Structure of the Nigeria Economy

COURSE TITLE: STRUCTURE OF THE NIGERIA ECONOMY

History and Structure of the Nigeria Economy
Introduction
Nigeria is a country that is blessed with many resources. Even before the colonization of the country, the
country has experienced significant positive performance in the economic activities.
We will start by looking at a brief overview of the formation of the country Nigeria.

The structure of Nigeria Economy

The structure of an economy can be defined as all complex organizational frameworks, or the outline of
logical connection through which the activities of the economy are connected. The economic structure of
an economy is a function of the sum of all the different economic activities in the geo-political boundaries
of that area. The structure of Nigeria is divided into four

• Production: this has to do with the all forms of agricultural activities (cropping, livestock, forestry
and fishing), industrial activities (manufacturing, mining and quarry) and the real estate and
construction.
• General commerce: the commerce part of Nigeria includes both the domestic trade and foreign
trade. It is also extended to the bills discounted.
• Services: this includes public utilities services, services in the education and health as well as
transport and communication services.
• Others: This include all other economic activities such as the activities of the credit and financial
institutions, all other forms of government activities not included in education, and health). It also
include government construction of roads. The activities of the private individual in providing
personal and professionals services such as hair dressers, fashion designers among all others are
also part of this group.
Determinants of Nigeria economic performance

The present economic performance of Nigeria is measured by some indicators. Some of these are
discussed below.

• Output: This is the sum of the goods and services produced in a country. It is usually measured using
the GDP but better measure is the real GDP. The output of Nigeria has been on the increase. Real

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 Structure of the Nigeria Economy
GDP for Nigeria was N69, 023.93billion in 2015 while GDP at PPP was $1,027.4billion. The major
contribution to the output of the country had been the oil sector from the sale of crude oil but the
agricultural sector has started improving in its contribution. In 2015, while the crude oil total RGDP
was N6,629.96 billion contribution of total agriculture was N15, 952.22 billion with crop production
contributing N14,274.94billion and the services sector performed more than the other sectors
contributing about N25,374.78 billion to the RGDP which is about 37 percent of the total GDP. In
2017, while the crude oil total RGDP fell to 5938.05, agricultural RGDP was N17, 179.50.
• Level of technology: Before now level of technology in Nigeria has been low. This has affected the
performance of the major productive sectors of the economy (agriculture and industrial sectors).
However, the level of technology in the country is becoming to grow with the recent trend in the global
advancement of technology.
• Population and its component: The level of population in a country affects the level of development
especially when the GDP per capita is used in the measure of development. It also increases the level
of dependency when there is high unemployment exists in the country. For Nigeria, the total
population is 195.9million in 2017. In terms of its composition, about 44 percent are with the age
bracket of 0-14 years, 53 percent are within 14-64 years while about 3 percent falls into 65 and above.
From the above, about 47% are in the dependency group and in addition to the high unemployment
rate, the level of development of the country is low. In terms of sex, while about 56 percent are female,
about 44 are male. The country also has an urban population of about 47.8%.
• Per capita income: The per capita income as at 2015 in 2011 PPP is $ 5,639 and a GDP per capita
growth of 3.5%. This is as a result of the high level of income. Hence per capita income is not a good
measure of the wellbeing of the people.
• Balance of payment: The country’s balance of payment position has been on the deficit. For instance
the country witnessed a continuous deficit BOP ranging from (2,394.9) in 2005 to (2,074.8) in 2015
although had a surplus of 3,235.5 (all in billions of Naira) in 2015 which can be attributed to the
improvement in the agricultural sector and resulted to the reduction in the importation.
Factors that can affect the Nigerian economy

Some of the factors that can affect any economy, Nigeria inclusive are:

• Political system: The political stability of the economy will determine if investors will come and
invest in the country. When there is political stability in the country, there will be certainty that

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 Structure of the Nigeria Economy
investment will be safe. The increase in the investment will lead to increase in economic growth of
the country.
• Cultural: Culture is defined as the customary beliefs, values and ethnical acts of a social group that
is transmitted with fairly unchanged form and passed on from generation to generation. Economic
culture is the sum of beliefs, attitudes, and values that acts on economic activities of individuals,
organizations, and institutions. A welcoming culture will always lead to the growth and better
performance of the country. Some of the component of culture is trust and respect. When trust is low,
there will be high cost of transaction as a result of monitoring. Lack of respect in the culture of the
people brings about limited morality and hindering those outside the culture from interacting with
them thereby hindering the growth of the economy. In Nigeria, the cultural diversity has hindered
rather enhance the growth of the economy through various cultural crisis.
• Religion: Religious activity can affect economic performance at the level of the individual, group, or
nation. Religious affiliation could serve as the base for group to work together and successfully
challenge established institutions and practices. This had not been considered by economist until
lately. There is argument as to the flow of the impact between religion and the performance of the
economy while some believe that the economy is molded by the religious believe of the people,
changes in the economic circumstances come theological adaptation others like W. Arthur Lewis
believe that the economic performance influences the religion act of the people. In Nigeria, there
have been various types of religious crisis and this has negatively affected the economy.

