum industry, in which it now participates in the
ownership of all new concessions and in several
existing ones. All government shares are held by the
Nigerian. National Oil Company (NNOC), which
participates in petroleum exploration, production,
refining, and marketing. The government also plans to
participate in the equity of all commercial banks in
the country as a means of assuring adequate financial
resources to support its Nigerianization policy. The
government, however, has attempted to remain
flexible in its demands and continues to encourage
foreign investment in many of the remaining sectors of
the economy.
B. Sectors of the economy
1. Agriculture, forestry, and fishing (U /OU)
a. Climate and crop zones
Nigeria's size (about 357,000 square miles) and
diversity of climate make possible ne production of a
broad range of agricultural products. The tropical
coastlands of the south, characterized by dense forests
and mangrove swamps, support rich belts of cocoa and
oil palm plantings; the dry north produces primarily
cotton and peanuts and is the main cattle raising area
of the country; and the area between the two is a
transitional area which produces the major food Irons
of the country�yams, cassava, corn, and rice.
Two seasons �dry and wet �are well marked
throughout most of Nigeria. The north's dry season,
from October to May, is usually made dusty by Sahara
winds. In the south the dry season extends from
Decembe; to February, with considerable% esert winds
in December and January. Rainfall varies from 150
inches per year on the coast to 25 inches or less in the
extreme north. Heavy rains contribute to severe soil
leaching. Commercial fertilizer is still not widely used,
although its consumption has increased rapidly in the
last decade.
b. Land use and tenure
Less than 15% of the land area of Nigeria is under
cultivation for farm or tree crops because of the
abundance of land and the rotational system of
farming (Figure 3). Except for the nomadic, livestock
raising Fulani of the north, most tribes farm their land
under a traditional system of shifting agriculture. The
land is cultivated for as many years as it is fertile and is
Total land area
357,000 square miles
Busl
Milo
Field
crops
FIGURE 3. Land use (U /OU)
3
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1
4 Other
j Health
4
Education
4
General government
Transportation and
communications
12
Distribution
4
5
Building and construction
1� Electricity and
water supply
Manufacturing
Mining (incl. petroleum)
C6 I A%,.Iculture, forestry. and
hing
FY 1960 FY 1970*
*Excludes easte-n states, Figures may not add
to total because of rounding.
FIGURE 2. Gross domestic product by economic
sector (U /OU)
the major government involvement has been in the
petroleum industry, in which it now participates in the
ownership of all new concessions and in several
existing ones. All government shares are held by the
Nigerian. National Oil Company (NNOC), which
participates in petroleum exploration, production,
refining, and marketing. The government also plans to
participate in the equity of all commercial banks in
the country as a means of assuring adequate financial
resources to support its Nigerianization policy. The
government, however, has attempted to remain
flexible in its demands and continues to encourage
foreign investment in many of the remaining sectors of
the economy.
B. Sectors of the economy
1. Agriculture, forestry, and fishing (U /OU)
a. Climate and crop zones
Nigeria's size (about 357,000 square miles) and
diversity of climate make possible ne production of a
broad range of agricultural products. The tropical
coastlands of the south, characterized by dense forests
and mangrove swamps, support rich belts of cocoa and
oil palm plantings; the dry north produces primarily
cotton and peanuts and is the main cattle raising area
of the country; and the area between the two is a
transitional area which produces the major food Irons
of the country�yams, cassava, corn, and rice.
Two seasons �dry and wet �are well marked
throughout most of Nigeria. The north's dry season,
from October to May, is usually made dusty by Sahara
winds. In the south the dry season extends from
Decembe; to February, with considerable% esert winds
in December and January. Rainfall varies from 150
inches per year on the coast to 25 inches or less in the
extreme north. Heavy rains contribute to severe soil
leaching. Commercial fertilizer is still not widely used,
although its consumption has increased rapidly in the
last decade.
b. Land use and tenure
Less than 15% of the land area of Nigeria is under
cultivation for farm or tree crops because of the
abundance of land and the rotational system of
farming (Figure 3). Except for the nomadic, livestock
raising Fulani of the north, most tribes farm their land
under a traditional system of shifting agriculture. The
land is cultivated for as many years as it is fertile and is
Total land area
357,000 square miles
Busl
Milo
Field
crops
FIGURE 3. Land use (U /OU)
3
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then allowed to revert to bush until it has regained its
fertility. Nearly all cash and subsistence crops are
grown on small, nonmechanized farms which average
3.7 acres per family. Plantation agriculture plays only
a small role in Nigeria.
Land tenure is still largely under the control of
extended families, clans, or villages. A farmer has title
to land by virtue of his membership in the clan. He
can use it to produce food and other necessities, but as
soon as the fallow period begins, the land reverts to the
clan and may later be allocated to another member.
Furthermore, because of the system of inheritance, a
clan's land tends to become fragmented and scattered.
The system discourages individual initiative and
perpetuates small, uneconomic plots. While the
government recognizes the need for change in the land
tenure system, systrrnatic land reform is unlikely for
some time because it is bound up with tribal order.
The government has treated the land tenure system as
a delicate political problem and allocated basic
responsibility for it to the state governments.
Permanent individual ownership is increasing to some
extent, however, as a result of population pressure and
changes in cropping patterns.
e. Agriculture
Nigeria's economy is heavily dependent on
agriculture, which supplies most of the domestic food
requirements and makes. Nigeria an important world
exporter of several agricultural commodities. Although
its relative share of GDP has been declining in recent
years as petroleum output has grown, agriculture
combined with forestry and fisheries still accounted for
over half of GDP in FY70. Exports of agricultural
products have helped finance the country's
development by making available foreign exchange
required to purchase capital goods abroad.
Nigerian agriculture generally suffers from low
productivity. Production techniques are primitive, and
yields are low. Increases in output have resulted
mainly from augmenting the area cultivated rather
than from improving production techniques. Growth
in agricultural output is projected at only about 2.4%
a year in the current development plan period (1970-
74), and the plan includes few specific provisions for
agricultural development.
State marketing boards promote stability in prices
and marketing of export crops. The boards have a
monopoly on the purchase of most export crops, which
they buy through licensed buying agents, at uniform
legal minimum prices which the boards establish. The
purchased crops are sold abroad through thy; Nigerian
Produce Marketing Company (NPMC), which
surrenders proceeds to the boards. Although the
primary objective of the marketing boards is to
stabilize prices paid to the farmers and improve the
marketing organization, the boards also provide
revenue to state governments which is used in both the
agricultural and nonagricultural sectors.
I Food crops -The staple food crops -roots
and tubers, grains and pulses -are grown chiefly
on a subsistence basis. Domestic production of
food crops generally satisfies local demand, but
some sugar, wheat, fish, and dairy products are
imported. The average daily caloric intake of
about 2,200 per person compares favorably with
that of other underdeveloped countries but is
considerably be]ONV that of most industrialized
countries. Protein intake, particularly from animal
sources, is low.
Root crops comprise over half of the food er -�,,s
produced for domestic consumption. Yams and
cassava are the most important (Figure 4), accounting
for over 90% of total root crop production, followed by
cocoyams and sweet potatoes. The root crops are high
in caloric value, having a high carbohydrate and low
protein content.
Grains, including sorghum (guinea corn), millet,
corn, rice, and wheat, are the second most important
class of food crop in Nigeria. They are considerably
FIGURE 4. Production of major food crops by crop year (U /OU)
(Thousand long tons)
na Data not available.
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1964/65
1965/66
1966/67
1967/68
1968/69
1969/70
ESTIMATE
1970/71
Yams
14,334
14,504
11,775
7,683
11,100
14,580
13,000
Cassava..........
7,872
8,069
8,266
8,462
8,679
8,895
9,000
Guinea corn......
4,172
4,168
3,110
3,336
3,500
4,015
na
Millet............
2,445
2,686
1,719
2,549
3,000
3,510
3,000
Corn
1,191
1,142
1,115
635
1,200
1,590
1,400
Rice
218
228
197
298
380
350
421
na Data not available.
4
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richer in protein and B vitamins than the root crops
and are used for human food, feed for livestock,
fermentation into alcoholic drinks, and othev-
purposes. The stalks are used for fuel, for basket and
mat weaving, and for structural purposes. Guinea corn
is by far the most import int cereal crop and is used
primarily as dawn, a fermented food rich in
carbohydrates.
The most important lulses grown are peanuts
(which are discussed ul.._'er export crops), cowpeas,
lima beans, and soybeans. They are an important
source of protein, and some are also rich sources of oil.
Ccwpeas often are interplanted with other crops or
used as a cover crop. They are a primary source of
plant protein in Nigeria as well as a source of
carbohydrate, calcium, iron, B vitamins, and carotene.
