The extent to which a country develops is anchored around its resources; this is demonstrated in how the revenue from natural resources (especially the oil and gas industries) has influenced Nigeria’s development strategies (Diugwu et al. 2013). The Nigerian economy can be described as fairly strong but with weak development as Nigeria ranks 158th of 177 countries measured in the United Nations Human Development Index (UNDP 2008). Petroleum production and export accounts for more than 90% of Nigeria's export earnings and about 40% of government revenues. 80% of Nigeria’s budget is funded by crude oil revenues. The Nigerian economy is greatly dependent on petroleum and has largely been unable to meet the high expectations of many people (Ike and Leo, 2013).
According to the 2012 report by African Economic Outlook (AEO), Nigeria’s economic growth had averaged about 7.4% annually over the past decade. Inflation rate fell from 13.7% in 2010 to 10.2 in 2011 following monetary policy tightening and eased to about 8.4% in 2013.
Table 4.1 - Nigeria’s Real GDP Growth Rates, 2004-2013 Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 GDP Growth Rates (%) 10.5 6.5 6.0 6.4 6.0 7.0 8.0 7.4 6.6 6.7 GDP in billions of US Dollars 67.6 5 87.8 4 112.24 145.42 165.92 207.11 168.51 228.64 243.98 262.61
Source: African Economic Outlook (2013); www.tradingeconomics.com
Notwithstanding strong economic performances from 2004 to 2013, the Nigerian economy still lags meaningfully behind more advanced countries in Africa and beyond in terms of living standards. Nigeria accounts for 14 percent of Sub-Saharan Africa’s GDP, yet over half of the country’s population lives on less than US$1 per day (World Bank, 2008; IMF, 2007). The growth in population exacerbates the poor living of Nigerians as UN projects that the population will increase to 210 million individuals in 2025 and 289 million in 2050. While the share of Nigeria’s population living below the poverty line has fallen from 70 percent in 1999 to 54 percent in 2005 (IMF, 2007). This translates into approximately 80 million Nigerians living in poverty. Only China and India have larger populations of poor people (DFID, 2004). Poverty rates vary widely by region. In the Niger Delta, for example, a 1996 survey found the highest poverty rates in the country as well as high unemployment rates and extremely low rates of literacy, access to health services, and access to safe water (Ross, 2003). However, the table 4.2 captures the relative poverty headcount from 1980 to 2010 in Nigeria.
Table 4.2 - Relative poverty headcount from 1980 to 2010
The above table shows an upward growth of Nigerian population in poverty. Nevertheless, another economic indicator that points to the performance of Nigeria is the rate of unemployment in the nation. In 2004 the official unemployment rate according to the Federal Office of Statistics was 11.8 percent, down from 18.1 percent in 2000 (Olusakin 2006). However, the World Bank (2008) estimates that the actual rate was 41 percent. In “key urban centres and amongst new graduates,” unemployment was as high as 50 percent (World Bank/DFID 2005). This high unemployment rate signifies major challenges to the Nigerian economy. In terms of unemployment by geopolitical zones in Nigeria, the south-south region has one of the highest unemployment rates in the country (see tab 4.3).
Table 4.3 - Unemployment Rates by Zone (1999- 2011) Zones 199 9 200 0 200 1 200 2 200 3 200 4 200 5 200 6 200 7 200 8 200 9 201 0 2011 South South 5.9 9.5 14.0 8.3 11.5 11.4 11.3 15.9 29.5 22.8 24.7 27.8 24.7 North Central 7.1 8.6 8.9 10.1 6.1 6.5 6.9 8.8 15.9 9.8 15.0 7.9 22.6 North East 8.2 34.5 13.4 12.5 12.8 14.0 15.3 15.1 18.5 12.1 30.1 26.1 31.9 North West 8.2 24.3 18.5 14.4 26.1 23.7 21.3 21.0 12.8 10.7 21.5 13.4 28.8 South East 8.4 15.5 16.5 11.9 15.2 14.4 13.7 15.3 18.1 10.4 15.8 23.0 19.6 South West 6.9 8.9 9.6 9.9 7.3 6.1 5.0 6.7 8.4 7.7 15.2 27.8 11.3 Nigeria 8.2 13.1 13.6 12.6 14.8 13.4 11.9 12.3 12.7 14.9 19.7 21.4 23.9 Source: National Bureau of statistics, General Household Survey Report (1999-2011).