THE NIGERIAN AGRICULTURE

Introduction

Agriculture is defined as the act or practices of cultivating the land for the production of plants and animals
for man use. Agriculture is a primary economic activity in Nigeria, which is the livelihood of a large
number of the people. The agricultural sector has long been recognized as an important sector in the
Nigeria economy. It comprises of crop production, fishing, livestock rearing and forestry. The structure
of agriculture in Nigeria makes it labour intensive because of poor method of farming.

Agriculture in the Pre-Colonial time in Nigeria

In the pre-colonial time, the structure of the Nigerian economy basically rested on the nature of the
vegetation and the main components are agriculture, handicrafts, trade, and transportation system. A key

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 Structure of the Nigeria Economy
factor to this was the availability of favorable climate, free of epidemics, fertile land suitable for
cultivation and grazing, coastal environment attractive for fishing and safety, such as absence of war.
Activities were mainly communities producing at subsistence level. The way to practice agriculture and
the crops grown were determined by the nature of the soil and terrain of the region. Agricultural practices
were crop production, fishing, hurting, and rearing of animals.

Crop production in pre-colonial Nigeria was mainly by shifting cultivation and crop rotation as a result of
land tenure practice and lack of knowledge of highly mechanized agriculture. The natural issues such as
erosion, drought, pests and diseases were addressed at the local level, depending on the various
communities. For example, set traps to catch birds and vermin on farms and canals were also dug to drain
the water to check floods. Wetting of farms during the drought had been an ancient agricultural practice
among Nigerians. Farmers relied on instruments such as the hoes, machete, and sickles. Different crops
were grown in the different regions. Instance, yams, okra, vegetables, maize, cocoyam, cassava, banana,
kola nuts and oil palm were grown in the southern part while ground nut, beans, milet etc were grown in
the northern part. Trade was done by batter.

Fishing was massively carried out on both inland and coastal water and was of wonderful economic value
to the pre-colonial Nigerians. The fish was one of the most critical items of trade between the goods in
Nigeria. Fish of numerous types are either sun dried or smoked to preserve them for long or short market.
Fishing was prominent among the Ilaje, Izon, Itsekiri, Efik, Jukun, Ijebu, Awori etc. At late 18th century
to the 19th century, most fishermen in Nigeria has begun to develop fishing gear and improved techniques,
such as clapnets, cast nets, ita, egho, Asure, ojijon, Agada, ighee, iyanma, ekobios UFO Riro, Nigeria etc.

The game was one of the leading economic activities in the pre-colonial Nigeria. It was quite essential
because many men and women depend on it for their economic survival in a stage of economic
development. Nonetheless, over time, hunting became an essential complement to agriculture. Hunting in
Nigeria during this period was on the lower level, including setting traps for birds, small animals like
squirrels, monkeys, lawn mowers, gators, etc. Yet another level is the hunting of large animals such as
crocodiles, elephants, wild pigs, antelopes, etc. Hunting was a dependable source of skin from meat and
animal material, shoe and drum making. It was a means of foot paths/road construction, settlement
development, medical values as well as economic values.
The breeding of animals, specially cattle, goats and sheep in commercial quantities were other forms of
agricultural activities done in the pre-colonial times. Grazing was practiced mainly by the Fulani in the

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 Structure of the Nigeria Economy
savannah region of northern Nigeria. Livestock production was a source of meat for the forest dwellers,
the workers demanded the skin to produce leather shoes, bags, shield for war etc.

