The objective of this sub-section is to analyse the development of the Nigerian economy over the period 1960-2002 by examining changes in the sectoral contribution to growth.
The main economie sectors - primary, secondary and tertiary sectors of the Nigerian economy are examined. An examination of the sources of growth of these sectors underscores the importance of each sector in the performance of the overall economy.
Traditionally, these sectors have been represented by agriculture, industry, manufacturing, and the service sectors respectively.
The primary sources of growth of the Nigerian economy prior to the discovery of ail in the early 1970s have been agriculture, industry and service. During this period, agriculture accounted for approximately 70 percent of output and employed over 65 percent of the labour force. In addition, agricultural products accounted for a lion's share of total exports (71 %) and were thus the predominant source of foreign exchange earnings and public revenue, with the agricultural marketing boards playing a leading role.
By the early 1970s, crude ail export emerged as the leading export commodity in the Nigerian economy. Since then, its dominance and overwhelming importance as the major foreign exchange earner has left Nigeria operating as almost a mono-product economy with ail accounting for about 80 percent of federal government revenue, more than 95 percent of export earnings and about 11 percent of GDP in 2000. It also accounted for 76.5 and 71.1 percent of federal government revenue in 2001 and 2002.
FIGURE 2 SOURCES OF GROWTH
Source: Central Bank of Nigeria annual reports and Statistical Bulletins
l
In the diagram (Figure 2), the main sources of growth in the Nigerian economy have been the agricultural, industrial, manufacturing and services. In the period (1960-1969), the agricultural sector played a prominent role as the main stay of the economy as well as the major source of government revenue. However, with the discovery of oil in commercial quantities in the early 1970s, the industrial sector assumed a predominant role in the economy, as a major source of government revenue and foreign exchange eamings. The dominant role of the oil sector has continued to soar up to the present period (1986 to 2002).
2.1.1 Structure of Production of the Economy 1960-1969
At independence in 1960, Nigeria was still largely an agricultural country, producing food for its own consumption and cash crops such as groundnuts, cocoa, rubber and palm oil for export. The discovery of oil in commercial quantities came towards the end of the decade and began to bring about a sizable reduction in agricultural share of the GDP. Thus, from GDP share of almost 64 percent in 1960, agriculture accounted for 49 percent of output in 1969. For the period 1960-1969, the contribution of agriculture in total output averaged 57.3 percent ofGDP (Iyoha and Oriakhi 2002).
The industrial share in output was 7.7 percent in 1960, however with the discovery of crude petroleum, its' contribution began to significantly rise during the second half of the period. By 1969, industry accounted for 15.6 percent of output; of this total the manufacturing sub-sector accounted for 6.4 percent. The sectoral share of services in the GDP rose steadily in 1960s. From a share of 28.5 percent in 1960, the contribution of services to GDP attained a high of 37.6 percent in 1968. During this period, the average share of service in output was 32.1 percent.
2.1.2 Structure of Production ofthe Economy 1970-1985
The contribution of the petroleum to the Nigerian economy became mu ch pronounced in the 1970s. The relative importance of the sector was buoyed by many factors among which were the increase in the output and exportation of crude oil as weil as Nigeria's membership of the Organization of the Petroleum Exporting Countries (OPEC). During this period, the contribution of the industrial sector to GDP increased from 8.7 percent to 13.8 percent. The relative contribution of the manufacturing to total out averaged 4.8 percent while the share of the industrial output to total GDP averaged 27.5 percent in the review period. The rise in the relative importance of oil in the economy resulted in the relative neglect of the agricultural sector, thus, the emergence of the "DUTCH DISEASE" syndrome. Dutch disease means a reallocation of resources from tradable sector into non-tradable sectors thus resulting in a fall in the tractables output and a rise in
the non-tradable output (Iyoha and Oriakhi, 2002). Thus as expected, in such instances, agriculture declined owing to a reallocation of resources in favour of non-tradables in the non oil sector of the economy. The relative share of agriculture to GDP feil from 41.3 percent in 1970 to 40.3 in 1985.
The oil boom impacted positive! y on the service sector as the relative share of services in output continued to soar, reaching 32.9 percent in 1970 and a high of 44.9 percent in 1974. For the period, the relative share of the services in GDP averaged 38.9 percent.
2.1.3 Structure of Production of the Economy 1986-2002
The global oil glut of the mid early 1970s and mid 1980s brought in it wakes a balance of payments disequilibrium caused by dwindling oil revenue. In order to revamp the
economy, the Federal government introduced the Structural Adjustment Progarnme (SAP) in July, 1986.
The po licy thrust of SAP included among others, the following:
• Exchange rate devaluation
• Elimination of priee distortion
• Reliance on market forces as a major determinant of economie activities
• Economie deregulation ( Libera1ization)
• Privatization and commercialization
• Economie diversification
The SAP had a favourable effect on agriculture but a negative impact on manufacturing.
SAP which entailed market determined priees (including exchange rate) led to increase in agricultural production as both priees and output expanded. As a result, the relative share of agricultural production to GDP rose from 20.0 percent in 1986 to a high of 40.6 percent in 1988. From 1986 to 2002, the relative share ofthe agricultural output averaged
40.0 percent. The period also witnessed a mild increase in the nurnber of service
providers in the banking and insurance sub-sector.
However the expansion in the number of financial institutions did not commensurate with the growth of the private sector. This poor showing was attributable to the high lending rates and the perennial dependence of the banking sector on cheap public sector funds and foreign exchange dealing from the Central Bank. This armchair banking was made manifest when in 1996 the federal government ordered the withdrawal of public sector deposits from banks to the Central Bank; under this arrangement, most commercial banks suffered a severe set back which resulted in liquidity crises and financial sector distressed.
In Nigeria as in most African countries, SAP led to a decline in the industrialization and rising unemployment (lLO, 1996). A close study of the relative contribution of manufacturing production to GDP showed that the contribution of the sector declined significantly. In 1980, manufacturing accounted for barely 8.4 percent of GDP. Its relative share rose to 9.9 percent in 1983 and was 8.7 percent in 1986. However, with the policy of deregulation, the manufacturing sector's relative ·share in output began to fall and reached a low of 5.29 in 1989. In 1986-2002, the manufacturing sector's share to GDP was a paltry average of7.0 percent while the industrial sector recorded 12.7 percent of the total out- put.
The service sector was not left out in the poor performance as its share in the total output declined from 33.8 percent in 1986, to 25.5 percent in 1989. For the period 1986-2002, the relative share of services in GDP averaged 32.9 percent.