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Nigeria's Economy Backslides

After seven years in power, Nigeria's military regime is to step down, but it leaves a legacy of unsolved economic problems including high inflation, high interest rates, and high unemployment.

AS our car inches along in one of Lagos's famous "go-slows," the local name for traffic jams, street salesmen walk by eagerly hawking newspapers, bread, cookies, luggage, sunglasses, ties, and dozens of other items.

The scene resembles Nigeria's economy today: slow-moving but full of dynamic, industrious, yet frequently impoverished people.

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Mounting frustration with the worsening economic and social conditions puts the country in a potentially explosive position, as Nigeria's military government prepares to hand over power to a civilian administration. Presidential elections are slated for December.

"The situation is very volatile," says accountant Ayo Ojulari.

An indication of the instability is the large-scale riots that broke out in the capital in May over a temporary shortage of gasoline.

Given popular dissatisfaction with the way the military has handled the economy, any attempt by the Army to prolong its seven-year hold on power beyond the January transition date "could end up in tremendous social reaction," says a Nigerian economist, who asked to remain anonymous.

Many Nigerians doubt that the military will stay in its barracks for long after stepping down. But the military's poor economic track record, means Nigerians are not likely to welcome it back.

If economic tensions, however, lead to massive strikes and more riots, the military might use national security as a pretext for a return to power.

Despite government reforms, Nigerians are slipping backward in terms of real income and purchasing power. Annual per capita income has fallen from about $1,000 in the early 1980s to around $300 today, economists say. And prices of goods have shot up an average of 45 percent since the government's devaluation of the national currency, the naira, in March.

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The military regime, led by Gen. Ibrahim Babangida, is leaving a pile of unsolved economic problems, Nigerian and Western analysts say, including high inflation, high interest rates (40 percent on some commercial loans), and high unemployment. The country also has low credibility among international donors because of its reputation for poor management, white-elephant projects, and official corruption.

Gasoline still sells for the equivalent of 12 cents a gallon because of a large government subsidy. Apparently, even General Babangida has not felt secure enough to remove the costly subsidy and risk massive protest.

Nigeria also had $33 billion in foreign debt at the end of 199l, according to the US Embassy here. But the country is not likely to get more debt relief until it puts its financial house in order, diplomats and international economists say.

Nigeria's systematic mismanagement of public resources is unsustainable, the World Bank said last November, in an internal report that pulls no punches.

The report notes that Nigeria is the 15th poorest country in the world, despite years of large oil revenues. Because of poor government investment of such revenues, the average Nigerian has seen little benefit from the oil, the report notes. The $4 billion Ajaokuta Steel Works, which the Bank says is likely to loose money when completed, is cited as an example.

The World Bank report also blames the Nigerian military government for neglect of education and health care.

It goes on to cite a breakdown of budgetary discipline, and lack of fiscal transparency - a term less diplomatic analyses substitute with the word "corruption."

Olatunji Dare, editorial board chairman of the daily Guardian newspaper, accuses the government of making "sweetheart deals" - public contracts with individuals and companies favored by the military, for expensive construction projects with "all kinds of hidden costs built in."

Adamu Ciroma, governor of the Central Bank of Nigeria from 1975 to 1977, alleges that some projects are designed to give some people a "certain percentage in their pockets. And once they get that percentage they don't care if the project is completed or not," says Mr. Ciroma, a candidate for the presidential nomination of one of the two political parties the military has allowed, the National Republican Convention.

An international economist here says much of the government's spending is "decided on the whim of the presidency." A lot of the money the government spends is never accounted for, he adds.

The structural adjustment program which the Babangida regime undertook in 1986, with the backing of the World Bank, called for trimming the government payroll and other expenditures, selling state-run enterprises, and abolishing the costly agricultural marketing boards that were reducing farmers' profits.

Devaluations of the naira, part of the reform process, made imports more expensive, forcing greater reliance on Nigerian-made products. Greater emphasis on local production is "making Nigerians more innovative, more industrious," says Nigerian official Tonnie Iredia.

Even though production increased in factories using local products, such as cotton, many industries dependent on imported parts and supplies slowed output, economists note.

The World Bank report says the structural reforms have been unsuccessful, with little change in federal spending patterns.

A Western diplomat, however, sees progress in the roughly 5 percent growth rate in gross domestic product over the past five years. The abolition of the marketing boards has helped increase crop yields, he says.

But the effect of the reforms "could have been a lot better" with improved management, he adds.

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