Introduction of Nigeria
The objective of the paper is to discuss the African nation of Nigeria and why it is a major regional power. Nigeria is a country located in western Africa. It has a population of 192 million people which is quite large in population compared to its neighboring African countries as well as being the 7th most populous country in the world. This represents 18% of Africa’s total population. Africa’s average population is the youngest amongst all the continents; the median age in 2012 was 19.7, when the worldwide median age was 30.4. Its coast in the south is located on the Gulf of Guinea in the Atlantic Ocean. The country is made up of 36 states and one capital named Abuja. Nigeria is officially a democratic secular country. The country is viewed as a multinational state as it is inhabited by 250 ethnic groups, of which the three largest are the Hausa, Igbo and Yoruba; these ethnic groups speak over 250 different languages and are identified with a wide variety of cultures. The official language is English. Nigeria has a varied landscape. The far south is defined by its tropical rainforest climate, where annual rainfall is 60 to 80 inches (1,500 to 2,000 mm) a year.93 In the southeast stands the Obudu Plateau. Coastal plains are found in both the southwest and the southeast.94 This forest zone’s most southerly portion is defined as “salt water swamp”, also known as a mangrove swamp because of the large amount of mangroves in the area. North of this is fresh water swamp, containing different vegetation from the salt water swamp, and north of that is rainforest.
Nigeria is a middle-income, mixed economy and emerging market, with expanding manufacturing, financial, service, communications, technology and entertainment sectors. It is ranked as the 30th-largest economy in the world in terms of nominal GDP, and the 23rd-largest in terms of purchasing power parity. It is the largest economy in Africa; its re-emergent manufacturing sector became the largest on the continent in 2013, and it produces a large proportion of goods and services for the West African subcontinent.15 In addition, the debt-to-GDP ratio is 11 percent, which is 8 percent below the 2012 ratio.
In the past, Nigeria had to deal with mismanagement, economic reforms of the past decade have put Nigeria back on track towards achieving its full economic potential. Nigeria’s GDP purchasing power has tripled from $170 billion in 2000 to $451 billion in 2012, although estimates of the size of the informal sector (which is not included in official figures) put the actual numbers closer to $630 billion.
Although oil revenues contribute 2/3 of state revenues, oil only contributes about 9% to the GDP. Nigeria produces only about 2.7% of the world’s oil supply (in comparison, Saudi Arabia produces 12.9%, Russia produces 12.7% and the United States produces 8.6%).19 Although the petroleum sector is important, as government revenues still heavily rely on this sector, it remains a small part of the country’s overall economy.
The country of Nigeria is known widely for its natural resources. These resources vary in how much. Agriculture accounts for about 18% of GDP and almost one-third of employment. Nigeria has 19 million head of cattle, the largest in Africa.30 Though Nigeria is no longer a major exporter, due to local consumer boom, it is still a major producer of many agricultural products, including: cocoa, groundnuts (peanuts), rubber, and palm oil. Cocoa production, mostly from obsolete varieties and overage trees has increased from around 180,000 tons annually to 350,000 tons.
Major agricultural products include cassava (tapioca), corn, cocoa, millet, palm oil, peanuts, rice, rubber, sorghum, and yams. In 2003, livestock production, in order of metric tonnage, featured eggs, milk, beef and veal, poultry, and pork, respectively. In the same year, the total fishing catch was 505.8 metric tons. Roundwood removals totaled slightly less than 70 million cubic meters, and sawnwood production was estimated at 2 million cubic meters. The agricultural sector suffers from extremely low productivity, reflecting reliance on antiquated methods. Agriculture has failed to keep pace with Nigeria’s rapid population growth, so that the country, which once exported food, now imports a significant amount of food to sustain itself. However, efforts are being made towards making the country food sufficient again.
The Oil Indurstry
Nigeria’s proven oil reserves are estimated to be 35 billion barrels natural gas reserves are well over 100 trillion cubic feet. Nigeria is a member of the Organization of Petroleum Exporting Countries (OPEC). The types of crude oil exported by Nigeria are Bonny light oil, Forcados crude oil, Qua Ibo crude oil and Brass River crude oil. Poor corporate relations with indigenous communities, vandalism of oil infrastructure, severe ecological damage, and personal security problems throughout the Niger Delta oil-producing region continue to plague Nigeria’s oil sector.
Efforts are underway to reverse these troubles. A new entity, the Niger Delta Development Commission (NDDC), has been created to help catalyze economic and social development in the region. The U.S. remains Nigeria’s largest buyer of crude oil, accounting for 40% of the country’s total oil exports; Nigeria provides about 10% of overall U.S. oil imports and ranks as the fifth-largest source for U.S. imported oil.
