Historical profile

Throughout its recent history, Nigeria has been run by a northern political elite drawn from the country's majority Muslim population. Military dictatorship managed to suppress underlying religious and ethnic tensions, which have simmered since the outbreak of the Biafran civil war in the 1970s. The election in 1999 of President Obasanjo, a former military dictator who voluntarily handed over power to a civilian government in 1979, was seen by members of the northern elite as concentrating economic and political power in the predominantly Christian south, even though he is a Muslim and is supported by many northerners. Obasanjo's election as a civilian president ended more than 15 years of unbroken military rule; the military has ruled for 29 years out of a total of four decades since Nigeria's independence. Yet, underlying regional resentments have intensified the growing ethnic and religious divisions within the country, threatening to tear the federal state apart. By 2002, Obasanjo was presiding over a country in turmoil, with his leadership undermined by a wave of violence and the move towards sharia (Islamic law) in many northern states. Massacres carried out by vigilante groups and the army became commonplace and Nigeria has confirmed its position as one of the world's most violent and corrupt countries.

The violent divisions within Nigerian society are exacerbated by deepening and widespread poverty, which has not been alleviated by the exploitation of the country's enormous natural resources. Oil has gone hand-in-hand with corruption, which has sapped the economy of its strength and inhibited the growth of non-oil sectors. Economic stagnation and poor governance have led to the collapse of IMF programmes, preventing Nigeria's chances of securing relief on its high level of foreign debt.

Democracy has brought little economic relief or encouraged greater respect for Nigeria's governing institutions. The opportunity Nigeria had to reform institutions and rejuvenate the private sector appears to have been squandered by the short-term and parochial attitudes of the country's politicians. Additionally, widespread human rights violations are continuing unabated.

Between the eleventh and fourteenth centuries, a number of Islamic Hausa kingdoms flourished in the area of modern-day Nigeria, while in the fourteenth and fifteeenth centuries the Yoruba empire developed into a regional power, and the Ibo (Igbo), with a diffuse political structure, lived in the east. The Yoruba first made contact with Europeans (Portuguese) in the fifteenth century, who, along with other European nations, began trading in slaves from West Africa.

1914 The territory that is now Nigeria was taken over by the British.

1922 A legislative council was set up. Much local power was left in the hands of traditional chiefs.

1947 A constitution established a federal system of government which attempted to take into account the interests of the three main regions of the colony – the northern and mainly Muslim Hausa and Fulanis, the predominantly Catholic Ibo in the east and the mixed Anglican and Muslim Yoruba in the west.

1960 Nigeria became independent.

1963 The Federal Republic of Nigeria was proclaimed.

1967–70 Three eastern states attempted to secede, as the Ibo people claimed their independence, resulting in the Biafran Civil War. Estimates for the death toll during the war range between 500,000 and two million.

1970s The Opec-led doubling of the price of oil in October 1973 and again in 1974, led to Nigeria becoming one of Africa's wealthiest states. Nigeria experienced a construction and consumer boom until the price of oil plummeted in the early 1980s.

1985 After 25 years of political turbulence, General Ibrahim Babangida seized power, he was widely supported by intellectuals, the press, some former politicians and the business community. The Genaral pledged to return Nigeria to civilian rule, but the hand-over date was repeatedly postponed.

1993 Elections were held, but were later annulled. Babangida stepped down from office. General Sani Abacha seized power in a coup d'état. He began to suppress all opposition.

1995 Ken Saro-Wiwa, Nigerian writer and advocate of the Ogoni people in eastern Nigeria, and eight other minority rights activists were executed. There was international outrage against both the government and Shell Oil Company, which had allegedly polluted Ogoni land. Nigeria was suspended from the Commonwealth and the EU imposed sanctions.

1998 Abacha died and General Abdulsalam Abubaker became Head of State. A full electoral timetable was announced for the first time.

1999 State legislative, National Assembly and presidential elections were held. Olusegun Obasanjo was declared the winner in the presidential elections.

2000 Sharia (Islamic law) was adopted in several northern states and opposed by the Christian minority. Religious and ethnic tensions grew and hundreds of deaths resulted from clashes between Muslims and Christians. Equatorial Guinea and Nigeria signed a treaty agreement about demarcation of their maritime border.

2001 The heads of Nigeria's army, navy and air force were encouraged to retire. President Obasanjo set up a National Security Commission in an attempt to halt the communal violence, sparked mainly by religious opposition, which had resulted in thousands of deaths.

2002 The parliament unanimously rejected legislation that would have banned new political parties from contesting presidential and legislative elections in 2003. Nigeria rejected the International Court of Justice ruling that gave sovereignty of the oil-rich Bakassi peninsula to Cameroon.

2003 President Obasanjo of the People's Democratic Party (PDP) was re-elected and the PDP won large majorities in the Lower House and the Senate. EU observers said the elections were marred by 'serious irregularities'.

2004 In January, the UN brokered talks between Nigeria and Cameroon about their disputed border and both countries agreed to start joint security patrols. After religious clashes in the central Plateau State, a state of emergency was declared there in May. On 18 August, Swiss authorities said that they would unfreeze most of the US$500 million deposited in Switzerland by the dictator Sani Abacha.

2005 The opposition boycotted the national reform conference (NPRC), called to discuss constitutional reform, claiming it had too few powers; it was inaugurated on 21 February.

