ECONOMIC POLICY OF THE OBASANJO ADMINISTRATION
(For 1999 - 2003)

When this Administration took office in May 1999, it inherited an economy with the following characteristics: declining capacity utilization in the real sector, poor performance of major infrastructural facilities, large budget deficit, rising level of unemployment and inflation. In addition, the economy had lingering problems of import dependence, reliance on a single economic sector (oil), weak industrial capacity, low level of agricultural production, a weak private sector, high external debt overhang, inefficient public utilities, low quality of social services and unacceptable rate of unemployment.

Guiding Principles

Since its inauguration, the Administration of President Olusegun Obasanjo has been pursuing an economic policy inspired by the following guiding principles:

  • The economy exists for and belongs to the people, and at all times the general well-being of all the people shall be the overriding objective of the government and the proper measure of performance.
  • Given the state of the economy which is equivalent to national emergency, economic management shall involve total commitment of the leadership at all tiers of government, and the mobilization of the populace without creating a bloated government.
  • Government shall be lean, efficient, honest, transparent, cooperative and friendly; operate on the basis of extensive devolution of power, and shall function mainly as a facilitator.
  • Government's primary role shall be to ensure, in cooperation with the private sector, the urgent creation of adequate and efficient infrastructure, particularly of energy, telecommunications, water and financial services to bring about a positive and internationally-competitive environment for economic activities.
  • Private enterprise, private effort, and non-governmental action shall play the major role in achieving the goals of the society and the derived targets of the government.
  • Everything shall be done to foster a strong work ethic to drive productivity.

Type of Economy

Based on these guiding principles, the Administration shall operate an economy which is:

  • market-oriented
  • private sector-led
  • highly competitive, internally and globally, particularly in areas of comparative advantage
  • technology-driven
  • broad-based
  • humane
  • open
  • internationally significant

Objectives

Given the poor state of the economy which it inherited, the Administration shall:

  • Revive and grow Nigeria's comatose economy
  • Significantly raise the standard of living of the people.
  • Put Nigerians back to gainful work and create new employment opportunities.
  • Reposition the economy to participate beneficially in the global economy.
  • Make Nigeria the hub of the West African economy.

Instruments

The instruments which the Administration shall use will include the following:

  • Stabilized market responsive exchange rate (within narrow bands with sufficient predictability)
  • Reduced interest rates ( to reach single-digit as soon as possible)
  • Reduced total tax burden (to a maximum of 30 per cent of corporate and personal incomes as soon as possible).
  • Low Customs Tariffs, especially for production inputs (at less than 10 per cent, with built-in incentives for local producers).
  • Shift in government expenditure structure in favour of productive, economic and social sectors.
  • Ensuring steady and adequate fuel supply.
  • Rehabilitation and reconstruction of infrastructure, such as electicity, roads, water supply, and so on.
  • Enhanced incomes for workers, particularly in the public sector.
  • Significant poverty reduction.
  • Special focus on Education and Human Capital Development
  • High priority to Agriculture, Manufacturing, Small/Medium Enterprises and the Informal Sector.
  • Institutional rationalization of government.
  • Privatization.
  • Cooperation with the National Assembly.
  • Generous incentives for local and foreign direct investment.
  • Reduction of Nigeria's external debt burden through successful negotiations with creditors and improved debt management.
  • Promotion of the deepening and increased efficiency of the financial system.
  • Operation of cooperative federalism to ensure inter-tier policy consistency and effectiveness.

Targets

With the judicious use of the aforementioned instruments, it is expected that by the year 2003 the following targets would have been achieved, compared with the year 1999 position:
 
 
 
Targets
  2003 1999
GDP Growth Rate 10% 2.4%
Inflation Rate Single Digit 13%
Gainfully employed labour force (both formal and informal) 70% 50%
Population access to safe water 60% 40%
Household access to electricity 60% 34%
Functional telephone lines per
1000 persons 30
Population of School-age Children in School 90% 50%
Population literacy level 80%
 57%
Nutrition Level (Daily Calorie in-take per person) 2500
 2120
Other Basic Human Needs (Level of Satisfaction) Medium/High Low
 
 

Performance Measurement

The Administration shall ensure that henceforth the assessment of the performance of the economy will derive from the guiding principles stated in paragraph 2 above. Accordingly, the traditional macroeconomic indicators shown in column III of Table 1 in the Appendix will also be accompanied with the indicators shown in columns I and II of the Table in monitoring performance.

Macroeconomic Policies

Arising from all the foregoing general principles and targets, government shall pursue a regime of macroeconomic and sectoral policies as follows:

  • Monetary policy will focus on price and exchange rate stability, and healthy balance of payments.
  • Government will pursue a low interest rate regime in order to support the real sector of the economy. More effort shall be made to narrow the gap between savings and lending rates.
  • Government shall pursue policies which will ensure the achievement of a moderate inflation rate in the medium term (even after allowing for a possible modest rise during the reflation of the economy).
  • The exchange rate of the Naira will be stabilized and made market-responsive. Government will sustain the Inter-Bank Foreign Exchange Market (IFEM).
  • Fiscal policy will be designed to increase the level of government revenue and to promote overall economic development. In this regard, priority sectors like Oil and Gas, Export Processing Zones, Solid Minerals and Agriculture will continue to receive increased fiscal incentives. However, government will curtail borrowing via CBN's Ways and Means Advances to a maximum of 12.5% of estimated current revenue, while additional loans will be sourced through the financial market without crowding out the private sector.
  • Government will rely basically on good faith collective bargaining for the determination of incomes in both the public and private sectors.

