Nigeria displays the characteristics of a dual economy: a modern sector heavily dependent on oil earnings overlays a traditional agricultural and trading economy. During the colonial era, cash crops were introduced, harbours, railways and roads were developed, and a market for consumer goods began to emerge. At independence in 1960 agriculture accounted for well over half of GDP, and was the main source of export earnings and public revenue, with the agricultural marketing boards playing a leading role. The leading role in the economy has now been taken over by the national oil company, the Nigerian National Petroleum Company (NNPC). In 2000, according to official Nigerian government estimates. the oil sector accounted for 83.5% of federal government revenue, more than 95% of export earnings and 10.4% of GDP at factor cost. Agriculture (including livestock, forestry and fishing) is still the main activity of the majority of Nigerians, constituting about 40% of GDP.

On an expenditure basis, the breakdown of GDP is characterised by very high levels of consumption (private consumption accounted for 63.8% of GDP in 2000 and public consumption for 25%) and low investment. Gross capital formation, concentrated almost exclusively in the oil sector, accounted for only 8% of GDP, according to Nigerian government data. (Reference tables 9-11 give GDP data).

Economy and Politics

Nigeria's economy is highly dependent on the oil sector, which accounts for about 46 percent of gross domestic product (GDP) and accounts for 85 percent of the country's foreign exchange earnings. With its large reserves of human and natural resources, Nigeria has the potential to build a highly prosperous economy, to reduce poverty significantly, and to provide the health, education, and infrastructure services its population needs. Despite the country's relative oil wealth, poverty is widespread and Nigeria's basic social indicators place it among the 20 poorest countries in the world.

GNP per capita, at about US$260 today is below the level at independence 40 years ago and below the US$370 that it obtained attained in 1985. About 66 percent of the population now falls below the poverty line of roughly one U.S. dollar a day compared to 43 percent in 1985. Economic mismanagement, corruption, and excessive dependence on oil have been the main reasons for the poor economic performance and rising poverty.

President Obasanjo's administration has identified corruption and governance as issues that need to be forcefully tackled in order to begin to reverse the economic decline. The Anti-Corruption Bill passed by the National Assembly, was signed into law by President Obasanjo into law. The government has also acknowledged the widespread poverty and has embraced the need to quickly adopt policies quickly to generate broad-based economic growth in which the poor share.

Nigeria is an important country in West Africa because it accounts for 47 percent of the region's population and 41 percent of the region's GDP. In recent years, Nigeria has exercised a leadership role through the West African peacekeeping force, the Economic Community of West African States Monitoring Group (ECOMOG), which restored peace in Liberia and Sierra Leone.