The high rate of unemployment in the Niger Delta is because the oil industry does not require much labour and foreign oil companies often bring many of their own employees into Nigeria; those living in the region gain few benefits from the industry and concurrently suffer high environmental and health costs (Ross, 2003). In exacerbating unemployment in Nigeria, is the fact that oil is mostly exported as crude, thereby making Nigeria miss opportunities to refine it and potentially create more value-added industries that employ more Nigerians (CIA 2008). Other sectors have struggled since the discovery of oil in Nigeria in 1956. Cocoa and groundnut exports have slumped, and palm oil exports have almost disappeared (McPherson 2003). Foodstuff, once an exported good, is now imported from other countries. In industry, the World Bank notes the potential for improved productivity in light manufacturing, leather goods, food, and beverages (World Bank/DFID 2005). It believes the most promising markets for this growth are local and regional, with the exception being those markets in which Nigeria is already globally competitive, such as shrimp and leather.
Alongside unemployment in deterring the economy of Nigeria is corruption. Transparency international ranks Nigeria 121st out of 180 countries in its annual corruption perception index. The AEO’s 2012 report claimed that the major challenge of the Nigerian economy is the dilapidated state of infrastructure, the over-dependence on the oil and gas industry and corruption which is widespread. Nigeria is the most oil-dependent country in the world as measured by oil’s share in exports. And since crude oil is currently the economic mainstay of Nigeria, Nigeria’s performance in monitoring and improving the activities of oil production is crucial in predicting the economic performance of the country rather, corruption has rocked oil’s management. For example, in 1965, when oil revenue was about US$33 per capita, GDP per capita was US$245 whereas, in 2000, when oil revenues were US$325 per capita, GDP per capita was still at the 1965 level. This is as a result of waste and poor institutional quality stemming from oil and is responsible for Nigeria’s poor long-run economic performance (Sala-I-Martin and Subramanian, 2003). In the opinion of Tayler (2006), this is as a result of high corruption in the country because one percent of the country’s population control 80 percent of oil wealth. Palley (2003) called it “natural resource curse”; a situation where mineral wealth fuels corruption and conflict rather than equitable economic development. Again, Nigeria’s export income from oil has been above 90 percent since the mid-1970s. In fact, the oil industry generated approximately $231 billion in rents—“returns in excess of production costs”—between 1970 and 1999, amounting to $1900 per capita and it does not show in the lives of the citizens. In Ross’s (2003) analysis, had each year’s oil rents been
invested in a fund that yielded just five percent real interests, at the end of 1999 the fund would be worth $454 billion. If divided among the general population, every man, woman and child would receive about $3,750
Dependence on oil and other valuable minerals can expose states to increased risks of civil war (Collier and Hoeffler 1998), high rates of corruption (Sachs and Warner 1999), and atypically slow economic growth (Sachs and Warner 1997). These factors are not far-fetched from the case of Nigeria. In Nigeria, frustration and anger surrounding corruption, pollution caused by the oil industry, and what is often considered an unfair distribution of oil profits has motivated violence and discontent in the Niger Delta (see section on the South-South region for further information) (Ross 2003). Also, years of authoritarianism, chronic opportunism and endemic corruption have debarred its potential benefits from trickling down to the people leading to a larger majority of people living in poverty (Omotola, 2006). At this point, it is necessary to look closely to the Niger delta and examine certain factors that might be potential stress factors to offshore workers in the region bearing in mind that the Niger Delta has had a long history of violence and crisis as a result of the neglect and underdevelopment in the region. All these will follow in the next sections.