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Economic development in Nigeria

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Key idea Specification content
Some LICs and NEEs are experiencing rapid economic development which leads to significant social, environmental and cultural change. A case study of one LIC or NEE to illustrate:

• the location and importance of the country, regionally and globally • the wider political, social, cultural and environmental context within which the country is placed • the changing industrial structure. The balance between different sectors of the economy. How manufacturing industry can stimulate economic development • the role of transnational corporations (TNCs) in relation to industrial development. Advantages and disadvantages of TNC(s) to the host country • the changing political and trading relationships with the wider world • international aid: types of aid, impacts of aid on the receiving country • the environmental impacts of economic development • the effects of economic development on quality of life for the population.

Nigeria’s place in the world

The location and importance of Nigeria

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Nigeria the “giant of Africa” is a former colony of the UK that can be found in West Africa.  It is growing rapidly as a country both economically and in terms of population. Many people around the globe think that Nigeria could be Africa’s global superpower if it can overcome the many problems that limit its development.
It already has the continent’s biggest economy, a huge military budget and is active in the West African and African continent.

By 2040 predictions are that;
• Nigeria will be the fourth most populous country in the world after India, China and the United States with population projected to grow from 184 million to 320 million by 2040.
• Gross domestic product (GDP) is projected to grow from $525-billion in 2014 to $4.2-trillion by 2040.

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Nigeria is an NEE and one of the economic leaders in Africa. Nigeria is rich in oil, and this makes 75 per cent of government money, but the rapid economic growth (over 7 per cent per year since 2009) is found mostly in the non-oil sector (according to the IMF). Nigeria is making increasing amounts of money from manufacturing and services.

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However, despite this wealth Nigeria has a quarter of Africa’s extreme poor people. In addition, more than 100 women die every day from complications during pregnancy and childbirth. Over 2,000 children under 5 die every day from preventable diseases and 8.5 million children do not go to school (the most of any country in the world).

Political links

Nigeria has many political and economic links around the world and has moved on from its days as a Commonwealth country occupied by the UK (it gained independence in 1960).  Its main trading partners include the European Union (EU), the United States, India, Brazil, and China.  Nigeria is also an active member of the Economic Community of West African States (ECOWAS) and is also part of the African Union. Nigeria has also stepped up its involvement in international affairs, the country ranks as the fifth largest contributor to UN peacekeeping missions (United Nations 2014) and has a non-permanent seat on the UN Security Council for 2014-15.

The changing industrial structure of Nigeria

The industrial structure of Nigeria

The economy of Nigeria is changing, and it is shifting from mainly primary based economy reliant on farming and extractive industries such as oil and gas, to one which making more money or GDP from manufacturing (secondary industries) and more services in the tertiary sector.  Despite these changes Nigeria remains a country divided, many people still work in farming and wealth is not well distributed between the very wealthy and the very poor.

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According to the World Bank, Nigeria is no longer be classified as a LIC (GNI less than $1,045) it is a  Newly Emerging Economy (NEE) with a GNI of $5,360. The economy of Nigeria grew at a massive 7% per year every year for over a decade (2004-2014). The oil industry has been one of the drivers of this change, but more recently it has been the growth of manufacturing and services that are helping the Nigerian economy grow.

Despite being Africa’s largest economy, Nigeria is not a rich country.  Estimates show that approximately 60 million people live below the national poverty line, and a further 60 million people live not far above it. More than 60% of those living in poverty are in the north and more than three quarters are estimated to be in rural areas. Nigeria now has 15% of the world’s children out of school and 10% of the world’s child and maternal deaths. Many girls and women are excluded from opportunities: only about 57% of girls in northern Nigeria attend primary school, and less than 1 in 4 go on to secondary school.

Nigeria’s economic potential is big because;
1. It has a large National (domestic) market
2. Its geographical position is good in West Africa
3. It has human resources (a large population)
4. It has plentiful natural resources such as Oil.

Limits to growth for all Nigerians include;
• Poor infrastructure such as roads
• Limited access to financial services for small/medium businesses and poor people.
• Lack of electricity
• Job creation being limited by import and export taxes or barriers
• A reliance on agriculture (with low productivity) is the main livelihood for poor people
• Poor governance and ongoing instability  – Nigeria has problems with corrupt politicians and recent terrorist attacks by Boko Haram in the north
• Disputes over land and water and access to (government) resources have also created grievances and violence. The Niger Delta continues to be fragile, but there has been no significant return to violence since an amnesty was implemented in 2010.
• Nigeria has only been democratic since 1999

How manufacture can stimulate growth
Manufacturing is a very important sector of an economy.  It is with manufacturing (also known as secondary industry) where primary goods such as food stuffs (like cocoa) or minerals (e.g. Iron Ore) are processed into usable goods such as chocolate or steel.  This is important for many LICs and NEEs because the price they receive for primary goods is often low and varies a lot on the world market.  Secondary goods command a higher price so the country can raise its GDP.

