Nigeria - Special Supplement and Advertisement

Ebony, Feb, 1990 by Yinka Craig, Sonala Olumhense, Remi Oyo, Tanoloju, Pat Utomi

In the 1980s it was predicted that if the price of oil dropped below $25 per barrel, the international financial system would tumble. By 1988, oil prices had dropped below $10 a barrel before recovering to a level well below $20 a barrel. At no time since oil was discovered in commercial quantities in Nigeria in 1956 had the economy been so strained.

Policy makers were forced to impose austerity measures and cut down economic development plans. By 1985, it was imperative that austere measures alone would not stem economic decline. A bold economic reform program had to be embarked on. Among the issues the adjustment program had to review was the Nigerian Enterprises Promotion Act, designed to allow Nigerians to participate in the development of the economy.

The Act, which was passed into law in 1972, was also aimed at stimulating entreprenuerial activity by Nigerians in the more modern sectors. A review of the Law in 1977 distributed business enterprises into schedules. One schedule of activity including such businesses as advertising and confectionery was exclusively for Nigerians. A second schedule allowed for up to 40 per cent foreign equity while a third schedule allowed for 60 per cent foreign control. This last schedule mostly covered high technology, capital intensive industrial and mining activities.

A new industrial policy for Nigeria which was introduced by President Babangida in January 1989 opens up more areas of the Nigerian economy to foreign investors. Foreigners can invest in wholly-owned enterprises or joint ventures with Nigerians. The new industrial policy also facilitates the process of investing in Nigeria. The streamlined procedures for investment access, has at its apex an Industrial Development Coordinating Committee (IDCC). The IDCC includes Federal Cabinet Ministers in relevant areas such as Industries, Trade and Internal Affairs.

The measures which have resulted in the review of ownership and control policies just cited were formally introduced in the second half of 1986. Among the ambitions of the program is the use of market mechanisms instead of administrative fiat in managing the economy. A foreign exchange market has helped restore confidence of trading partners in the ability of Nigeria to service its obligations. Devaluation of the Nigerian currency, the Naira, consequent upon market principles, facilitated exports and therefore a broadening of the foreign earnings base of the economy. This makes the repatriation of profits made by foreign investors easier.

In addition the program has led to deregulation and removals of measures such as price control. The program seeks to capture the essence of President Babangida's declaration in 1985 that his administration is determined to "break the vicious cycle of hope and despairing, faith and doubt, affluence and poverty, stability and chaos which had characterized the past quarter of a century."

The package also includes a program of privatization and commercialization designed to make what until recently was a long list of government owned enterprises more efficient. These enterprises had constituted a huge drain on the national treasury as they returned annually for subvention. Ownership of these potentially very viable enterprises being privatized is open to investors from around the world.