The United Kingdom is Nigeria’s largest trading partner followed by the United States. Although the trade balance overwhelmingly favors Nigeria, thanks to oil exports, a large portion of U.S. exports to Nigeria is believed to enter the country outside of the Nigerian government’s official statistics, due to importers seeking to avoid Nigeria’s tariffs. To counter smuggling and under-invoicing by importers, in May 2001, the Nigerian government instituted a full inspection program for all imports, and enforcement has been sustained. The government also has been encouraging the expansion of foreign investment, although the country’s investment climate remains daunting to all but the most determined. The stock of U.S. investment is nearly $7 billion, mostly in the energy sector. Exxon Mobil and Chevron are the two largest U.S. corporations in offshore oil and gas production. Significant exports of liquefied natural gas started in late 1999 and are expected to expand as Nigeria seeks to eliminate gas flaring by 2008.
Since the fall in oil prices in 2015 and 2016, the government exchange rate policy has limited devaluation of the naira due to inflation concerns by the President Muhammadu Buhari. Nigeria ranks 27th worldwide and first in Africa in services’ output. Since undergoing severe distress in the mid-1990s, Nigeria’s banking sector has witnessed significant growth over the last few years as new banks enter the financial market.
Private sector-led economic growth remains stymied by the high cost of doing business in Nigeria, including the need to duplicate essential infrastructure, the lack of effective due process, and nontransparent economic decision making, especially in government contracting. While corrupt practices are endemic, they are generally less flagrant than during military rule, and there are signs of improvement. Meanwhile, since 1999 the Nigerian Stock Exchange has enjoyed strong performance, although equity as a means to foster corporate growth is being more utilized by Nigeria’s private sector.
Foreign Investment and Trade
In 2005, Nigeria imported about US$26 billions of goods. In 2004 the leading sources of imports were China (9.4%), the United States (8.4%), the United Kingdom (7.8%), the Netherlands (5.9%), France (5.4%), Germany (4.8%), and Italy (4%). Principal imports were manufactured goods, machinery and transport equipment, chemicals, and food and live animals.
In 2005, Nigeria exported about US$52 billions of goods.
In 2005, Nigeria posted a US$26 billion trade surplus, corresponding to almost 20% of gross domestic product. In 2005, Nigeria achieved a positive current account balance of US$9.6 billion. The Nigerian currency is the naira (NGN). As of mid-June 2006, the exchange rate was about US$1=NGN128.4. In recent years, Nigeria has expanded its trade relations with other developing countries such as India. Nigeria is the largest African crude oil supplier to India — it annually exports 400,000 barrels per day (64,000 m3/d) to India valued at US$10 billion annually.
India is the largest purchaser of Nigeria’s oil which fulfills 20% to 25% of India’s domestic oil demand. Indian oil companies are also involved in oil drilling operations in Nigeria and have plans to set up refineries there.
The trade volume between Nigeria and the United Kingdom rose by 35% from USD6.3 billion in 2010 to USD8.5 billion in 2011.
Although Nigeria must grapple with its decaying infrastructure and a poor regulatory environment, the country possesses many positive attributes for carefully targeted investment and will expand as both a regional and international market player. Profitable niche markets outside the energy sector, like specialized telecommunication providers, have developed under the government’s reform program. There is a growing Nigerian consensus that foreign investment is essential to realizing Nigeria’s vast but squandered potential. European investments are increasing, especially since Belgian consultancy companies such as Genco are exploring the Nigerian market. Companies interested in long-term investment and joint ventures, especially those that use locally available raw materials, will find opportunities in the large national market. However, to improve prospects for success, potential investors must educate themselves extensively on local conditions and business practices, establish a local presence, and choose their partners carefully.
With the information stated above, it is self-evident to realize that Nigeria is a regional superpower through and through. Nigeria large economy, focused on oil and agriculture has created a surplus of jobs in recent years for many Nigerians. When a country is able to stimulate jobs, that stimulate consumers spending which keeps the economy in a steady cycle. Nigeria economy is also very important being that it is the largest African nation within population which puts Nigeria on the map to be a focus when it comes to trade and investment, not only does this help Nigeria it helps some of the neighboring countries they work with when it comes to trading. Nigeria economy is one that holds a great deal of influence in today’s international economy. Nigeria also produces’ more oil than any other African nation.
Overall, I predict Nigeria will continue to remain a global leader and economic power in Africa due to its vast economic state influenced from agriculture, oil, and the other resources it continues to profit from.