Ox Tech Systems

Merry Christmas from all of us at Ox Tech Systems...may the birth of Christ usher in peace and progress to you and your family.

How efficient is your business process?

Wouldn't you rather allow us redefine it?

www.oxtechsystems.com

OIL BOOM ERA (1971-77)
In 1971, the share of agriculture to GDP stood at
48.23 per cent. By 1977, it had declined to almost 21
per cent. Agricultural exports, as a percentage of
total exports, which was 20.7 per cent in 1971,
reduced to 5.71 percent in 1977. The discovery of oil
in commercial quantity in the mid-1950s, coupled
with the oil-boom resulting from the Arab oil embar
go on the USA in 1973, affected the agricultural
sector adversely. The economy became heavily
dependent on oil. By this time, oil revenue repre
sented almost 90 per cent of foreign exchange
earnings and about 85 per cent of total exports.
While the boom afforded the government much
needed revenue, it also created serious structural
problems in the economy.
The agricultural sector was most hit. Rural urban
migration increased, as people attempted to reap or
benefit from the windfall from oil. Produc tion of
agricultural commodities for export declined. Food
production became a problem. Starting from 1974,
the economy became a net importer of basic foods.
Huge foreign exchange earnings were utilised in
importing food. Nonetheless, prices of foodstuff
remained high. Policies like the govern ment's
Operation Feed the Nation (OFN) pro gramme could
not reverse the deteriorating food situation.
Government was involved in direct food production,
provided subsidies to peasant farmers and created
more commodity boards for various agricultural and
food products. The growth rate of GDP was quite
high, such that a growth rate of 10.5 per cent in 1976
was considered unimpressive. Government
expenditure fuelled the inflation rate. Between 1975
and 1976, the rate of inflation reached 23 per cent. It
reduced to 16 per cent in 1976 and 1977. For the
same periods, unemploy ment rate was 4.3 per cent
and 2 per cent respec tively. The discomfort index in
1976 stood at 27.3 per cent.
The neo-Keynesian type management of the
economy was glaring during this period. Policy
makers advised the government not only to embark
on ownership and control of the commanding heights
of the economy like the petroleum and min ing
sectors, but also to be directly involved in bank ing,
insurance, clearing and forwarding, among oth ers.
With the promulgation of the Nigerian Enterpri ses
Promotion Decree in 1972, Government became
directly involved in virtually all aspects of the econ
omy, especially as foreign exchange was thought to
be no longer a constraint to development.
This era had its problems. Primitive accumulation
intensified. Corruption, theft, real estate specu
lation, outright looting' of government treasury and
other fraudulent practices prevailed. The State, on its
own, intensified the creation of a business class that
depended solely on government contracts rather
than on production. The gap between the rich and the
poor widened considerably. Ad-hoc and ill-conceived
government policies exacerbated the problem. For
example, the 100 per cent salary increase of 1975,
tagged the Udoii Salary Award, was disastrous tor the
economy as prices increased by more than 100 per
cent. The payment of a year's arrears of the increase
in salary, further worsened the situation.
The exchange rate regime encouraged imports. The
economy was heavily dependent on imports; almost
everything was imported, from toothpicks to
toothpaste dispensers. There was no serious attempt
to invest the windfall from oil in viable proj ects.
Except for the huge expenditures on educa tion and
construction of dual carriage highways in some parts
of the country, Nigeria would have had nothing to
show from the oil boom era. The industrial sector
also depended on import ed inputs, machinery and
raw materials. Hence, the so-called manufacturing
and mining industries (using 1972 as the base year),
which indicate remarkable increases, appear
misleading. The manufacturing sector increased by
82.2 per cent between 1972 and 1976 and by almost
94 per cent between 1972 and 1977.
The increases must be interpreted with caution, if
industrialisation is seen to imply the process of
developing the capacity of that country to master and
locate, within its borders, the whole industrial
production process, namely production of raw materi
als, production of intermediate products for other
industries; fabrication of the machines and tools
required for the man ufacture of the desired
products and of other machines and tools, skills to
man age factories and to organise production
processes. Declining oil revenues, disequilibrium in
the balance of payments, growing unemployment,
increasing rate of inflation and political instability, all
confirmed that demand-induced policies were no
longer effective. By 1978, a country which had
thought that foreign exchange was not a constraint on
development went borrowing on the Euro-dollar
market.
Despite the oil boom, the private sector remained
weak. The existing macroeconomic poli cies
continued to encourage consumption rather than
production. The economy was consuming what she
was not producing. The austerity measures
introduced by the mili tary administration under
General Olusegun Obasanjo were short-lived because
structural prob lems were not addressed. GDP, which
grew at 10.5 per cent in 1976 declined by 5.7 per
cent in 1978 and grew by only 5.9 per cent in 1979.
Conse quently, the economy entered the
recessionary phase, requiring further stabilisation
measures to reverse the gloomy situation.