Poverty Reduction Programme

The strategy to be employed shall be to empower Nigerians in both their rural and urban areas to become more economically productive, with a view to improving their quality of life. To avoid the mistakes of the past, projects and measures to be implemented will be people-oriented. The people concerned, as stakeholders, will be fully involved in determining the projects and will take ownership. Poverty reduction programme will involve the immediate improvement of infrastructure in the urban and rural areas, with government taking the leadership in mobilizing resources. Significant improvements in the supply of water, energy, basic educational facilities (both under the UBE scheme and mass adult literacy programmes), basic health facilities, roads and transportation will be embarked upon immediately on a nationwide basis. There will be a Poverty Reduction Fund. A poverty eradication agency will also be established for the implementation of specific programmes and projects in this sphere.

Sectoral Policies

Government will continue to implement sectoral and structural policy measures geared towards attaining short, medium and long-term goals of improved economic growth, complementarity, external sector competitiveness and poverty reduction. However, special emphasis will be on the following areas, among others:

Agriculture

Agriculture will be given the greatest priority both for poverty reduction in the rural areas, and for the improvement of the economy generally. New technology, improved seedlings, better storage facilities, fertilizers, pesticides, etc, will be made readily available. Government will rely on private sector enterprises to provide these inputs. Furthermore, government will embark on massive expansion of agricultural extension services and will ensure better and easier delivery of credits to farmers. The government will embark on a massive campaign, with appropriate policies, in order to achieve self-sufficiency and expanded export volume in crops such as rice, maize, millet, sorghum, ginger, groundnuts, cocoa, coffee, etc, as well as selfsufficiency in industrial crops such as soya beans, palm produce, rubber and cotton. Government will encourage the involvement of Non-Governmental Organizations in all these measures. Effective protection, consistent with new international agreements, will be given to operators in the sector to ensure success. Guaranteed producers prices will be established in line with the national priorities of self- sufficiency and expanded export production. Government will concentrate on sectors where the country has comparative advantage and change the nature of Nigeria's exports from primary to processed or manufactured goods.

Education and Human Capital Development

Government will provide affordable quality education for all Nigerians. The UBE and Mass Adult Literacy Programmes will be pursued in earnest. Government will encourage private provision of educational facilities at all levels. Considerable resources will be committed to rehabilitating and improving secondary and tertiary educational institutions. Government will pursue other areas of human capital development through increased emphasis on industrial apprenticeship schemes, entrepreneurship training and development of a data of Nigerian human capital stock, which will include skilled non-resident Nigerians (especially those in Europe and North America).

Information and Communications Technology (ICT)

Government will create incentives to expand access to information and communication technology which will facilitate leap-frogging in order to short-circuit the longer span of development. Government will encourage local production of ICT equipment and materials (computers, telephones, Tvs, etc). Government will encourage the development of payment systems which will facilitate the growth of electronic-commerce.

Infrastructure

The Government will make available resources for the refurbishment and improvement of the facilities and management of NITEL PLC, MOBILE TELECOMMUNICATIONS PLC, and NATIONAL ELECTRIC POWER AUTHORITY (NEPA). Government will pursue the privatization of these enterprises. The privatization exercise will be accomplished within the life of this Administration. As the privatization of these parastatals (the output of which is a small proportion of the required quantum of services), is not an end in itself, government will no longer allow monopolies in these sectors and will create the enabling environment to attract massive private investments in order to meet additional requirements of the economy.

Transport

Government will encourage private investments in roads, railways and air transportation. Government will sustain the deregulation in the domestic air services, while it will prepare Nigeria Airways for privatization. Furthermore, government will encourage private sector participation in the construction and management of highways, railways and seaports.

Oil and Gas

Government will ensure that there is adequate budget provision to cover its share of costs of agreed production quotas. The budget provisions will be released promptly, so as to avoid any disruption in planned operations. Every measure will be taken to improve the workings of the joint venture technical committees to ensure that there is equity in the apportionment of contributions between the two sides. Government will ensure that the local content of oil and gas activities reaches 40% by the year 2003. Government will create conducive environment in the oil producing areas to make the communities effective and more involved stakeholders in the exploitation of oil resources.

Manufacturing

Government will move away from export of primary commodities into the export of processed and manufactured products. All necessary incentives and encouragement will be given for the development of agro-allied industries. Government will bring back into full operation the Ethylene Plant in Eleme and will promote related downstream plants to produce intermediate petrochemical products for local consumption and export. Manufacturing industries will be encouraged to export plastic household goods and toys, textiles and garments, furniture, etc. Government will review existing tariffs and take all possible measures to encourage infant industries, while applying the new WTO regulations. Government will review all projects in the capital sector, e.g. iron and steel plants, pulp and paper plants, the purpose being to complete where viable, and expand where desirable.

Solid Minerals

Government will create a regime of internationally competitive incentives to attract private capital for the accelerated development of the country's vast endowments in solid minerals.

Development Resources

In view of the envisaged accelerated growth and development of the economy government will create the necessary enabling environment to attract a large inflov of foreign direct investment. In this regard, government will ensure:

  • Policy consistency and stability
  • Removal of all bureaucratic bottlenecks
  • Improvement in security of persons and property
  • The conclusion of bilateral and multilateral agreements on investment protection, and
  • Re-orientation of the bureaucracy into a friendly welcoming one.