The Nigerian Economy Today

Introduction

Nigeria is a country established on the coast of western Africa. It has an area of 356,669 miles (923,768 km). It is bordered to the north by Niger, the east by Chad and Cameroon, the south by the Gulf of Guinea, and to the west by Benin. Nigeria is not only large in size--it is larger than the U.S. state of Texas--it is furthermore Africa's most populous country. However, Nigeria's most varied characteristic is its people. More than 400 dialects are voiced, including Yoruba, Igbo, Fula, Hausa, Edo, Ibibio, Tiv, and English. The country has abundant natural assets, especially large deposits of petroleum and natural gas(David, p35)

The economy

Despite the gloomy picture painted of the world economy, the Nigerian economy seems to be resistant to common shocks. What else can you expect from an economy that earns more than 90% of its foreign exchange earnings and 83% of government revenues from oil? Health of the Nigerian economy is based entirely on the health of the oil and gas sectors.

With the price of oil hovering around $ 80 a barrel, Sanusi has no problem to make such a bold prediction. Nevertheless, it reflects deficiencies rather than force the Nigerian economy as unstable as the price of oil, the whole future of the Nigerian economy depends on it(David, p35).

The financial sector is currently in crisis, with close to 10.000 employees of the bank has already laid off and many others to go in the coming period. Nearly all banks have declared losses in the last quarter of 2009. Credit from banks stopped and more than 10 of the 25 banks considered to be bankrupt and in need of buyers. The government has already injected more than 1.2 trillion naira to rescue banks, and yet the situation remains very unstable(Donald, p68).

If such a situation exists in the developed capitalist economy, the economy as a whole would not be in a recession, but in the Nigerian economy is still growing. This can be explained mainly from the financial sector remains underdeveloped compared to the size of the economy. For example, the largest bank in South Africa, Standard Bank Group, in 2004, about the same capital base, and three times the total assets of all the current 25 banks in Nigeria. Mortgage loans account for less than one percent of GDP in Nigeria, compared with 20 percent in South Africa. In 2006, credit to private sector from the banking sector stood at 23 per cent of GDP in Nigeria, compared with 14 percent in 2004, but still much lower than 80 percent in South Africa. Only one out of ten Nigerians were formally a bank account, compared with nearly five out of ten South Africans.

This gives us an idea of how underdeveloped the Nigerian economy. Real estate sector lost 30% of its value since the third quarter of 2009 and continues to decline. Insurance sector is seriously under fire and had already begging the government bail-out funds (Martin Dent and ...