In addition to use as a food, cowpeas are used us
livestock fodder and in the manufacture of fertilizers.
(2) Export crops Cocoa, peanuts, palm products,
rubber, cotton, and sesame seed are Nigeria's major
export crops (Figure 5). Although agricultural
exports have long been the backbone of the Nigerian
economy, their relative importance has declined in
recent vexrs because of increased petroleum exports.
In 1968 agricultural exports including forest prod
ucts xvere valued at $384 million and made up 65%
of the value of all exports, but by 1970 they ac-
counted for just 33 although their value had risen
to $405 million. Agricultural exports declined to
about $360 million in 1971, less than one- fourth of
the total.
Nigeria is the second largest cocoa- producing
country in the world, and cocoa exports, valued at
$200 million in 1971 (12% of total exports), are the
leading export crop of the country. About 90% of the
crop is produced in Western State (Figure 1), and
small quantities are produced throughout the country.
Except for a few large plantations, cocoa is generally
grown on small peasant farms. Since 1964, production
has been declining due to the low rate of replantings
and the poor condition -)f existing plantations. Most of
the cocoa is exported unprocessed, but small amounts
of cocoa butter, cake, and powder are produced in the
country for export.
Peanuts are the second ranking cash crop. Exports
of peanuts and peanut products were valued at $61
million, or 4% of total exports, in 1971, making them
the third ranking export product of the country. Most
peanuts for export are produced in northern Nigeria,
while production in the south largely supplies local
requirements. Emphasis has been placed increasingly
on the processing of peanuts into oil and cake, largely
to avoid the fluctuating international prices of raw
peanuts; domestic crushing mills now have a capacity
of about 400,000 tons annually.
Production of peanuts has declined since 1966,
largely because of a shift in relative prices of peanuts
and cotton; substantial acreages formerly planted to
peanuts are now planted to cotton. li, 1970/71, the
peanut crop was adversely affected uy poor weather,
and production was unusually low. Production in
1971/72, stimated at about 325,000 tons, continued
to decline as land was diverted to more profitable food
crops. Besides the declining production, smuggling,
largely to Niger, has also affected the quantity of
peanuts available for legal export and for domestic
consumption.
Before the civil war, Nigeria was the world's leading
exporter of palm products, but disruption of
production and transportation difficulties during the
war reduced output to 40% of its prewar level. Since
the end of the war production has recovered to some
extent, but exports probably never will return to their
prewar level, since a larger part of the output now is
consumed locally. Exports of palm products were
FIGURE 5. Marketing board purchases of major export crops (U /OU)
(Thousand tons)
1959/60 1961/62 1963/64 1965/66 196i168 1968/69 1969/70
Cocoa
149
191
216
182
231
186
218
Peanuts............
446
686
787
978
684
763
638
Palm kernels
423
362
401
414
193
220
295
Palm oil
190
129
148
130
4
14
28
Rubber
57
60
72
70
52
56
58
Seed cotton.........
89
83
129
127
79
162
270
Sesame seed
21
21
20
23
13
13
17
na Data not available.
*Purchases during calendar years for last half of year shown (e.g., 1959/60 =1960 calendar year)
*Exports during calendar years; commodity not purchased by marketing boards.
ESTIMATE
1970/71
299
281
302
31
na
113
6
5
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valued at $50 million in 1971, accounting for 3% of
total exports, compared to $94 million, or 1251 of the
total, in 1966. The bulk of the crop is harvested from
wild palm groves in the eastern and midwestern area.
Palm oil, extracted from the palm fruit, is by far the
most valuable product and is used in the manufacture
of edible fats, and in the soap, candle, and tinplate
industries. The palm kernels are crushed to extract
palm kernel oil, which has applications similar to
palm oil, and the residual cake is used for livestock
feed. Palm leaves, which are 6 to 15 feet long,
are used locally for roof g and to make fences
and baskets.
Nigeria is the largest producer and exporter of
rubber in Africa, but exports have been stagnant in
recent years. Rubber exports valued at $17 million
constituted 1 of the total exports in 1971. Abo;it 80%
of production comes from Mid Western State, where it
is grown mostly on native smallholdings. The Rubber
Development Agency of Mid Western State is
attempting to improve the production, marketing, and
manufacturing of rubber by guaranteeing a fixed price
and by attempting to increase the purity of the raw
rubber. Production of rubber was 58,000 long tons in
1969/70.
Most cotton is grown in the north, where production
has been expanding steadily except for the 1967/68
crop year, when bad weather caused a sharp drop.
Total output in 1969/70 amounted to about 270,000
tons. Cotton lint for weaving is the most valuable
product of cotton cultivation. Some cotton lint is
exported, but a large portion of the outpQ is used in
Nigeria's expanding textile industry. Some cottonseed
is exported, but most is used as animal feed and as a
source of oil.
Production of sesame seed, also known as benniseed,
has remained stable except in 1967/68 and 1968/69
crop years, when poor weather caused output to drop
to 13,000 tons. The crop is grown chiefly in Benue
Plateau State. Sesame seed oil is used for margarine
and cooking and as a substitute for olive oil.
d. Livestock
Although accounting for only about 5% of GDP,
livestock production is important to Nigeria as a
source of animal protein and other nutrients and as a
source of hides and skins for export. The animal
population includes an estimated 11 million cattle, 7.5
million sheep, 21.5 million goats, 700,000 pigs, and 66
million fowl. Nearly all of the cattle and about two
thirds of the sheep, goats, and poultry are raised in the
northern states. Pigs are raised primarily in the south.
[01
The nomadic Fulani tribes, which own most of
Nigeria's cattle, move from place to place in search of
water and better pastures for their animals during the
dry season. The long treks result in emaciated animals,
and many of the animals that are taker into tsetse
infested areas die of trypanosondasis. The government
plans to eradicate the tsetse fly and settle the nomadic
herdsmen by providing stable sources of water through
the construction of wells and dams, but it probably
will be many years before the quality of Nigerian
cattle is significantly improved.
Sheep and goats are raised both for meat and for
their skins. Most slaughtering takes place on festive
occasions, but it is also done throughout the year to
supplement the meat supply. Most skins f, ,r export
come from the northern states. The tied Sokoto goat of
the north is a chief source of Moroccan and other
colored leather.
Pig breeding offers one of the best opportunities for
increasing the output of animal protein in Nigeria.
Indigenous pigs are small and inferior to imported
breeds, and efforts ;,ie being made to improve
production through crossbreeding and commercial
production of imported breeds. The government also
plans to increase production of inexpensive feed in
order to reduce pork prices.
Poultry raising has benefited from government
programs to make feed available at reasonable cost
and to improve poultry quality by introducing
imported breeds. Local breeds of poultry are small and
are poor layers. They are found in all settlements and
tend :o scavenge for their food. Ducks, geese, guinea
fowl, and turkeys are raised primarily for private
cons:imption.
e. Forestry
More than one -third of Nigeria's land area is
covered by forests, but only about 10% is classified as
permanent forest reserves. Most of the forest reserves
consist of northern savanna woodland. The high
forests of the southern part of the country account for
20% of the reserves, and the coastal swamps acco-int
for less than 1% of the total. Since the savanna
woodland contains relatively few valuable species and
many of its forests are virtually inaccessible, its main
use is as a source of firewood and building materials
for the local inhabitants. The dense high forest of the
wet southern part of the country provides nearly all of
the industrial wood. The high forests contain many
tropical broadleaf species, such as obeche, mahogany,
sapele, and abura. Timber exports have originated
here for centuries; the numerous rivers, creeks, and
roads facilitate the transport of timber.
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All of the forest area except that held by the state
governments is owned by tribes, clans, or families and
is classed as community forest. The government's
Policy is to place all state forests and one- fourth of the
community forests into reserves to create a permanent,
w%Il- managed forest estate covering 25% of the
co;nntry's land area. So far, however, increasing
population, the land tenure system, and the bush
fallow method of cultivation have limited the reserve
to only about 10% of the land area. In the west,
scientific protection and management of forest
reserves have been possible, with forestry policy
providing a 50 -year cycle of felling and regeneration.
Other forests, however, have been steadily reduced as
a result of careless and uncontrolled timber- cutting
and shifting agricultural cultivation.
Timber and plywood exports have declined in
recent years, and by 1970 they -ere only about one
third their 1960 volume (1 6). In 1969 timber
exports were valued at $23 million, or 5% of total
exports; by 1965 their value had declined to $20
million, less than 3% of total exports, and in 1971
timber exports of $10 million were less than 1 of total
export ie decline is attributed to competition from
other m.,re efficient west African producers, increased
shipping costs, increased domestic consumption, and
relatively poo: quality, which reduced exports to the
United States. Most exports go to the United
Kingdom, the Netherlands, West Germany, and Italy.
f. Fishing
Fishing contributes less than 5% of Nigerian; GDP.
