Country Brief

Background Country Brief last updated September 2009

With a population of 148 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; critical infrastructure; food security; land tenure changes and home ownership; national security; wealth creation; and focus on the Niger Delta.

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).

Over the last five 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. Fiscal reforms have also begun to roll out to the States. 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 heavily depends on the oil and gas sector, which in 2008 contributes 97.5 percent of export revenues, 81 percent of government revenues, but recently only about 17 percent of gross domestic product (GDP) as oil output has declined due to unrest in the Niger Delta region. The agricultural sector now dominates economic growth, contributing 42 percent of GDP in 2008. 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 and the Federal Ministry of Finance’s web site. Despite the country’s relative oil wealth, GDP per capita is about US$1,401 (2008), 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 few years has been commendable. However, in 2008, performance was strong through the third quarter, but performance in the fourth quarter began to be affected by the impact of the global financial crisis.

Economic reforms since 2001 achieved important positive results including:

• Growth of the non-oil economy doubled to over 7 percent since 2001, compared to the previous 5-year period
• Average Inflation rate was 5.4 percent in 2007 as against 17.8 percent in 2005. It however rose to 11.6 percent in 2008, largely due to the impact of the food crisis.
• International reserves reached US$53 billion by the end of 2008 from $41.8 billion in 2006.
• A federal Fiscal Responsibility Bill, institutionalizing the oil-price based fiscal rule, and a Public Procurement Bill were passed into law in 2007.
• A Bank consolidation program was implemented in 2004/2005, strengthening the financial sector and enhancing its ability to provide credit to the private sector. This has been a strong factor in protecting Nigerian banks from the direct impact of the global financial crisis.  However, in 2009 Nigeria’s banking system has experienced pressure owing to an increase in non-performing loans, partly on account of the stock market.
• The government has 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 government reiterates its intentions to only contract concessional debt in the future. The 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.   A Country Partnership Strategy (CPS) for FY10-13 has been prepared by the World Bank, DFID, USAID and AfDB to increase development effectiveness and its main components are driven by the Government’s 7-Point Agenda.  In addition to support in response to the global financial crisis, the partnership will focus on three themes of: (i) improving governance; (ii) maintaining non-oil growth; and (iii) promoting human development.Governance will be a core theme; and because it is fundamental to achieving results in the other two areas is also a cross-cutting theme.  The CPS partners will also continue to coordinate closely with Nigeria’s other main development partners including the UN programs and agencies, Japanese International Cooperation Agency, the French Agency for International Development, Canadian International Development Agency and the European Commission. 

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 eight IDA projects and 2 GEF grants.  Bank commitments have tripled from $1.5 billion in FY05 to $4.5 billion in early FY10.  The Bank is the largest development partner in Nigeria and the country’s portfolio is the largest in terms of net commitments in the Bank’s Africa Region. The strong focus on the current portfolio is on project implementation for results.

In FY10, to support the Government’s response to the financial crisis, the Bank has already approved a Development Policy Credit for US$500 million.  Other projects in the pipeline for FY10 include State Health, Rural Access and Mobility 2, State Governance and Capacity Building 2, Growth Employment and Markets in States, Public Private Partnership Initiative, Lagos Urban Transport 2, and additional financing for Urban Water 1 and 2.

Non-lending services are helping the Government to analyze policy options, inform lending and build capacity.  In previous years analytical and advisory work has been carried out in public sector financial management and governance, agriculture, health, energy, education, water, financial sector, investment climate and ICT.  In FY10, non-lending activities will include among others the Community Based Health and Nutrition and Governance of Service Delivery which will inform water, health and education projects and a Country Status Report on Education.

The Nigeria portfolio is relatively young but a few investment operations are showing results on the ground.  Community driven development projects have demonstrated an impact on poverty and improved livelihoods (e.g. Fadama II project increased on average net incomes of fadama users by 60%). The Lagos Urban Transport Project has contributed to improved quality of roads, improved access and a 30% decrease in average fares (from 140 naira to 100 Naira) despite a rise in fuel costs. The Malaria Control Booster Project supported a national bed net distribution campaign in 2008, about 8.3 million bed nets were distributed through IDA support, and an additional 4.1 million nets are expected to be distributed in 2009. 

Nigeria is International Finance Corporation (IFC)’s largest country portfolio in Sub-Saharan Africa with US$457 million in debt, equity, quasi equity and guarantee products. The FY10-12 IFC Country Strategy for Nigeria focuses on: (i) increased diversification into the real sectors with priority given to power and agribusiness in recognition of Nigeria’s key needs and Government priorities; (ii) diversification within financial markets to include trade finance, housing finance, insurance, MSME finance, microfinance and structured financed products targeting agribusiness, health and education sectors; and (iii) integration of advisory and investment services to enhance private sector development in Nigeria.

MIGA’s gross exposure in Nigeria is $118.5 million and consists of six projects, sponsored by investors from India, Lebanon, Switzerland, the UK and Virgin Islands (UK),in support of the country’s manufacturing and services sectors.

In FY09, WBI capacity building efforts are concentrated in two areas: (1) strengthening the National Assembly’s oversight function, and (2) urban environment and strengthening the PSSDC in the Lagos Transformation plan. WBI will also provide support on a regional basis in other areas such as strategic choices for education reform; trade; and social protection, judicial reform, Public Private Partnerships in Infrastructure.

Contacts

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