Country Brief

Background                                                                                      Country Brief last updated March 2008

With a population of 140 million people, Nigeria is the largest country in Africa and accounts for 47 percent of West Africa’s population. Nigeria’s population is made up of about 200 ethnic groups, 500 indigenous languages, and two major religions ― Islam and Christianity. The largest ethnic groups are the Hausa-Fulani in the North, the Igbo in the Southeast, and the Yoruba in the Southwest. Nigeria is also the second largest economy in Sub Sahara Africa and accounts for 41 percent of the region’s GDP.

Politics

In April 2007, Nigeria held its third consecutive national elections, further consolidating the transition from military to democratic rule that began in 1999.

On May 29, 2007, Umaru Musa Yar’Adua was sworn in as the third democratically elected President of the Federal Republic of Nigeria. This marked the first handover of power from one civilian government to another in Nigeria’s history. President Yar’Adua has committed his government to reform and his’ 7-Point Agenda’ identifies the development of human capital; economic reforms; transport; power; rule of law; the Niger Delta and electoral reform as key priorities for his administration.

Internationally, Nigeria continues to be a leading player in the African Union, the New Partnership for Africa’s Development (NEPAD), and in the Economic Community of West African States (ECOWAS).

In the last four years, Nigeria has made important strides in economic reforms and the fight against corruption. Government efforts are beginning to bring results, as evidenced by Transparency International and other surveys. Streamlined due process procedures at the federal level are ensuring that public money cannot be disbursed for investment spending unless procurement procedures have been respected. The Government is committed to and forcefully implementing the Nigeria Extractive Industry Transparency Initiative. Nigeria has also been removed from the Financial Action Task Force (FATF) on Money Laundering list of non-complying countries.

Economy

Nigeria 's economy depends heavily on the oil and gas sector, which contributes 99 percent of export revenues, 85 percent of government revenues, and about 52 percent of gross domestic product (GDP). With its large reserves of human and natural resources, Nigeria has the potential to build a prosperous economy, reduce poverty significantly, and provide the health, education, and infrastructure services its population needs. For general information on Nigeria’s economy, see the Government of Nigeria’s web site www.nigeria.gov.ng and the Federal Ministry of Finance’s web site www.fmf.gov.ng. Despite the country’s relative oil wealth, GDP per capita is about US$752 (2005), and poverty is widespread – about 54 percent of the population lives on less than 1 dollar per day. Nigeria ’s macro-economic performance over the last two years has been commendable. The economic reform efforts are showing positive results including:

• Non-oil growth sector grew at a rate of 8.2 percent in 2005 and reached 9.6 percent in 2007.
• Inflation was 5.9 percent in 2007 as against 10 percent in 2006.
• International reserves reached about US$54 billion by the end of 2007.
• A Fiscal Responsibility Bill has been passed into law.
• A bank consolidation program was implemented strengthening the financial sector and enhancing its ability to provide credit to the private sector. It has one of the most active stock markets in the world.
• In February 2007, Nigeria’s credit rating (BB-) from Fitch and Standard and Poor’s was re-confirmed.
• Nigeria liberalized its import protection regime and adopted the Common External Tariff which lowered the average tariff from about 29 percent to 12 percent.
• The government made substantial progress with privatization (including concessions) of several major companies in steel, petrochemicals, mining and ports.

Nigeria successfully negotiated with both the Paris and London Clubs and the country now has no major foreign debt. The US$750 million fiscal space created by the debt deal with the Paris Club creditors has been allocated for the achievement of MDGs and poverty reduction. The Budget classification has been amended to help monitor and track MDG expenditures.

Donor Partnership and Coordination

Development partner coordination in Nigeria is strong. The Bank Group and DFID have prepared a joint Country Partnership Strategy (CPS) anchored on Nigeria’s home grown National Economic Empowerment and Development Strategy (NEEDS). In the last two years, the partnership was extended to include USAID, particularly at the state level, and cooperation with UNDP, EU and AfDB is being strengthened. The partnership includes joint diagnostic, joint project preparation and supervision, and joint Country Portfolio Reviews. A joint progress report on the CPS has been prepared to take stock of implementation experiences, developments in Nigeria and reflect the new government’s priorities, and make the necessary adjustments going forward.