Expansion is hindered by the lack of satisfactory
fishing terminal, trained manpower, and suitable
fishing vessels. Nevertheless, the potential for
expansion of fish production is large, as fish *s a
significant adjunct to the diet throughout the country
FIGURE 6. Timber and plywood exports (U /OU)
(Thousand cubic feet)
and an important supplement to meat as a source of
animal protein. The current development plan
allocates about $13 million for capital expenditures to
increase the fish catch. The largest expenditure,
planned by Lagos State, is to be used to build a large
fishing terminal and expand the fishing fleet.
Landings totaled about 156,000 metric tons in 1970.
The catch includes sardinella, bonga, croaker, catfish,
threadfin, sole, bigeye, rays, shark, and shrimp. A 15%
ad valorem tax is levied on the wholesale price of fish
landed by Nigerian -owned and operated vessels, and
a 25% 'tax is levied on fish landed by foreign -owned
vessels.
About 54,000 tons of fish are caught annually by
the traditional canoe fishermen. Sea canoe fishing is
conducted all along the coast on a full -time basis and
produces about 25,000 tons a yeas. In addition, many
villagers engage in brackish water fishing on a part
time basis.
Modern commercial fishing is based on a modest
inshore fleet, an expanding shrimp fleet, and a charter
fleet. The first two operate in waters off the Nigerian
coast. The charter fleet, under which Nigerians are
permitted to charter foreign vessels and land the catch
in Nigeria, operates in distant waters. Most of the fish
comes from chartered Soviet and East European
vessels and is landed as frozen whole fish.
Nigeria is the largest consumer of fish and fish
products in Africa. Smoking is the most common
method of processing the fish, and there is an
important internal trade in smoked and dried fish.
Some of the domestic demiand is supplied by imports,
but they declined after the civil war, when imports of
stockfish (air -dried cod without salt) were banned as a
means of conserving foreign exchange. Imports v .;re
valued at $19 million in 1964, whereas in 1970 they
were valued at only $4.1 million. As an anti
inflationary measure, the ban was lifted in 1972.
2. Fuels and power (C)
Nigeria possesses fuel resources capable of providing
far more energy than is needed to meet foreseeable
domestic requirements. Energy sources known to exist
in Nigeria include wood, coal, petroleum, natural gas,
and water power. The inadequacy of interstate
transport is the most important factor limiting the
development of the various fuels.
Wood is the principal fuel used by the Nigerian
population for household heating and cooking. Only
in the major cities are other fuels used to any extent in
homes. Nearly all of the savanna forest growth is
suitable for fuelwood, but the brushlands are the main
source of fuelwood for. the agrarian population.
7
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PLYWOOD AND
LOGS
SAWN TIMBER
VENEERS
1960.........
22,211
2,098
574
1961.........
20,340
2,200
718
1962.........
16,212
2,337
769
1963.........
19,662
2,690
725
1964.........
21,418
2,695
745
1965.........
16,167
2,508
880
1966.........
15,344
2,373
742
1967.........
8,996
1,733
525
1968.........
8,535
1,918
584
1969.........
8,877
2,176
714
1970.........
5,967
1,570
741
and an important supplement to meat as a source of
animal protein. The current development plan
allocates about $13 million for capital expenditures to
increase the fish catch. The largest expenditure,
planned by Lagos State, is to be used to build a large
fishing terminal and expand the fishing fleet.
Landings totaled about 156,000 metric tons in 1970.
The catch includes sardinella, bonga, croaker, catfish,
threadfin, sole, bigeye, rays, shark, and shrimp. A 15%
ad valorem tax is levied on the wholesale price of fish
landed by Nigerian -owned and operated vessels, and
a 25% 'tax is levied on fish landed by foreign -owned
vessels.
About 54,000 tons of fish are caught annually by
the traditional canoe fishermen. Sea canoe fishing is
conducted all along the coast on a full -time basis and
produces about 25,000 tons a yeas. In addition, many
villagers engage in brackish water fishing on a part
time basis.
Modern commercial fishing is based on a modest
inshore fleet, an expanding shrimp fleet, and a charter
fleet. The first two operate in waters off the Nigerian
coast. The charter fleet, under which Nigerians are
permitted to charter foreign vessels and land the catch
in Nigeria, operates in distant waters. Most of the fish
comes from chartered Soviet and East European
vessels and is landed as frozen whole fish.
Nigeria is the largest consumer of fish and fish
products in Africa. Smoking is the most common
method of processing the fish, and there is an
important internal trade in smoked and dried fish.
Some of the domestic demiand is supplied by imports,
but they declined after the civil war, when imports of
stockfish (air -dried cod without salt) were banned as a
means of conserving foreign exchange. Imports v .;re
valued at $19 million in 1964, whereas in 1970 they
were valued at only $4.1 million. As an anti
inflationary measure, the ban was lifted in 1972.
2. Fuels and power (C)
Nigeria possesses fuel resources capable of providing
far more energy than is needed to meet foreseeable
domestic requirements. Energy sources known to exist
in Nigeria include wood, coal, petroleum, natural gas,
and water power. The inadequacy of interstate
transport is the most important factor limiting the
development of the various fuels.
Wood is the principal fuel used by the Nigerian
population for household heating and cooking. Only
in the major cities are other fuels used to any extent in
homes. Nearly all of the savanna forest growth is
suitable for fuelwood, but the brushlands are the main
source of fuelwood for. the agrarian population.
7
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Consumption of fuelwood in most years is estimated at
about 30 million cubic meters.
Nigeria has the only workable coal deposits in west
Africa. The deposits near Enugu have been worked by
the government since 1915, but the gradual
dieselization of the Nigerian railroads beginning in
1958, the development of hydroelectric and gas
turbine power, and the civil war drastically curtailed
the demand for coal, and production declined from
905,000 tons in 1958/59 to 731,000 tons in 1965/66,
and to only 155,000 tons in 1971. Production is not
likely to return to earlier levels but will probably be
limited to meet specialized requirements, although
some coal was exported to Ghana in 1972.
Petroleum, Nigeria's most important fuel, plays a
significant role in development. With production in
early 1972 reaching nearly 1.8 million barrels a day
(Figure 7), Nigeria is now the eighth largest petroleum
producer in the world. Petroleum is by far its argest
export, increasing in value from $191 million, or 26%
of the total exports in 1965, to $1,175 million, or 71
of the total in 1971. Balance of payments
contributions (net foreign exchange earnings) of the
petroleum sector (Figure 8) grew concurrently, from
$91 million in 1965 to $370 million in 1970. The
(Thousand barrels per day)
1800
1600
1400
1200
I
1000
soo
I
Petroleum production
600
400
200
0
1960 61 62 63 64 65 66 67 68 69 70 71 72
fan -May)
FIGURE 7. Nigerian petroleum production (U /OU)
0
AVICons of Doson
Boo
700
600
:w
400
300
200
too
Contribution to
government revenues
Contribution to
balance of payments
0 1 1 1 L I I I I I 1 1
1961 62 63 64 65 66 67 68 69 70 71
rstimaw
FIGURE 8. Petroleum's contribution to government
revenue and balance of payments (U /OU)
contribution to government revenues has also
increased, partly from increased production but also
because of tax agreements negotiated in November
1970 and April 1971 which increased prices and sped
up payments to the government. The contribution to
government revenue grew from $38 million, or about
9% of the total in FY66, to an estimated $983 million,
or well over half of the government revenue in FY72.
Currently more than a dozen international
petroleum companies have concessions in Nigeria, of
which six are now actually producing. Shell -BP,
owned by Royal Dutch Shell and British Petroleum, is
by far the largest. The other producers are Gulf,
Mobil, AGIP /Phillips, Texaco /Chevron, and French
Petroleum Research and Exploitation Company
(SAFRAP). Five companies recently completed
negotiations with the government to exploit promising
offshore concessions where most of Nigeria's
production probably will be centered in the next
decade.
Like other major petroleum exporters, Nigeria has
sought since the end of the civil war to increase its
control over its valuable resources. In July 1971,
Nigeria became the 11th member of the Organization
of Petroleum Exporting Countries (OPEC). Nigeria
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has also been seeking to increase government
participation in petroleum concessions. The first
participation agreement came in April 1971 with
SAFRAP. In return for permission to resume
production� stopped during the civil war �the
company yielded 35% of its holdings to the Nigerian
Government, and the government's share will
gradually be increased to 50 In September 1971 the
government exercised an option to assume one -third
participation in the AGIP Phillips operation in
Nigeria. In addition, 51% participation in the new
offshore concessions has been reserved for the
government. Negotiations have also beer. initiated by
the government to acquire a participating interest
probably about one third �in the other existing
concessions in Nigeria. All government shares in
petroleum production will be held by the Nigerian
National Oil Company (NNOC), which will
participate fully in petroleum exploration, production,
refining, and marketing. Some promising offshore
concessions have been reserved for NNOC.
