Long one of the country's biggest moneymakers, the financial sector experienced extensive turbulence in 2009, both as a result of exogenous shocks and domestic issues. Taking office in June, the new Central Bank governor, Lamido Sanusi, quickly initiated a dramatic overhaul of the country's financial sector. When probes in August and October found nine undercapitalised banks, the government sacked the management of these banks and issued $4bn in bailout money to prevent a systematic collapse.
In August, the Nigerian Insurance Commission published its “Development and Restructuring Initiatives”, a series of three-year targets which include increasing the insurance industry's gross premium income from N164.5bn ($1.09bn) to N1.1trn ($7.35bn) and creating 250,000 jobs in the sector. Lending also increased, with credits to the private sector up 20% between March and November.
The Nigerian capital market was the world's worst performer in first-quarter 2009, with the Nigeria Stock Exchange taking a 37% drop and some stocks losing up to 60% in value, though by the end of the year many had recovered, but well below their peaks. To stimulate the economy, the state spent more than $13bn from its Excess Crude Account over the course of 2009. Nonetheless, GDP growth is expected to pass 8%, due to increased oil production after the summer.
Inflation remains a challenge, reaching 12.4% in November, due in part to rising transportation costs pulled up by higher fuel costs. Subsidies for fuel, which cost the government $300m monthly, have also come under fire as an inflationary pressure.
Perhaps Nigeria's biggest success of 2009 was an amnesty programme for militants in the Niger Delta initiated by President Alhaji Umaru Musa Yar'Adua at the end of the summer, which has led to a fragile peace. In fall, plans for the development of the impoverished region were pushed through. The Federal Executive Council approved $1.3bn for large-scale infrastructure projects by the Niger Delta Development Commission, the majority of which pertain to road construction. However, given the uncertainty of the president's health, the sustainability of the ceasefire is questionable and renewed attacks in recent days have highlighted the fragility of peace.
The International Finance Corporation is also providing $250m in mezzanine financing to ramp up nationwide telecommunications infrastructure. Local telecommunications group Helios Towers will use this money to pursue a shared infrastructure scheme for telephone towers, as opposed to individual companies creating their own.
In the midst of construction growth, however, cement production has not kept up with demand, which led to a spike in prices. In October, the government gave cement producers a three-year tax break on importing equipment to spur production. Meanwhile, development on the 16,500-ha Lekki Free Zone, near Lagos, one of the country's biggest real estate projects, has stalled due to confusion over phase one construction roles and financing, with several Chinese firms currently negotiating their activity.
Electricity supply has also been unreliable, with generation falling 23.1% year-on-year in first-quarter 2009. Less than a quarter of domestic demand is being met, and the government's pledge to boost capacity to 6000 MW has not been followed through. Estimates of the demand for power range from 8000 to 10,000 MW.
Long one of the country's biggest money-makers, the financial sector experienced extensive turbulence in 2009, both as a result of exogenous shocks and domestic issues. Taking office in June, the new Central Bank governor, Lamido Sanusi, quickly initiated a dramatic overhaul of the country's financial sector. When probes in August and October found nine undercapitalised banks, the government sacked the management of eight of these banks and issued $4bn in bailout money to prevent a systematic collapse.
The Petroleum Industry Bill, aiming to overhaul the energy sector's legal and regulatory framework, remains under contention as international oil companies press for revisions. In addition to streamlining industry operations, the new legislation would increase Nigeria's share of profits from oil exports, which companies such as Shell and Chevron argue could make oil and gas projects unviable. Crude oil production, which had fallen to 1.3m barrels per day in the summer due to Niger Delta unrest, rebounded to 1.9m by November with President Yar'Adua's amnesty programme. In June, Nigeria and Russia signed on to a joint venture, Nigaz, to exchange infrastructural know-how and share natural gas profits.
While hydrocarbons still dominate the economy, diversification efforts have been moderately successful over the past decade. Nigeria has developed competitive niches in cinema – "Nollywood" is the world's third-largest film industry – as well as consumer goods and beer. Nigeria's mining sector is embryonic, but the Ministry of Mines and Steel Development has predicted that it should begin to see revenue within five years. The Segilola Gold Project, which located a large deposit in Osun State, is the biggest project currently under way.
In line with the government's drive to become one of the world's largest economies by 2020 – articulated in the ambitious Vision 2020 plan – Nigeria has put considerable emphasis on education, but there remains much work to be done if these goals are to be met. Continual public teacher's strikes have plagued the education sector, with staff asking for training and higher pay. The government arranged a strike suspension with the main professors' union in October, but many students had already opted to enroll in private universities. Seven new private institutions were approved in October, bringing the total to 41 – however, higher tuitions limit access to only the wealthier citizens.
Rattled in 2009 by the global financial crisis, Nigeria has recovered to its pre-crisis levels in most sectors, although strong measures are needed to ensure the country's long-term development. Provided that the peace in the Niger Delta is maintained, Nigeria will likely enjoy higher levels of oil production and foreign direct investment in 2010.