How manufacturing industry can stimulate economic development
Manufacturing is a very important sector of an economy.  It is with manufacturing (also known as secondary industry) where primary goods such as food (cocoa) or minerals (Iron Ore) are processed into usable goods such as chocolate or steel.  This is important for many LICs and NEEs because the price they receive for primary goods is often low and varies a lot on the world market.  Secondary goods command a higher price so the country can raise its GDP.

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The diagram (above) shows how manufacturing can have a full positive multiplier effect . If an industry such as the Oil industry in Nigeria’s Niger Delta invests in manufacturing plants (such as an oil refinery like the Warri Oil refinery in Nigeria, shown below) there can be many knock on beneficial effects.

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The manufacturing attracts jobs within the factory as locals take up new jobs.  These locals then spend their money in the local economy and pay taxes. Other industries that can help to service the factory can make money. This boosts the economy further, allowing more money to be put into services, immigration to occur and innovation which could lead to other new industries.

Read the article below:

Recent oil developments in the Niger delta

The role of transnational corporations (TNCs) in relation to industrial development

Transnational Corporation (TNC) is a company that has operations (factories, offices, research and development, shops) in more than one country. Many TNCs are large and have well‐known brands. Often TNCs have their headquarters and areas of research, development and product innovation in the country they start in, and manufacturing and factories in other countries (often poorer ones to take advantage of cheaper labour and environmental costs).

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Nigeria is attractive to many TNCs because of the large market on offer and lower labour costs.

Shell in Nigeria
Shell is a massive TNC that operates in many countries around the world.  Extracting the oil is a primary industry but Shell also refine the oil, which is a secondary manufacturing industry and they also sell the finished products, which is a tertiary service. Shell’s work in Nigeria produces more than 21% of the countries total petroleum production from more than eighty fields. Shells bring positives and negatives to the country.

Advantages and disadvantages of TNC(s) to the host country

There are many positives and negatives of Transnational Corporations for a country like Nigeria.  TNCs like Shell provide jobs in factories making supplies and in services where the products are available for sale, and they do try to clean up after they accidently damage the environment. TNCs often have charities to help people in the country they work in.  Shell has the Shell Foundation to help sustainability and biodiversity and help local communities.  The main advantage is that TNCs can help countries develop by investing money and encouraging development. Shell has spent $12 billion in LICs.  TNCs pay tax which can be used by the governments of countries to help their people. Shell paid £20billion in corporation tax in 2013. Finally, oil refineries like those in Nigeria use lots of local companies to help them run.  This creates a multiplier effect and TNCs allow the import of new technologies into a country, improving it.

However, sometimes TNCs come in for criticism. Their activities have polluted the environment in the past.  Shell has had many incidents involving oil spills. TNCs have been accused of human rights abuses in the past. Shell has been accused of crimes against the Ogoni people in the Niger Delta (see below).  In addition, employees in LIC’s are working for long hours in poor conditions (in factories known as “Sweat Shops”). Also, employees in LIC’s might be paid much less than employees in HIC’s for doing higher intensity jobs. Some TNCs have even been known to use child labour in their factories. In addition, the jobs in the LIC’s are not secure. They could lose their jobs without warning if company decide to set up somewhere cheaper. The profits from the production go straight to the headquarters in the HIC. They aren’t reinvested in the LIC. Even in HICs, big TNCs like Amazon and Starbucks have been accused of doing everything they can to limit the amount of tax they pay by playing the system.

(TNCs positive and negative impacts)

Human right and TNCs – Case study:

The Niger Delta contains Ogoniland, home to a community that fought back against Shell.  Shell has extracted $30billion worth of crude oil from the land of the Ogoni people since the 1950s.  Oil revenue makes up 75% of the Nigerian economy and ½ of that comes from Shell.  This has had consequences for the Ogoni people, many of whom live without electricity or running water, who see none of the oil profits and have to live with the poisoning of land and water from pipelines, oil spills and gas fires.

Ken Saro-Wiwa organised the locals into the Movement for the Survival of the Ogoni People (MOSOP) who used non-violent protest against the power of Shell.  The protest movement were attacked, killed and mutilated and some people blamed the government for this.  The military Government made their intentions clear and Ken Saro-Wiwa said  – “This is it.  They (the Nigerian army) are going to arrest us all and execute us.  All for Shell”.  On May 22nd 1994 Ken Saro-Wiwa was arrested on a murder charge, he told the tribunal “I and my colleagues are not the only ones on trial.  Shell is here on trial….The company (Shell) has indeed ducked this particular trial but its day will surely come”.  Despite massive pressure from Germany, France and Australia, Saro-Wiwa was hanged with 8 other protestors in 1995.

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Read – Why Nigerian activist Ken Saro-Wiwa was executed?

 

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