Nigeria's one petroleum refinery is lr,cated near Port
Harcourt. Although it was badly damaged during the
civil war and was forced to close in July 1967, it
reopened in May 1970. The refinery has a capaity of
55,000 barrels per day and is currently barely able to
meet most of Nigeria's needs for refined petroleunj
products other than premium grade gasoline.
Origmally the refinery was owned 50% by the
Nigerian Government and -"5% each by Shell and by
British Petroleum. In early 1972, however, the
government's participation was increased to 60 with
20% each remaining for Shell and BP. A second
refinery is being, planned.
Large quantities of natural gas exist in Nigeria, both
in isolation and in association with deposits of crude
petroleum. All production to date, however, has been
associated with petroleum production, and most of the
gas has been flared. Production in 1971 was about 1.2
billion cubic feet a day, but consumption was only
about 17 million cubic feet a day. Production of gas
will continue to expand with petroleum production.
Consumption should also expand, since many future
industrial and electric power needs for fuel are
expected to be met by natural gas. In addition, an
agreement has been signed with Guadalupe Gas
Company to build a $25 million to $30 million plant
in Port Harcourt to extract liquified petroleum gas
(LPG) from natural gas that presently is being flared
in the area. The plant would be owned 60% by the
Nigerian Government. Before construction is begun,
however, problems associated with transportation,
marketing, and gas gathering must be resolved.
Several proposals are also being considered by the
government for construction of a plant to produce
liquefied natural gas (LPG), but beea.ise of the large
investment required� several times more than for an
LPG plant decision may be withheld until a
proposed independent economic and technical study
of gas utilization has been made.
The electric power industry in Nigeria, although
small, is expanding rapidly and is highly important to
economic and social development. The planned
industrialization is keyed initially to the availability of
sufficient electric energy. At the end of 1971, the
estimated installed capacity totaled 1,111,000
kilowatts (kw.), and production during the year
amounted to almost 1.7 billion kilowatt -hours
(kw.-hr.), about 30 kw. -hr. per capita.
At least eight entities are involved in the production
of electric power hi Nigeria. The governments owned
Electricity Corporation of Nigeria (ECN) is a statutory
organization responsible for the generation of thermal
electric power and for the transmission, d;st,ribution,
and sale of nearly all electric power. A, second
government company, Niger Dam Auihority, was
created in 1962 to construct and operate the Kainji
Dam and other future hydroelectric powerplants on
the Niger River. It operates a 330 kilovolt (kv.)
national transmission grid which delivers power from
the Kainji Dam hi droelectric plant to several
substations, where it is turned over to ECN for further
transmission, distribution, and save. The Niger Dam
Authority was rnPreed with the ECN to form the
National Electric Power Authority in 1972. The most
important privately owned producer is the Nigeria
Electricity Supply Co. (NESCO), which was
established in North Central State to produce and
furnish ti,ermal electric power to the nearby mines and
to sell bulk electricity to ECN for distribution and sale
to consumers in Jos, Bukuru, and Vom. The other
privately owned producers are industrial concerns that
produce electricity for their own use: Shell Petroleum
Development Company of Nigeria, African Timber
and Plywood (Nigeria) Ltd., Nigeria Sugar Company,
United Africa Company of Nigeria, and Dunlop
Rubber Estate.
The electric power base comprises 60 powerplants.
Almost all are thermal installations, but the most
significant single source of energy is the Kainji Dam
hydroelectric powerplant, which accounts for about
30% of Nigeria's total capacity. It has an initial
capacity of 320,000 kw. and a potential total capacity
of 960,000 kw. if all generators are installed. Although
the remaining powerplants in the country are
relatively small individually, their collective capacities
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constitute an important segment of the total national
power capacity, and they are of particular importance
in supplying power ti, remote localities and to isolated
industries.
The transmission system consists of 330 -kv., 132 -kv.,
66 -kv., and 33 -kv. lines. The 330 -kv. system comprises
over 800 miles of a single- circuit overhead
transmission line connecting the Kainji Dam plant
with major substations at Jebba, Oshogbi, Lagos,
Benin City, and Kaduna. At each substation, the
voltage is stepped down from 330 -kv. to 132 -kv. before
supplying bulk power to the ECN.
Consumption of electric energy has increased
considerably during the last decade, the largest
amounts being consumed in Lagos and in the Ibadan
area. The demand for electricity for industrial,
agricultural, and domestic purposes up to the mid
1980's should be met by the currently planned
expar,aion in generating capacity. Distribution of
electricity for residential use normally is single phase,
50- cycle, alternating ru:rent at 210 volts, and for
industrial and commercial use, three phase, 50- cycle,
alternating current at 400 volts.
Development of the electric power industry is
focused on completing the second and third stages of
the Kainji Dam hydroelectric powerplant, which
should meet the country's needs well into the 1980's.
Upon completion of the Kainji Dam plant, plans are
to be formulated for building the 500,000 -kw. Jebba
and the 480,000 -kw. 4hiroro Gorge hydroelectric
powerplants downstream on the Niger River. In the
interim, additional thermal plants fueled by natural
gas may be constructed. Considerable development of
transmission and distribution facilities is also planned
by ECN and NESCO, and expansion of the
interconnected system has begun.
3. Minerals and metals (C)
Nigeria is richly endowed with mineral resources,
and mining has become a strategic sector in the
nation's economy. Tin ore and columbite are the most
economically significant minerals (excluding pe-
troleum), but deposits of gold, limestone, marble, and
iron, 3:;ad, and zinc ores are also found. Disruption of
transportation and loss of experienced workers during
the civil war delayed development of mineral
resources and resulted in a reduction of output of some
minerals (Figure 9). In 1970 minerals (excluding
petroleum) provided 4% of all exports, compared to
6% in 1966. The value of mineral exports, however,
grew from $46 million in 1966 to $49 million in 1970;
their declining relative importance was due mainly to
the increase in petroleum exports.
We
FIGURE 9. Production of principal minerals (U /OU)
(Thousand tons)
na Data net available.
*Quantity in Troy ounces.
Nigeria has long been the world's fifth largest tin
producer, but production has declined in recent years
because of diminishing ore reserves, depressed prices,
and increased production costs. Production is expected
to continue to decline at the rate of about 10% a year.
Nevertheless, metallic tin, with exports worth $35
million in 1971, is Nigeria's most important mineral
export (excluding petroleum). The ore is mined near
Jos in Benue Fiateau State, smelted, and exported as
tin ingots. Ingot production amounted to 9,000 tons in
1970; exports of tin averaged 10,000 tons annually in
1966 -71, most of which went to the United Kingdom.
The two tin smelters in the country have a capacity
well in excess of total on, production.
Nige w is the third largest producer of columbite in
the world and is an important source of columbium,
which is used to manufacture stainless steel and to
make alloys with a high degree of heat resistance for
such uses as jet engines. Production of columbite was
over 2,000 twis a year from 1960 to 1965 but has been
declining since then. The United States is the largest
importer -of Nigerian columbite. Tantalum and
zirconium, also used in the steel industry.as alloying
elements and in high- temperature applications, are
extracted as byproducts of columbium.
Two major iron ore deposits are found on the
Agbaja Plateau in the north and near Enugu in thf,
east. The ores have a metallic content of only 45% to
50 however, and are further disadvantaged by a
high phosphorus and sulfur content. The U.S.S.R. has
undertaken a survey of Nigeria's iron ore and coal
resources which may lead to the construction of a
Soviet sponsored iron and steel complex.
4. Manufacturing and construction (U /OU)
Manufacturing has been an important contributor
to the overall growth in Nigeria's economy. During the
last decade its percentage contribution to GDP
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TIN
COLUM-
!-ME-
ORE
B.rE
MARBLE
GOLD*
1965.......
12.9
2.5
STONE
1,291.6
1.6
79.0
1966.......
12.6
2.2
1,098.0
1.1
45.0
1967.......
12.6
1.9
883.2
1.0
39.0
1968.......
13.0
1.1
647.4
0.4
214.0
1969.......
11.6
1.5
680.0
1.2
299.0
1970.......
10.6
1.6
677.5
1.8
124.0
1971.......
10.7
1.2
788.3
3.8
na
na Data net available.
*Quantity in Troy ounces.
Nigeria has long been the world's fifth largest tin
producer, but production has declined in recent years
because of diminishing ore reserves, depressed prices,
and increased production costs. Production is expected
to continue to decline at the rate of about 10% a year.