The World Bank Group

The International Development Agency (IDA) is the Bank’s interest-free lending arm for the poorest countries. The Nigeria portfolio currently supports twenty-two IDA projects, 2 GEF grants and total commitments of about US$2.6 billion. The Bank is the largest development partner in Nigeria and the country’s portfolio is the second largest in terms of projects in the Bank’s Africa Region.

Through the implementation of the CPS (FY05-09), the World Bank has strengthened the policy dialogue, analytical and advisory assistance, as well as increased financial support to Nigeria. The strategy focuses on helping the government to achieve results in three main areas: (i) human development; (ii) non-oil growth; and (iii) better governance. In order to ensure impact, the bulk of financial assistance in these three areas supports the reform efforts at the federal level and in 4 to 5 states where commitment to governance and fighting poverty is relatively strong. The Bank is already supporting state programs in governance, education, health and agriculture. Projects supporting basic service provision and community driven development are implemented in all of the states.

In FY08, the Bank has already approved two regional projects West and Central Africa Air Transport (US$15.6 million) and Niger Basin Water Resources (US$45 million). Two additional projects, Federal Roads (US$330 million) and Rural Access and Mobility (US$60 million) are expected to be approved by the Bank’s Executive Directors in April 2008. Projects currently under preparation include: Commercial Agriculture, Fadama 3, Community Social Development, Second State Education and others.

Non-lending services are helping the Government to analyze policy options and strengthen the analytical base for the financial program under the CPS. Over the last few years, this work included a Poverty Assessment, an Agriculture Sector Review, a Country Environment Assessment, a Public Expenditure Management and Financial Accountability Review, and Country Economic Memorandum. In FY08, work is being done in Rural Finance, Agriculture Public Expenditure Review, Investment Climate, Fiscal Federalism and Energy Policy Notes.

The Nigeria portfolio is still relatively young but a few investment operations have started to show results on the ground. Three community driven development projects have already demonstrated an impact on poverty and improved livelihoods (e.g. Fadama II project increased on average net incomes of fadama users by 60 percent). The Lagos Urban Transport Project has contributed to improved quality of roads, improved access and a 30% decrease in transportation costs.

Nigeria is International Finance Corporation (IFC)’s largest commitment portfolio in Sub-Saharan Africa US$553 million which represents about 37 percent of the region’s portfolio and focuses on: (i) financial markets, infrastructure, manufacturing & services, indigenous oil-gas-petrochemicals, agribusiness and healthcare; (ii) diversification within financial markets to include trade finance, housing finance including mortgages and securitizations, insurance, MSME finance, microfinance; and (iii) improving the investment climate and developing the local fixed income capital market. IFC is also the lead adviser to the government for the privatization of Nigeria airports.

The Multilateral Investment Guarantee Agency (MIGA)’s gross exposure in Nigeria is US$102.9 million and consists of five projects in support of the manufacturing and services sectors. The FY08 pipeline consists of two additional investments in the infrastructure and services sectors. These projects, to be sponsored by investors from South Africa and the United Kingdom, have an anticipated combined gross exposure of US$120 million.

MIGA’s online investment promotion services (www.fdi.net and www.pri-center.com) are unique web portals that offer free country analyses and information relating to foreign direct investment (FDI) and political risk management and insurance for 175 countries. These initiatives contribute to MIGA’s mandate of promoting FDI in developing countries as a way to enhance growth and development. At present, these services feature 221 documents on investment opportunities and the related business, legal and regulatory environment in Nigeria.

WBI is concentrating its efforts in two areas: (1) youth participation in the development debate; and (2) strengthening the National Assembly’s oversight function. WBI also provides support in a limited number of other areas, such as strategic choices for education reform; trade; and social protection.

Contacts

Mr. Onno Ruhl
Country Director for Nigeria
102 Yakubu Gowon Crescent
Opposite ECOWAS Secretariat
P.O. Box 2826, Garki, Abuja, Nigeria
Tel: 234-9-314-5263
Fax: 234-9-314-5268
E-mail: oruhl@worldbank.org