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Prepared by Jeanne Gobat.
Firm-level survey data were collected from about 232 manufacturing firms of all sizes, spread across nine sectors in Nigeria. This survey forms part of the World Bank’s Regional Program on Enterprise Development Survey (RPED).
Unfortunately, significant data limitations make it very difficult to analyze factors affecting productivity in Nigeria. For example, investment is not broken down by private and public sector, or by non-oil versus oil, and few wage and employment data are available.
In 1960, Nigeria’s per capita income was just 11 percent below Indonesia’s and exceeded India’s and China’s by 24 and 57 percent, respectively. In forty years, Indonesia has achieved per capita income growth four times higher than Nigeria, and China and India have also surpassed Nigeria.
Nigeria was, in the 1960s, one of the largest exporters of cocoa, cotton, groundnuts, palm oil, and rubber and a net exporter of foodstuff. By the end of the 1990s, Nigeria had lost considerable export market share; imports of food products now account for about 10 percent of imports, and non-oil exports for about 5 percent of total exports.
The public sector’s share of economic activity is probably much higher if one includes spending by state-owned enterprises.
Nigeria had restrictive foreign direct investment regulations until 1995. The passage of the 1995 decree by the Nigerian Investment Promotion Commission eliminated discriminatory screening processes for foreign investment and allowed 100 percent foreign ownership of any business except those in the oil and gas sectors and in sectors deemed sensitive to national security.
It would be more accurate to calculate the TFP without the oil sector. Unfortunately, data for investment do not allow for such an analysis.
According to government reports, many of the capital projects were never completed. In addition, public investment may be overstated as some of the reported capital spending could be capital flight or private consumption.
This is a derived figure. Nigeria’s Federal Office of Statistics provides overall investment.
standard growth accounting framework was used to derive these figures. The labor force will grow at 2.8 percent a year, and, typical for a standard Cobb-Douglas production function, labor’s share was assumed to be 0.6 percent. Improvements in educational attainment are captured as part of total factor productivity growth. The depreciation rate of the capital stock was set at 6 percent. See Tahari and others (2004).
Although required by law, fiscal accounts, including those of state-owned enterprises, have not been audited and made publicly available on a timely basis, impairing the ability of parliament and the general public to monitor fiscal operations and hold public officials accountable.
Adequate and high-quality physical infrastructure is central to economic development. Studies have found that firms that have access to good infrastructure invest more and are more productive. See Weiss (1999).
Only 10 percent of rural households and 40 percent of the country’s population have access to electricity. Poor power service also has serious implications for the attainment of the country’s health and education goals. Unreliable power has made it difficult to refrigerate vaccines and operate hospitals and also prevents children from studying at night.
Mobile phones have started to make up for this shortcoming.
Foreign companies have to go through additional steps, including registering with the Nigerian Investment Promotion Commission (NIPC), which they must do every year in the state in which they will operate; provide background information on company officers, and proof of share capital deposited with a local bank; and provide information on training programs for local personnel. They also face a quota restriction in hiring expatriates.
Nigeria’s bankruptcy laws (Bankruptcy Act of 1979) are based on U.K. laws. Corporate bankruptcies and the use of receiverships or administrators to manage businesses during reorganization or liquidation are not uncommon in Nigeria. Less common are personal bankruptcies.
When land is allocated, the recipient receives a certificate of occupancy for a period of up to 99 years. The certificate entitles the person, with the consent of the state governor, to sell, lease, or mortgage the land.
Credit registries are information-sharing institutions that make credit information on borrowers available to lenders. Studies find that in low-income countries public credit registries play a constructive role, and, where they have been introduced, credit to SMEs and households has expanded. See Djankov, McLeish, and Shleifer (2005).