Nevertheless, metallic tin, with exports worth $35
million in 1971, is Nigeria's most important mineral
export (excluding petroleum). The ore is mined near
Jos in Benue Fiateau State, smelted, and exported as
tin ingots. Ingot production amounted to 9,000 tons in
1970; exports of tin averaged 10,000 tons annually in
1966 -71, most of which went to the United Kingdom.
The two tin smelters in the country have a capacity
well in excess of total on, production.
Nige w is the third largest producer of columbite in
the world and is an important source of columbium,
which is used to manufacture stainless steel and to
make alloys with a high degree of heat resistance for
such uses as jet engines. Production of columbite was
over 2,000 twis a year from 1960 to 1965 but has been
declining since then. The United States is the largest
importer -of Nigerian columbite. Tantalum and
zirconium, also used in the steel industry.as alloying
elements and in high- temperature applications, are
extracted as byproducts of columbium.
Two major iron ore deposits are found on the
Agbaja Plateau in the north and near Enugu in thf,
east. The ores have a metallic content of only 45% to
50 however, and are further disadvantaged by a
high phosphorus and sulfur content. The U.S.S.R. has
undertaken a survey of Nigeria's iron ore and coal
resources which may lead to the construction of a
Soviet sponsored iron and steel complex.
4. Manufacturing and construction (U /OU)
Manufacturing has been an important contributor
to the overall growth in Nigeria's economy. During the
last decade its percentage contribution to GDP
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increased from 5% in FY60 to 10% in FY70.
Manufacturing was second only to petroleum in rate
of growth and was the only ..ector that continued to
expand during the civil war. Although the war caused
destruction of facilities and halted output in the east,
import controls stimulated production in the rest of
the country, and the index of manufacturing increased
from 165 (including the east) in 1966 to 212 (excluding
the east) in 1969 and in 1970 ?t reached 250
(1963 =100). Reconstruction in the east is now
substantially complete, but several plants that were
too severely damaged to be profitably repaired or
plants that can no longer compete with newer
structures have not been reactivated.
Nigeria's large domestic market, linked by a
relatively well- developed transportation system, and
the country's active export processing market have
been largely responsible for this industrial develop-
ment. Industries producing largely for domestic
consumption include food processing, textiles,
chemicals, footwear, construction materials, metal
processing, light machinery, and petroleum refining.
Industries processing largely for export include palm,
sheanut, and peanut oil mills, cotton ginning mills,
rubber processing factories, tanneries, and timber
sawmills.
Despite the past record of expansion, further
industrial development in Nigeria faces a number of
problems. Much of the past growth has been in import
substitution industries, and the possibilities for further
substitution are becoming more and more limited as
Nigeria attains self sufficiency in the production of
many consumer goods. Production of intermediate
and capital goods is so� ,ewhat limited by the size of
the market and the lack of skilled labor and technical
and managerial experience. Furthermore, since the
removal of most import restrictions, domestic
industries now face price and quality competition
from imports, and the more uneconomic domestic
producers may founder.
Most of the output of manufactured goods now
consists of finished consumer goods, but efforts are
being made. to increase production of intermediate
and capital goods for sale to other domestic industries,
and vertical integration of industries is being
encouraged. The government also is continuing its
Policy of Nigerianization. A decree passed in late 1971
established an Industrial Training Fund to finance the
training of native labor. This was followed by a decree
in early 1972 reserving some sectors of the economy
exclusively for Nigerians and establishing a require-
ment for Nigerian participation in a number of
others. Nevertheless, foreign investment with and
without indigenous participation has been encouraged
by providing tax holidays, relief from import duties,
and other financial aids and incentives.
Construction activity accounted for less than 5% of
GDP during the last decade. The most important
project during that period was the $250 million Kainji
Dam, although significant progress was made in tfe
construction of housing, industrial plants (cement and
textiles), roads. bridges, and railroads. During the civil
war total building hlAivity declined, and there was
also extensive damage ko existing structures, especially
in the east. Homes, schools, and hospitals were
destroyed or vandalized, roads and bridges were
damaged, repairs were neglected, and railroad bridges
and roadbeds were ruined. Consequently, recent
construction activity concentrated on reconstruction
well as on new construction. New construction will
increase further, if the proposed iron and steel
complex, the second oil refinery, the automobile
assembly plants, and other major development plan
projects get underway.
Nigeria iF self sufficient in almost alt' basic building
material-. i,umber, paint, glass, clay products, and
cement are produced locally, and, except for cement
and iron and steel prAucts, imports are not
significant. Almost all heavy construction equipment,
however, must be imported.
5. Domestic trade (U /OU)
Much of the domestic trade in Nigera consists of
movements from countryside to nearby urban areas,
but a significant portion of it is long distance. A large
part of the local trade is in domestically produced
foodstuffs such as grains, animal products, kola nuts,
roots, pulses, and vegetable oils; interregional trade
comprises domestic light manu;actures such as soap,
textiles, earthenware, and leather products of lesser
importance. The output of large -scale enterprises like
the petroleum refinery serve national rather than
regional markets. The growing urban concentration of
population and the growth in import substitution
industries have increased the domestic movement of
goods. As transportation improves and the number of
large -scale plants increases, national trade is likely to
increase further.
Some retail merchandising is controlled by
European -owned department .,cores; firms like the
Kingsway Stores, the A.G. Leventis Company, arid the
Union Trading Company cater largely to foreigners
and wealthy Nigerians. Most consumers patronize
small shops and local markets which are owned largely
by Nigerians, although there are also a number of
Lebanese and Indian establishments. The local
11
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markets are run by Nigerians who are responsible for
their maintenance and financial operations. The
markets are fragmented, with many petty traders
selling goods in small, quantAies and determining
prices by bargaining. The local sales force of the south
consists of women, commonly called" mammys," who
trade in the markets or sit along the roadsides selling to
passers -by.
Government policy has been aimed at increasing
internal trade and directing more of its benefits to
Nigerians. A decree in March 1972 called for the
Nigerianization of retail trade during the current
development plan period. In addition, since
transportation is a significant element in the cost of
distribution, the government plans to improve the
transportation network. The government also plans to
establish a national trading organization to train
salesmen and traders in modern practices and credit
grturantee corporation to enable indigenous busi-
nessmen to finance domestic trading activities.
C. Role of government in the economy
(U /OU)
1, Economic policy
Nigeria's planning experience, which dates from the
end of the World War Ii, has gone through various
phases of central and regional emphasis. The first
plan, from 1946 to 1954, was highly centralized in
formulation and execution. Prepared by a group of
senior colonial government officials, the plan was
largely ineffective. The second attempt at planning
(1955 -62), introduced after Nigeria adopted the
federal system of government, was largely regional in
approach and left the country with virtually five
development programs. The 1962 -68 plan was the first
national plan. While structured like the 1955 -62 plan
with separate programs for each region, this plan also
recognized the common objectives and targets of the
component governments. Although capital spending
did not reach the target level, the plan was largely
successful and saw the completion of several major
projects, including the petroleum refinery, the Niger
Dam, the sugar and paper mills, and the ports
extension.
The civil war, which started in 1967, interrupted the
planning process and forced the government to focus
on minimizing the war's adverse impact on the
economy. A number of imports were banned or
licensed, and tariffs were increased to protect the
country's balance -of- payments position. In addition,
repatriation of profits and dividends was deferred, and
12
a moratorium was imposed on repayment of liabilities
under contractor financed agreements. Exports of
essential domestic foods were controlled by licenses to
combat inflation, and a capital gains tax and a super
tax on ;profits were introduced. Although these
measures helped the economy to survive the war
relatively intact, there were, nevertheless, budgetary
and balance -of- payments deficits and substantial
inflation.
In October 1970 the government adopted the
Second National Development Plan, which is to run
from April 1970 to March 1974. Reconstruction costs,
estimated at $840 million in the public sector and
$650 million the private sector, are concentrated in the
first 2 years of the development plan. The basic
economic objective of the plan, however, is to achieve
un average annual rate of growth is DP of 6.6%
through more intensive capacity utilization and
through an increasing rat of capital formation. Total
investment during the period is slated at $4.5 billion,
divided almost equally between the private and public
sectors. Foreign capital is expected to contril-,ute 50%
of the private investment and 19% of t,.e public
investment. The plan accords highest priority to
agriculture, industry, transportation, and manpower
development, and the second order of priority goes to
social services and utilities.
In the first 2 years of the current plan, the state and
federal governments had difficulty attaining the
planned level of investment. Initially, postwar
problems of reconstruction and rehabilitation and a
lack of financial resources �,vere responsible for the
shortfall in investment. The recovery of petroleum
production after the war, however, provided financial
resources considerably beyond expectations. Cur-
rently, budgetary and foreign exchange resources are
no longer constraints on development, but the limited
executive capacity of the government and a lack of
properly prepared, feasible projects will continue to be
an obstacle to the plan's execution for sonic time.
