Nigeria has a dual economy with a modern segment dependent on oil earnings, overlaid by a traditional agricultural and trading economy. At independence in 1960, agriculture accounted for well over half of GDP, and was the main source of export earnings and public revenue. The oil sector, which emerged in the 1960’s and was firmly established during the 1970’s, is now of overwhelming importance to the point of over-dependence: it provides 20% of GDP, 95% of foreign exchange earnings, and about 65% of budgetary revenues. Competition between ethnic and regional groups for power and access to the country’s oil wealth has been at the root of politics in Nigeria.
The largely subsistence agricultural sector has not kept up with rapid population growth. Nigeria, once a large net exporter, now imports food though the Administration of President Umaru Musa Yar’Adua has introduced far-reaching policy initiatives to reverse this trend and attain national food self-sufficiency. Based on GNP per capita, Nigeria is among the world’s 20 poorest countries. Economic growth since the early 1970’s has been erratic, driven primarily by the fluctuations of the global oil market. During the 1980’s and 1990’s Nigeria faced growing economic decline and falling living standards, a reflection also of political instability, corruption, and poor macroeconomic management (most notably the failure to diversify the economy).
Fundamental economic reforms were introduced by the Administration of President Olusegun Obasanjo which resulted in a stable macro-economic environment, including debt relief. A major debt deal led to massive reduction in Nigeria’s debt from over US$36 billion in 2004 to a mere US$3.6 billion in 2008. President Umaru Musa Yar’Adua has intensified economic reforms on the basis of the foundation laid by his predecessor. Between 2004-2008, the country’s GDP grew two-fold to $209.5 billion and at an impressive rate of 7%. This was the best performance for many years, above the regional average of 6%.
The country’s GDP recorded an average growth rate of 6.3% between 2006 and 2008. This was largely fuelled by the growth of the non-oil sector, including the phenomenal increase in the price of crude oil before the sharp decline of 2008, made worse by the global economic meltdown.
GDP growth rate is projected at 5% in 2009 while non-oil GDP is expected to remain at 6.3% by the end of 2009.
According to the governor of the Central Bank of Nigeria Sanusi Lamido Sanusi, inflation declined steadily from 15.1% at the end of 2008 to 11.1% at the end of July 2009.