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Published online by Cambridge University Press: 13 August 2021
Oil has become Nigeria’s engine of growth, replacing peasant agriculture. But the transmission system has its own peculiar rhythm. As managed by government, the oil revenues have produced an economic fluctuation comparable to the business cycle in the more developed capitalist economies. As in the classic business cycle, there appears to be at work a cyclical process which I call the Nigerian petro-political fluctuation, such that one economic fluctuation produces conditions which generate the next. This article will present the workings of the petro-political fluctuation during the years 1973-79.
Valuable research assistance was rendered by Milica Zarkovic.
1. This division of the petro-political fluctuation into steps is an explanatory device and is not meant to imply that there are discrete time-separated stages.
2. An average oil price is an elusive concept; petroleum prices are multifaceted and variable and average-price figures can only be approximations: see Schatz, Sayre P., Nigerian Capitalism (Berkeley:. University of California Press, 1977), pp. 1–2 Google Scholar, and sources cited there.
3. The posted price, essentially a fictional device for determining taxes and royalties, increased from $4.13 per barrel in October 1973 to $8.40 in November 1973 and to $14.69 on 1 January, 1974, at which level it remained until March 1975 (ibid.).
4. Figures presented here represent what may be called oil revenues earned, i.e., production for the month times net revenue per barrel (after production costs) earned by the Nigerian government that month. The revenues were not actually received until two months later, on the average (ibid.; this is also the source of the oil data cited in this and the preceding paragraph).
5. It was officially listed as a deficit of N18.2 million, but this was because of some peculiarities in Nigerian budgetary accounting.
6. Schatz, Nigerian Capitalism, p. 31.
7. West Africa, 3 March, 1975, p. 249.
8. Schatz, Nigerian Capitalism, pp. 40-46.
9. Data on the Nigerian economy have to be considered unreliable at best.
10. Some cumulative data are available on foreign-investment stocks; however, these figures do not reflect annual flows of foreign-initiated investments. For one thing, foreign ownership stakes were sharply decreased by “indigenisation”; for another, they exclude the Nigerian capital that participates in investments initiated by foreign firms.
11. This is a simple average; a compounded average would be lower.
12. Source of monthly data: Central Bank of Nigeria, Economic and Financial Review (December 1977): 76.
12. The London Economist spoke of “panic measures,” 9 July, 1978, p. 74.
14. Budget Speech, New Nigerian, 3 April, 1979 (hereafter referred to as “1979 Budget Speech”). West Africa described the additional package of restrictive policies introduced by General Obasanjo as “drastic action”: 9 April, 1979, p. 611.
15. Budget Speech, West Africa, 31 March, 1980, p. 557 (hereafter referred to as “1980 Budget Speech”).
16. “1979 Budget Speech.”
17. Ibid.
18. “1980 Budget Speech,” p. 557.
19. There are other price-level data, however. For example, United States Embassy figures for Lagos retail prices show a 29.9 percent increase between 1976 and 1977, dropping to a 9.1 percent increase between 1977 and 1978. Such a movement is in conformity with expectations on the basis of the petro-political cycle.
20. “1980 Budget Speech.”
21. In one way of calculating, the projected deficit for fiscal 1980 is N2,283 rather than N971. The larger figure is based on President Shagari’s nominally listed capital expenditure of N7,623 rather than the actually authorized expenditure of N6,311. The difference of N1,312 is “reserved,” i.e., is not to be spent unless there is “improvement in revenue expectation” (“1980 Budget Speech,” p. 560).
22. If we make the assumption that Nigerian oil prices remain throughout 1980 at the February 1980 level (a conservative assumption), oil production in the nine-month period of fiscal 1980 was at the same rate as the first nine months of 1979 (the latest nine months for which figures are available to the author) (a liberal assumption)–and that the ratio of government revenues to price was the same as in 1978-79 (a conservative assumption)–then the Nigerian government collected oil revenues at a rate = 123.5 percent (representing production) × 238.6 percent (representing prices) × N5,200 million (1978-79 oil revenues). This would amount to N11,493 for the nine-month fiscal year. Making the further conservative assumption that other revenues are not increased by the rising oil revenues of the country but remain the same, total revenues for fiscal 1980 would be N13,434. This would yield a surplus of N604 million relative to the authorized expenditures of N12,830.
23. “1980 Budget Speech.”