2. Government finance
Nigerian public finance is carried or: at four
levels �by the federal government, the 12 state
governments, abf;ut 20 public corporations, and more
than 100 local auti,orities. The federal government has
exclusive power to impose customs and excise duties,
company income taxes, and mining royalties and
rents. The states depend primarily upon personal
income tax and sales taxes for their direct revenue. In
certain areas such as mining royalties and rents, the
federal government has authority to collect revenue
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but is required to pass the revenue :o the states. Local
governments derive their revenue through grants from
the states and through local taxes.
The allocation to the states of revenues collected by
the federal government is complex. It is based in large
part on the principle of "derivation," under which
revenue on products exported from a state and duty on
goods consumed cr :Ailized within a state are paid to
that state. A modification introduced in 1969,
however, requires that some of the mining rents and
royalties and import duties be paid into a
Distributab'.e Pool Account (DPA) for division among
the States on the basis of population and balanced
regional development. In 1970 the DPA was divided
into two parts �one to be divided equally among the
12 states and the other to be divided on the basis of
population. The government in 1970 also changed the
distribution of revenues from mining royalties and
rents, reducing the federal government share from
20% to 5 reducing the state of origin's share from
50% to 45 and increasing the DPA share from 30%
to 50% of such revenues. Income from offshore
petroleum and from all petroleum profits taxes,
however, remain with the federal government.
The state and federal governments prepare separate
budgets each fiscal year (1 April through 31 March).
All use similar systems to distinguish between current
and capital expenditures. Current revenues and
expenditures are credited or debited to consolidated
revenue funds maintained separately by each
government. Capital receipts and expenditures are
handled similarly through development fund
accounts. Any surplus on the current account is
transferred periodically to the development fund
account.
Federal government current revenues and expendi-
tures have been greatly influenced in recent years by
petroleum production and trade and by the civil war.
From s' :;ependence in 1960 until the beginning of the
civil "ar in 1967. the federal cu:reryt budget _on-
sistentl% shox%ed a surplus (Figure 10). During the
war, however, surpluses "ere replaced by gro,ving
deficits. Defense expenditures rose from an estimated
$35 million in FY67 to more than $500 million in
FY70. Furthermore, despite increased tax rates and
new taxes, revenue declined during the war because
petroleum production was disrupted and imposts of
high -duty consumer goods were reduced. When
petroleum production recovered, however, the deficits
disappeared.
Nigeria has historically received most of its revenue
from indirect taxes. In FY70, for example, 66% of
federal revenues were derived from import, export,
and excise duties and fees. In that year direct taxes
contributed 14 mining rents and royalties
contributed I I%, and 9% came from other sources
such as interest and government agency earnings.
These percentages are changing rapidly, however,
with the surge in government petroleum revenue.
Petroleum revenues in F170 were abort $95 million,
whereas in FY72 they have been estimated at more
than nine times that amount, making petroleum the
most important source of government revenue.
The largest expenditure in FY70 was for defense,
which accounted for about half of total current
expenditures. Another one fourth of the total consisted
of transfers to the states, leaving the remaining fourth
for administrat ?on, social services, and economic
services. Defense expenditures have remained high. In
FY71 current defense spending was estimated at $378
million almost 30% of the total �and capital
spending on defense was estimated at $80 million.
State government revenues and expenditures are
largely influenced by the federal government, from
which the states receive 60% to 70% of their current
revenues. The state governments' local revenues
obtained from income taxes, export duties, sales taxes,
and taxes on native and local authorities fluctuate
FIGURE 10. Federal government revenues and expenditures (U /OU)
(Millions of dollars)
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1959/60
1961/62
1963/64
1965/66
1967/68
1968/69
1969/70
1970/71
1971/72*
Current revenue...........
249
321
349
451
420
420
610
1,061
1,332
Current expenditure.
229
306
348
443
430
510
9:38
1,109
1,489
Of which:
Transfer to states.....
108
131
137
179
172
148
255
402
s32
Current surplus or defi-
cit
+20
+15
Insig
+7
-10
�90
�a28
�48
Capital expenditure........
100
90
126
156
193
195
245
190
445
Overall deficit...........
�80
�75
�126
�149
�203
�285
�573
-238
�602
*Revised estimate.
13
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widely but have been increasing as the states become
more efficient in their collection. In FY69, the states'
first year of operation under independent fiscal and
budgetary systems, seven of the states achieved a
surplus on current account; current revenues were
$215 million, and current expenditures were $205
million. Capital expenditures were $66 million,
however, leaving an overall deficit of $56 million. The
budget estimates for FY72 show state current revenues
of $565 million nearly two and one -half times their
FY69 level �of which 67% was to come from the
federal government. Current expenditures were
estimated at $539 million, leaving a surplus of $26
million.
Th, public debt portfolio of the federal government
is divided into three main parts� funded, unfunded,
and floating. The funded segment is made up of
internal long -term development loans and long -term
foreign loans. The unfunded segment consists of
treasury certificates of 1 to 2 years maturity and loans
from international agencies and foreign governments.
The floating debt consists of 90 -day treasury bills. Like
other government finance, the public debt was
markedly affected by the civil war. From the
beginning of the war in 1967 until its end in 1970, the
debt more than doubled. Although the external debt
remained relatively stable during the war, the internal
debt soared as the government was forced to rely
increasingly on deficit spending financed by short
term borrowing from the commercial banks. By March
1971, the public debt totaled almost $2 billion, of
which almost 90% was internal (Figure 11). Recently
the increase in public debt has leveled off, rising only
3% in 1971.
3. Money and banking
Nigeria's unit of exchange is the pound. Issued
initially by the Nigerian government in 1959, the
Nigerian pound (N�) was convertible into the British
pound sterling on a one -to -one basis until the sterling
devaluation of Nevember 1967. The Nigerian pound
retained its par value, making the exchange rate with
the dollar N�1= US$2.80. The Nigerian pound again
retained its par value with gold during the exchange
rate realignment of December 1971, making its
present exchange rate with the dollar N�1= $3.04.
A new &2imal currency is already being introduced
and is scheauled to become the official unit of
exchange on January 1973. The "naira," worth 10
shillings 'h NP of the present currency, will be the
larger unit, subdivided into 100 "kobo," each kobo
worth slightly more than the present penny.
14
EXTERNAL WTERK4L 1,677
0 n
F
(A Niau of Dak rs)
908
485
325
130 197 241 247
1965 196:' 1969 1971
FIGURE 11. Nigerian public debt (U /OU)
The banking system consists of the Central Bank of
Nigeria, 15 commercial banks (foreign and domestic),
two acceptance houses, and various other financial
institutions such as the Post Office Savings Bank,
regional financial corporations and loan boards, and
the cooperative banks. At the top of the banking
structure is the government -owned Central Bank,
which was established in 1958. The main function of
the Central Bank is the regulation of the money supply
to achieve monetary Stability and adequate economic
growth. The Central Bank has the sole right to issue
Nigerian notes and coin. Under its open market
operations withority, the bank may purchase, sell, and
discount Nigerian treasury bills, treasury certificates,
inland bills of exchange, and, within limits, long -term
securities of the federal government. In addition, the
bank has the power to lend to the commercial banks
against specified security. The Central Bank controls
the commercial banks' liquidity ratios by requiring
banks to maintain specified ratios 1 ,etween liquid
assets and demand deposits and betwe m liquid assets
and time deposits. The liquidity ratios are intended to
protect the depositors as well as to influence the
money supply.
The Central Bank is banker to the federal and state
governments and marketing boards. It advises the
central government on such matters as monetary and
general economic policy, the advisability of issuing
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new securities, the initiation of capital expenditures,
and the establishment of the yield and maturitv
structure of the national debt. The bank is authorized
to act as banker for commercial banks and other credit
institutions, and it may engage in commercial banking
itself. It n also subscribe to, hold, and sell shares of
any corporation set up wish the approval of the federal
government to promote th. development of a money
market or to improve t", financing of economic
development.
Government monetary policy prior to 1967 was
aimed primarily at achieving balance -of- payments
equilibrium and a reallocation of credit in favor of the
productive sectors, but the civil war increased the
financing requirements of the government appreci-
ably. Although the Central Bank of Nigeria Act was
amended in 1968 to give the bank additional powers
to control credit, it was difficult for the bank to
enforce realistic limits on the growth of credit to the
government. Short -term domestic borrowing from the
commercial banks was relied upon to finance the
massive public spending during the war. This was
accompanied by a decreasing rate of expansion of
credit to the private sector and a substantial growth ir,
the money supply which has resulted in serious
inflation in Nigeria. After declining 4% in 1967 and
holding steady in 1968, prices for the lower into ne
group rose by 10% in 1969, about 14! in 1970, and an
estimated 15% in 1971. Inflation '.as now abated,
however, largely because of growing production and
imports, the latter paid for by increased petroleum
foreign exchange earnings.