Agriculture in the colonial and post-colonial period

The colonial period introduced the use of money and agricultural incentives increased as a result of the
incentives that will be gotten from the sales of the produces. This also led to the introduction of
mechanized agriculture. Agricultural activity dominated the economy through the period of the
independence till 1973/74. Before the colonial came and till 1973/74, the agricultural sector accounted for
more than 70% of the GDP and about 90% of employment. However, its contribution fell from 1974/75
with the discovery of oil. From 1973-1978, the annual growth rate of the sector was 0.6% while from
1978-1982, the rate of growth was negative. The sector was neglected and resources devoted to other new
sectors such as the oil. From mid-1970, policies were put in place to supply large scale agricultural
enterprises with high subsidized investment and imported materials inputs while the small farmers who
form the vast number in agricultural producers were denied access to resources. Agro allied industries
were established and this required large expanse of land. There was the establishment of the backward
integration process. Thus the agricultural sector was transformed from labour intensive to capital intensive
(income concentrating) in the 1980s. This transformation was not fruitful as can be seen from the
performance of the sector because the policy neglected the small scale farmers that formed the vast number
of the farm producer.

The role of agriculture in the Nigeria economy

Agriculture has been identified to be playing important roles in the development of Nigeria economy it
has played major roles in the provision of food, employment, supply of raw materials, earns foreign
exchange etc. An analysis of some of the sectors roles are:
i) Food supply. The agricultural sector has played prominent role in the provision of food particularly
between 1960 and 1970s, supplying about 90% of the total food in the country. This has led to very
low level of food importation of about 9% in those periods. However from 1989, food importation
began to grow and it grew to about 30% in 2000. This however fell to 6.9% in 2005, grew again to
28% in 2011 and as 2012 food import was about 14% of the total import. Between 1970 and 1979,
the growth rate of food supply was negative at about -20%. Nigeria is presently facing huge food
security challenges. About 70 percent of the population lives on less than N 100 (US$ 0.70) per day,
suffering hunger and poverty.

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 Structure of the Nigeria Economy
ii) Employment: the agricultural sector has played prominent role in the provision of employment in
Nigeria. Before 1970, the sector provided about 80% of the total employment. However this has
dropped as a result of the relegation of the sector for oil. Data showed a declining share of total labor
in agriculture, from about 59% in 1981–1985 to 45% in 1996–2000. The sector still employs about
50% of the total labour force population.
iii) Export earnings: In its contribution to export earnings, the sector contributed about N282.4million as
at 1960 accounting for about 62% of total export but as at 1995, it contributed only about 1.8% of
the total export. This fell to 1.3% in 1996 and 1% in 2000. This can be attributed to its low
productivity and the fall in the world demand for primary goods. The sector has a terms of trade of
120, this fell to 80 in 2005 and grew gradually to
100 in 2014 iv) Contribution to GDP: As at 1929, the sector accounted for about 57% of the total
GDP with oil palm contributing about 85% of this share 1960, the sector contributed about 70% of GDP.
This has however dropped with the discovery of the oil sector. The contribution of the sector to GDP fell
to 24% in 1975 and 14% in 1983. This decline led to the introduction of the Structural Adjustment
Programme (SAP) in 1985. This witnessed a partial success and the sector contributed 30.1% in 1991
because of the little impact of SAP. Data showed that the crops subsector dominated the agricultural sector
GDP over the past years, accounting for between 71% and 80% of the agricultural sector RGDP in the
period 1981 to 2000. The sector contributed about 24% of the RGDP 2010 with the crop subsector
accounting for about 90% of this, and about 30% in 2017.
v) Source of market for industries. Agricultural sector serves as a market for industrial activities providing
them with raw materials as well as market for the industrial products such as fertilizers and other
farm inputs as produced in Nigeria.
Overall performance of the Agricultural sector

Nigeria has about 79 million hectares of arable land, of which 32 million hectares are cultivated.
Over 90% of agricultural production is rain-fed. Smallholders, mostly subsistence producers’ account for
80% of all farm holdings and typical farm sizes range from 0.5 hectare in the south to 4 hectares in the
north. Both crop and livestock production remains below potentials. Inadequate access to and low uptake
of high quality seeds, low fertiliser use and inefficient production systems lead to this shortfall.

Generally, there had been a lack of consistency in the growth performance of the agricultural sector in the
1981–2000 periods, with some evidence of unstable or fluctuating trends, probably due to inconsistencies
in policies and policy implementation in the period. It may be concluded that high instability was a

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 Structure of the Nigeria Economy
hallmark of the agricultural sector with most important indicators in the sector displaying wild periodic
fluctuations from good performance to bad performance and vice versa.
In fact, it may be stated that a very unstable growth pattern characterizes Nigeria’s agriculture and points
to the need to address the instability inducing factors identified above.

