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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 or secondary industries and more services in the tertiary sector.  Despite these changes Nigeria remains a country divided as the graph below shows.  Many people still work in farming and wealth is not well distributed between the very wealthy and the very poor.

Nigeria Economy

According to the World Bank, Nigeria would no longer be classified as a Low income country with a GNI of less than $1,045; it is a Middle Income Country that is also 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 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 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.

Positive multiplier effect

The diagram 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. 

The manufacturing attracts jobs DIRECTLY within the factory as locals take up new jobs.  These locals then spend their money in the local economy and pay taxes.  This leads to knock on INDIRECT secondary positives. Other industries that can help to service the factory can make money, a cleaning or catering company for example, or a component company.  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.

Oil industry Nigeria

There are often many TNCs involved in this process, including Royal Dutch Shell, a British/Dutch company which extracts and refines oil in Nigeria. Locals have also profited but in an illegal manner, stealing oil from pipelines and refining or manufacturing it themselves, causing widespread toxic pollution of the environment.  Further information on this is found in the section on TNCs.

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