Fifteen commercial banks with nearly 300 offices
and branches operate in Nigeria (Figure 12). -ight of
the banks are Nigerian owned, while the r-st are
owned totally or partly by large foreign banks. All
hanks, however, must be incorporated in Nigeria to
transact business in the country. Commercial banks
play an important role in the Nigerian economy, with
deposits totaling $1,061 million and loans totaling
$766 million in March 1972.
The Nigerian Finance Ministry and the Central
Bank have provided guidelines for commercial banks
to assure their support for government policy. Each
bank is required by the Central Bank to extend a
minimum of 40% of its loans, advances, and discounts
to Nigerian borrowers. Credit guidelines set up by the
Centrg1 Bank require that by the end of FY73, 45% of
each bank's ou+ loans and advances be for
manufacturing, agriculture, mining, real estate and
construction; 32% for general commerce; 11% for
services; and 12% for other categories including state
government financial institutions. Furthermore, in
April 1972, the Finance Ministry announced that the
federal government planned to negotiate the
acquisition of a 40% interest in each commercial bank
in order to give the government a role in bank
management to synchronize further commercial bank
policy with government policy.
A number of other financial institutions exist in
Nigeria. The government Post Office Savings Bank
operates through post offices and pros +.al agencies
throughout the country. The Nigerian Industrial
Development Bank, Ltd., finances enterprises that are
unable to get funds through regular commercial
FIGURE 12. Commercial banks operating in Nigeria (U /OUI
BANK
African Continental Bank, Ltd
Arab Bank (Nigeria), Ltd
Bank of America Nigeria, Ltd
Bank of India, Nigeria, Ltd
Bank of the North, Ltd
Barclays Bank of Nigeria, Ltd
Co- Operative Bank of Western Nigeria, Ltd
International Bank for West Africa, Ltd......
Mercantile Bank of Nigeria, Ltd
National Bank of Nigeria, Ltd
New Nigeria Bank, Ltd
Pan African Bank
Standard Bank Nigeria, Ltd
United Bank for Africa, Ltd
Wemabank
PRINCIPA?. SHARE HOLDERS
Eastern state governments.
Arab Bank, Ltd., Amman, Jordan.
Bank of America, San Francisco.
Bank of India, Ltd., Bombay.
Northern States Marketing board.
Barclays Bank D.C.O., London.
Co- operative Movement of the Western State.
Banque Internationale pour l'Ajrique Occidentale
of Paris and First National City Bank of
New Fork.
South Eastern State Government.
Western State Marketing Board.
Mid Western State Government.
Rivers State Government.
Standard Bank Group, London and Chase Man-
hattan Bank, New York.
Five European and one U.S. bank.
Western State Government.
15
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channels. The two cooperative banks finance the
marketing of crops by various cooperative societies,
and there are a large number of cooperative Thrift and
Loan and Thrift and Credit societies. The Federal
Loan Board makes loans for industrial development,
and the Revolving Loan fund assists in the
establishment, expansion, and modernization of
industrial enterprises. There are also at least seven
regional development corporations established to
finance development in specific regions. In addition,
in 1960 a number of financial institut;,)ns joined
together to establish the Lagos Siock Exchange.
Exchange transactions averaged almost $2 million a
month in 1970, and the Exchange is expected to play
an important role in mobilizing funds for industrial
purposes.
D. International economic relations
1. Foreign trade (U /OU)
Nigeria's external trade has been dominated in
recent years by rapidly rising petroleum exports. After
being disrupted by the civil war, the value of
1659
Millions of U.S. Dollars
Other
petroleum exports increased over tenfold �from about
$100 million in 1968 to nearly $1.2 billion in 1971
(Figure 13). Because of expanded production and
increased prices, petroleum now comprises nearly 75%
of Nigerian exports. Agriculture contributed more
than half the total value of exports in 1965, but less
than one- fourth in 1971. Nonpetrolcum exports in fact
declined in value from $547 million in 1965 to $484
million in 1971.
The surge in earnings from petroleum exports has
financed increased imports (Figure 14), which nearly
doubled between 1965 and 1971; an increase of 42%
in the wilue of imports occurred in 1971 alone.
Consumer goods and raw materials made up 63% of
total imports in 1971, and capital goods mostly
imports by the petroleum companies �made up the
rest.
Nigeria's trade balance has shown a surplus every
year since 1966, after being in deficit from 1954 to
1965 (Figure 15). Although both agricultural and
petroleum exports were adversely affected by the civil
war, which also brought an increase ir. military
imports, the government reduced nonmilitary imports
and vontinued to show a trade surplus. Export
ca,nings have recovered from wartime levels, but the
Millions of Dollars 1507
Miscellaneous
Machinery and
transport equipment
Petroleum
Manufactured goods
16
Palm products
Cocoa
Rubber, cotton, and peanuts
Tin, tin ore, and columbite
FIGURE 13. Composition of exports (U /OU)
Chemicals
Crude materials,
fuels, and lubricants
Food, beverages,
and tobacco
FIGURE 14. Composition of imports (U /OU)
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1960 1965 1971
1960 1965 1971

Million US$'
ISO
1601
1401
120(
1000
800
600
400
100
1960 61 62 63 64 65 66 67 68 69 70 71
*Export data exclude reexports.
FIGURE 15. Balance of trade (U /OU)
postwar relaxation of import controls also brought a
rising level of imports, and the trade surplus has
remained stable. In 1971 the trade surplus exceeded
$150 million.
Traditionally the United Kingdom has been the
largest customer for Nigerian exports, but since
independence the trade pattern has been broadened to
include other countries. In 1959 the United Kingdom
received 50% of Nigerian exports, but by 1970 its share
had dropped to 29% (Figure 16). Almost half of the
exports to the United Kingdom were petroleum and
petroleum products, but cocoa beans and peanut oil
were also important. The Netherlands was the second
ranking customer in 1970, and the United States was
third. Petroleum and petroleum products were the
major items exported to both the United States and
the Netherlands.
EXPORTS $1,228 million*
IMPORTS $1,059 million*
12
Other
E.
Japan
15
United States
9
Other Europe
Italy
2- Belgium- Luxembourg
West Germany
France
5
Netherlands
France
Italy
13
West Germany
31
United Kingdom
100%
12
EXPORTS $1,228 million*
Other
10
Sweden 2\
U.S.S.R. 2
4
Spain
Italy
West Germany
7
Netherlands
17
France
9
Brazil 2
Canada 2
United States
12
United Kingdom
29
/007,
*Converted at N21= US$2.80
FIGURE 16. Direction of trade (U /OU)
Nigeria's imports have followed a pattern similar to
that of its exports. In 1959 the United Kingdom was
the source of 45% of Nigeria's imports, but by 1970 its
share was 31 The principal imports from the United
Kingdom were electrical machinery, medical and
pharmaceutical products, trucks, paper, motor
vehicles and parts, and road construction, mining,
and conveying machinery. The United States rose
to second place as it Nigerian supplier; the more
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important items imported from the United States were
cereals and road construction, mining, conveying, and
electri+ -al machinery. West Germany was important as
a supplier of trucks and cars.
Nigeria has relatively liberal import controls. Until
the outbreak of the civil war most commodities could
be imported under open general license. The main
exceptions were goods from the Communist bloc,
Japan. and Hong Kong; coal from the dollar area; and
sugar, cement, and petroleum products. Durin- the
wa., however, emergency import controls vere
progressively placed on an increasing range of goods,
until by the end of the war only a limited list of goods
was not subject to specific import licensing. In
addition, duties were increased on many goods to
encourage the use of domestic substitutes, and a
"national reconstruction surcharge" was added to 11
imports. Since the war's end, however, imports have
again been liberalized, and although most bulk
agricultural commodities are still licensed, almost all
other restrictions have been removed. In addition,
although some tariffs were raised in 1972 to protect
domestic manufacti iers, tariffs on many consumer
goods were reduced. Import duties on selected raw
materials were also lowered in 1972 to boost local
competitiveness. Imports are now prohibited only
from Rhodesia and South Africa.
Exports ar,= relatively unrestricted. Most locally
produceL goods may be exported freely, under open
general license, to any country except South Africa
which require individual licenses �and Rhodesia, to
which exports are prohibited. Individual export
licenses are required for cigarettes and tobacco,
columbite, tin and tin byproducts, tantalite, goods
made of imported components, and goods controlled
by the marketing boards. The export of some items
such as African antiquities is prohibited except under
special conditions. Certain explosives and foods may
not be exported.