Factors constraining agricultural performance

The agricultural sector has been faced with many constrain to its growth. Among these are:

• Technical constraints: Technical constraints include the high incidence of pests and diseases,
inadequate infrastructural facilities, dependence on unimproved inputs, and rudimentary
technology. Others are an inefficient inputs supply and distribution system, and high
environmental hazards.
• Lack of labour resources: A major problem of agricultural labor supply arises from the increasing
migration of able-bodied youths from rural to urban areas. The consequence of the massive
migration of youths is seasonal labor shortage, especially at the peak periods of labor demand
(during land preparation, planting, weeding, and harvesting).
• There is also the problem of low agricultural labor productivity: The population pressure on land
is increasing while the quality of land is declining.

• Socioeconomic constraints: The socioeconomic problems that constrain Nigeria’s agriculture

include scarcity and high cost of improved farm inputs, inefficient marketing arrangements as a
result of by high marketing margins, and lack of legally enforceable ownership and control rights
over land which serves as a disincentive to investing in agriculture and which arises from the lack
of an appropriate land tenure system.
• Inadequate extension services, credit facilities, poor research coordination and weak linkage
between research and extension
• Low rate of growth in international demand for primary export commodities arising largely from
competition with synthetic products; low income elasticity of demand; and increasing food deficit.
• The continued use of rudimentary tools and cultural practices. Low level of mechanization
• Poor state of rural infrastructure especially roads and this leads to high cost of farming operation
and transportation

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 Structure of the Nigeria Economy
• Small scale production: Agricultural production is predominantly in the hands of a multitude of
small-scale, unorganized farmers scattered across the country. These people have dispersed nature
of farm settlements that hinders the participation of farmers in agricultural and rural development.
• Inadequate credit supply to the sector: Credit flow to the agricultural sector is an indicator of the
sector’s capacity to invest and grow. Credit to the sector has not been encouraging. The share of
total bank credit going to agriculture first was N0.6billion in 1981 and it grew to N5.1Billion in
1991 translation to an increase of from 6.7% to 16% as a result of the various policy measures that
were put in place at that period which also is the SAP period. As at 2001 bank credit to the sector
was about to 6.9%, and in 2014, it was 3.7% of the total banking credit given out. This pattern of
movement shows a reflection of the level of government priority for agriculture and, more
importantly, the degree of compliance of the banking system with agricultural credit guidelines
and this contributes to the ineffectiveness of the sector. Also, the Federal Government’s total
expenditure both capital expenditure and recurrent has been low given the importance of the sector.
• Policy instability: One of the major constraints to agricultural policy effectiveness is the policy
instability. Many policies have been put in place yet there seem to be no improvement in the
performance of the sector. This could be partly ascribed to political instability as every successive
government tended to jettison most of its predecessor’s policies and programs in the erroneous
belief that a new government could only justify its existence or make its mark by adopting entirely
new policies and programs.
• Inconsistency in policies: Agricultural policies have been inconsistent. There is the tendency for
mutually antagonistic rather than being mutually complementary and reinforcing.
• Narrow base of policy formulation: Policy formulations are always narrow because of the narrow
level of involvement of the people and their institutions in the formulation of policies. These
policies tended to lack grassroots support and the popular mobilization required for their success.

Efforts at Overhauling Agriculture in Nigeria both Past and Present.

In order to alter activities of the agricultural sector for better, the federal government had embarked on
and implemented several agricultural policies and programmes. Some are abandoned, some restructured
and others are still in place. In retrospect, four distinct agricultural policy phases can be identified in
Nigeria, The first phase spanned the entire colonial period and the first postindependence decade from
1960 to about 1969, the second covered the period from about 1970 to about 1985, the third phase started

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 Structure of the Nigeria Economy
from about 1986 in the structural adjustment period, and the fourth was what could be characterized as
the post-structural adjustment era starting from about 1994.

In the pre-1970 era, the government philosophy of agricultural development was characterized by small
direct government intervention in agriculture. As such, the government’s attitude to agriculture was
relaxed, with the private sector and particularly the millions of small traditional farmers bearing the burden
of agricultural development efforts. Government only supported their activities and played the role of
providing agricultural research, extension, export crop marketing, and pricing activities which were based
on regions with the Federal Government contribution being confined largely to agricultural research.

In the period 1970–1985, the apprehension of the state of the agricultural sector led to a change of the
attitude of government towards the sector. Government became more involved in the agricultural sector
and several policies were put in place towards the agricultural sector. Among these are National
Accelerated Food Production Programme (NAFPP) formulated in 1972. It was focused on the peasant
farmers to educate them, provide fund for agriculture and increase food production; the Nigeria
Agricultural and Cooperative Bank (NACB) of 1972 that was aimed at financing peasant agricultural
practices, Operation Feed the Nation (OFN) of 1976 which was channeled at educating famers towards
increasing food production and Agricultural Credit Guarantee Fund in 1977. Sector-specific agricultural
policies were largely designed to facilitate agricultural marketing, reduce agricultural production costs,
and enhance agricultural product prices as incentives for increased agricultural production.