Trade agreements exist with Poland, the U.S.S.R.,
the People's Republic of China, Romania, Hungary,
Bulgaria, Czechoslovakia, Chad, Niger, Syria,
Dahomey, Zaire, Togo, Cameroon, Egypt, Japan,
Tunisia, and West Germany. The agreements are
similar in pattern, providing for suggested lists of
commodities to be traded, payment in convertible
currencies, and most favored nation treatment.
2. Foreign aid (C)
Nigeria receives aid from a number of sources, both
Communist and non Communist. Foreign aid
18
financed 50% of the 1962 -68 development plan. It was
also important for relief and reconstruction during and
after the civil war. With the rise in petroleum
revenues, however, foreign aid has become less
important as a source of financing. The Second
National Development Plan includes planned
investments of $4.5 billion, of which foreign aid is
expected to provide $423 million, or less than 10
The major non Communist sources of aid to Nigeria
have been the International Bank for Reconstruction
and Development (IPRD), the United States, the
United Kingdom, and West Germany. Other sources
include Japan, Canada, Italy, France, Belgium, the
Netherlands, Sweden, and the International
Development Association (IDA). IBRD assistance has
been largely for construction of infrastructure and for
reconstruction and industrial development. The
United Kingdom has provided technical assistance
and roans for rehabilitation, general development, and
telecommunications. U.S. economic aid, which has
averaged about $25 million a year since 1962, has
been mainly for agriculture, education, and
transportation:
Communist economic aid extended to Nigeria since
1965 has totaled $49.2 million. Of this, the U.S.S.R.
extended an estimated $500,000 in 1965 and $6.7
million in 1970, Czechoslovakia extended $14 million.
in 1965, and Poland extended $28 million in 1971. In
addition, the U.S.S.R. has extended $9 million in
military aid to Nigeria. It is estimated that there are
over 200 Communist economic technicians in Nigeria
from the U.S.S.R. and Eastern Europe.
Nigeria has also provided aid on a small scale. In
early 1972, Lagos extended a $3 million interest -free
loan to Dahomey, which had been receiving quasi
commercial assistance from Nigeria since early 1971.
In addition, Nigeria has begun reconstructing a road
from Idiroko (on the Nigerian border) to Porto -Novo,
Dahomey, at Nigeria's expense.
3. Balance of payments (U /OU)
Nigeria's balance -of- payments situation was greatly
affected by the civil war, prior to which the country's
external payments position was comfortable and
improving. The war, however, resulted in a balance
of- payments squeeze, which might have reached crisis
proportions if the government had not imposed firm
controls on trade and payments. Despite the controls,
however, reserves fell by $110 million between 1965
and the end of 1969 and did not regain their 1965 level
until early 1971. Furthermore, the decline in reserves
APPROVED FOR RELEASE: 2009/06/16: CIA- RDP01- 00707R000200100003 -2

CONFIDENTIAL
FIGURE 17. Balance of payments 1965 -70* (U /OU)
(Millions of U.S. dollars
*Because of rounding, components may not add to totals shown.
*Converted at N�1 $2.80.
would have been much worse if foreign payments had
been made when due. By permitting overdue
payments to accumulate, Nigeria w,-is able to show a
small deficit in 1968 and a sma'1 surplus in 1969
(Figure 17). Foreign payments have since been placed
on a systematic basis.
Foreign exchange problems during the war are
traceable to a combination of increased military
imports, decreased exports, and reduced medium- and
long -term capital inflows. Total payments for military
equipment during the war were estimated at between
$300 million and $400 million. At the same time,
exports fell during the war years, from $780 million in
1966 to $578 million in 1968, mostly because of
reduced petroleum production but also because of the
fall in exports of palm products from the east. Long
and medium -term net capital inflows during the war
also declined dramatically, and by 1969 they were
only about 10% of the prewar level.
The recovery of petroleum production and exports
eased Nigeria's external payments problem. Since
April 1971, imports have been paid for On a regular
basis. During 1971 and early 1972 the government
liquidated a backlog of payments which appeared to
pose a threat to the economy a year earlier. The
settlement of arrears was effected in advance of the
agreed date, in spite of the fact that imports increased
$360 million in 1970 and $448 million in 1971. With
continued increases in petroleum production,
Nigeria's foreign reserves should be strengthened and
the balance of payments should no longer he a
constraint on the country's economic development.
The Ministry of Finance is responsible for basic
foreign exchange control policy, and the Central Bank
of Nigeria is the principal administrator of exchange
Policy. Most commercial banks have been appointed
by the Finance Ministry as authorized exchange
dealers. Certain transactions such as repatriation of
capital, transfer of profits, and raising of external loans
must be approved by the ministry. Other transactions,
such as purchases of foreign currency and transfers of
Nigerian currency to accounts of residents in other
countries, may be approved by the authorized dealers.
Transactions not within the scope of the dealers or the
Finance Ministry must be submitted to the Central
Bank.
All foreign currency proceeds (except those
originating from petroleum exports) are deposited with
the Central Bank, which supplies the authorized
dealers with the foreign exchange they require for
approved payments. The petroleum companies, on the
other hand, are permitted to retain abroad the
proceeds from their petroleum exports and to convert
into Nigerian currency only the amounts required to
meet their payments to the government and to cover
their local operating expenses.
CONFIDENTIAL NO FOREIGN DISSEM
19
APPROVED FOR RELEASE: 2009/06/16: CIA- RDP01- 00707R000200100003 -2
1965
1966
1967
1968
1969
1970
Trade bal ance
7.0
84.3
57.1
48.4
236.3
242.2
Service payments
-250.9
-348.0
311.1
332.1
-405.4
-773.4
Transfers
7.6
5.9
21.6
48.2
29.1
63.0
Balance on current account
-250.3
-257.9
-232.4
-235.5
-140.0
-468.2
Balance on capital account
265.7
170.0
163.2
217.6
100.2
460.8
Errors and omissions
18.2
63.3
-33.9
10.9
54.0
89.3
Overall balance
33.6
-24.6
-103.0
-7.0
14.3
82.0
Net contribution of the oil sector to the overall
bal ance
91.3
121.5
136.4
80.6
156.5
369.3
*Because of rounding, components may not add to totals shown.
*Converted at N�1 $2.80.
would have been much worse if foreign payments had
been made when due. By permitting overdue
payments to accumulate, Nigeria w,-is able to show a
small deficit in 1968 and a sma'1 surplus in 1969
(Figure 17). Foreign payments have since been placed
on a systematic basis.
Foreign exchange problems during the war are
traceable to a combination of increased military
imports, decreased exports, and reduced medium- and
long -term capital inflows. Total payments for military
equipment during the war were estimated at between
$300 million and $400 million. At the same time,
exports fell during the war years, from $780 million in
1966 to $578 million in 1968, mostly because of
reduced petroleum production but also because of the
fall in exports of palm products from the east. Long
and medium -term net capital inflows during the war
also declined dramatically, and by 1969 they were
only about 10% of the prewar level.
The recovery of petroleum production and exports
eased Nigeria's external payments problem. Since
April 1971, imports have been paid for On a regular
basis. During 1971 and early 1972 the government
liquidated a backlog of payments which appeared to
pose a threat to the economy a year earlier. The
settlement of arrears was effected in advance of the
agreed date, in spite of the fact that imports increased
$360 million in 1970 and $448 million in 1971. With
continued increases in petroleum production,
Nigeria's foreign reserves should be strengthened and
the balance of payments should no longer he a
constraint on the country's economic development.
The Ministry of Finance is responsible for basic
foreign exchange control policy, and the Central Bank
of Nigeria is the principal administrator of exchange
Policy. Most commercial banks have been appointed
by the Finance Ministry as authorized exchange
dealers. Certain transactions such as repatriation of
capital, transfer of profits, and raising of external loans
must be approved by the ministry. Other transactions,
such as purchases of foreign currency and transfers of
Nigerian currency to accounts of residents in other
countries, may be approved by the authorized dealers.
Transactions not within the scope of the dealers or the
Finance Ministry must be submitted to the Central
Bank.
All foreign currency proceeds (except those
originating from petroleum exports) are deposited with
the Central Bank, which supplies the authorized
dealers with the foreign exchange they require for
approved payments. The petroleum companies, on the
other hand, are permitted to retain abroad the
proceeds from their petroleum exports and to convert
into Nigerian currency only the amounts required to
meet their payments to the government and to cover
their local operating expenses.
CONFIDENTIAL NO FOREIGN DISSEM
19
APPROVED FOR RELEASE: 2009/06/16: CIA- RDP01- 00707R000200100003 -2

CONFIDENTIAL
NO FOREIGN DISSEM
CONFIDENTIAL
APPROVED FOR RELEASE: 2009/06/16: CIA- RDP01- 00707R000200100003 -2