The Nigerian enterprises promotion decrees was established in 1972 and reformed in 1977 while the Land
Use Decree was promulgated in March 1978. Also in 1977, a center for Agricultural Mechanization was
created to conduct farm mechanization research and carry out tests on foreign farm machinery in order to
determine their suitability or adaptability to Nigerian conditions.

With the birth of civilian administration in 1979, the Green Revolution Program was launched in 1980
with its objectives centered on self-reliance in food production and the diversification of
Nigeria’s sources of foreign exchange. The programme covered all areas of agricultural production, but it
was truncated by the mismanagement and fraud, poor and thorough research and extension services,
problems of land acquisition, inadequate data, inadequate executive capacity and lack of infrastructural
facilities.

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 Structure of the Nigeria Economy
Structural adjustment period (1986-1993)

The need for the transformation of the rural sector has been recognized as a means of the development of
the agricultural sector since agricultural activities are mostly carried out in the rural part. But trends in the
transformation of the rural sector shows that despite the huge investment in the agricultural sector, which
was assumed will automatically bring about eradication of rural poverty and isolation has not been
achieved. This is partly due to the deplorable conditions of rural areas, enormous size, the failure of the
state-led approach to development, Nigeria’s dwindling fortune in the petroleum export market, a
burgeoning debt burden, and an unhealthy investment climate led to the realization that the country’s
economy required some drastic restructuring. This gave impetus to the Structural Adjustment Program
(SAP) launched in July 1986. It comprises a mix of demand-side policies, supply-side policies, and other
policies designed to improve a country’s international competitiveness.

Generally, Structural Adjustment policies in Nigeria were aimed not only at correcting existing price
distortions in the economy but also structural imbalances and for promoting non-price factors which
would enhance the effectiveness of price factors. To address the problem of rural under development in
Nigeria, the Directorate of Foods, Road and Rural Infrastructure (DFRRI) and the National Agricultural
Extension and Research Liaison Services were established in 1987. This was meant to open the rural areas
through the construction of access roads, and provision of basic amenities of modern living. The National
Agricultural Research Project and The National Agricultural Land Development Authority (NALDA) was
established were also established in 1991 to create the priority of fund in agricultural research, strengthen
agricultural research institutions as well as the implementation of land development policy such as the
provision of strategic support for land development. However, NALDA proved to be ineffective and was
subsequently scrapped.

Post SAP Period (1999-date)

The effect of SAP on the Nigeria economy was also seen in the agricultural sector. Although there were
initial positive effect, but the economy system could not accommodate the policy of SAP. The sector was
neglected for a long time given the long period of military regime. Emphasis was on the provision of
finance/credit to the sector. This led to the development of new credit policies as well as the restructuring
of the old ones that were not effective. Among these were the National Poverty Eradication Programme
(NAPEP), established in 1999 by the federal government aimed at reducing poverty level in the country
by providing directed (subsidized) credit to farmers and the unemployed.

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 Structure of the Nigeria Economy
In 2000, Nigerian Agricultural Cooperative and Rural Development Bank (NACRDB) was established
from former Peoples Bank of Nigeria, the Nigeria Agricultural and Cooperative Bank (NACB) and the
Family Economic Advancement Programme (FEAP). The Commercial
Agriculture Credit Scheme (CACS) was established in 2009 to provide finance for the country’s
agricultural value chain (production, processing, storage and marketing).

In 2004 and 2008, the Federal Government launched an economic reform called National Economic
Empowerment and Development Strategy I (NEEDS) and NEEDS II programme to encourage private
sector participation in the development of the economy. In the agricultural sector, NEEDS were directed
to influence improvement in the production, processing and distribution of agricultural commodities.
Between 2009 and 2011, the Government of Nigeria, began to work towards reforming the agriculture
sector after many years of neglect. Vision 2020 was declared with the aim of attaining food security,
increasing production and productivity among others. The Agricultural Transformation Agenda, ATA was
introduced and took place between 2011-2015, built on the principle that agriculture is a business and
therefore policy should be about supporting it. It was aimed at developing the value chain of five key
commodities; rice, cassava, sorghum, cacao and cotton.

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