2006 On 1 January the Central Bank of Nigeria (CBN) announced that 13 banks faced liquidation for failing to meet the N25 billion capitalisation target. In August, Nigeria ceded the Bakassi peninsula to Cameroon in accordance with the 2002 International Court of Justice ruling.

2007 Umaru Yar'Adua was elected president on 21 April. Mrs Patricia Etteh resigned as Speaker of the House of Representatives on 30 October. She was succeeded by Dimeji Bankole (PDP).

Political structure

The 1979 constitution was amended in 1999, when significant powers were devolved to the 36 states.

The political system is divided into three tiers: the federal or central level, the state level and local government.

Under a presidential system, the president, who is also the commander-in-chief of the armed forces, is vested with executive powers under the constitution of the federal republic. The president and his ministers form the federal executive council with the president as the chairman.

A similar structure exists in the states where the governor and his commissioners form the state executive councils. Each state has a legislature, executive and judiciary, although their legislative arm is unicameral.

Federal republic comprising 36 states and the Federal Capital Territory (FCT, Abuja).

The Federal Executive Council is headed by an elected president who serves no more than two four-year terms.

The president is both Head of State and head of government, initiating the policies and programmes of the government and ensuring that they are implemented after they have been passed into law by the legislature. The success or failure of any government depends largely on the incumbent president who combines the roles of the chief executive with those of the ceremonial Head of State.

Despite his wide-ranging power, the president has restrictions, which include ratification of all his major appointments by the National Assembly. The president is excluded from membership of both houses of the National Assembly.

Although he is empowered to conduct foreign affairs, all treaties require the ratification of the Senate. Only the National Assembly can declare war and peace. While he appoints members of the judiciary, he cannot remove them.

The legislative powers of federal government are vested in a bicameral National Assembly. The Senate has 109 seats, three from each state and one from the FCT; members elected by popular vote to serve four-year terms and the House of Representatives 360 seats, with members elected by popular vote to serve four-year terms.

Each of the states of the federation has a unicameral legislature.

Nigeria's legal system is based on English common law, Nigerian customs and tradition, and Sharia (Islamic law). Sharia predominates in the northern Islamic states.

21 April 2007 (presidential and parliamentary).

Presidential: Umaru Yar'Adua (PDP) won 24,784,227 votes; Muhammadu Buhari (ANPP) won 6,607,419 votes. Turnout was 57.5 per cent.

Senate: PDP won 53.69 per cent of the vote (76 seats out of 109); ANPP won 27.87 per cent (27 seats); and Alliance for Democracy (AD) 9.7 per cent (six seats). Turnout was 49.3 per cent.

House of Representatives: PDP won 54.49 per cent of the votes (223 seats out of 360); ANPP won 27.44 per cent (96 seats); AD won 9.28 per cent (34 seats). Turnout was 50 per cent.

2011 (presidential and parliamentary)

Political parties

People's Democratic Party (PDP) (since 1999; re-elected Apr 2003)

All Nigeria People's Party (ANPP)

Population

130.24 million (2005)

March 2006: 140 million (men 71.7m, women 68.3m) (provisional results, Dec 2006). Previous census in 1991 showed a total of 88.5m.

Population

The population is expected to reach 278.8 million by 2050.

About 52 per cent of the population is male and 48 per cent female. Approximately 47 per cent of the total population is under 15 years of age.

Much of the population is concentrated in the southern part of the country as well and Kano in the north. There has been an expansion of a number of cities, spurred by development and rural–urban migration.

Hausas (21 per cent), Yorubas (20 per cent), Ibos (17 per cent) and Fulani (9 per cent) comprise the four major tribes.

Islam (about 50 per cent), Christianity (about 40 per cent), traditional beliefs (about 10 per cent).

Education

Primary schooling lasts for six years. Admittance to secondary schooling is through examination. Junior secondary school lasts for three years until age 15 with progress on to senior secondary school until age 18. Some students may undertake technical, vocational schooling from age 12 and can undertake academic and specialised subjects and graduate at age 18.

Around 7 per cent of the government's budget is allocated to education.

Health

Per capita total expenditure on health (2003) was US$51; of which per capita government spending was US$13, (WHO 2006).

The Federal Ministry of Health (FMOH) provides policy and technical guidance to the 36 states and the federal capital territory (Abuja), co-ordinating state efforts towards the goals set by the national health policy. Annual health expenditure stands at around 3–4 per cent of GDP, of which government spending is approximately 23 per cent and foreign spending about 7 per cent.

The primary healthcare network has seriously declined with low level coverage of services such as immunisation and supply of essential drugs. The Health System Fund is a major project implemented by the state and federal ministries of health aimed at institutional development, training and an essential drug programme.

Nigeria has a growing problem of HIV/Aids as well as a significant rise of other non-communicable diseases, however, with 65 per cent of the population living below the poverty line, health measures can provide only short-term solutions to systemic problems.

Nigeria is one of only two countries that exports polio (the other is India), according to the World Health Organisation – Global Polio Eradication Initiative (WHO – Polio Eradication). In 2006, Nigeria accounted for 60 per cent of all global cases – five states in the north are the epicentre of over 50 per cent of all worldwide, and 80 per cent of Nigeria’s, cases. There has been a history of mistrust by local people to immunisation and the WHO plans to target the population with more health benefits by combining the polio vaccinations with anti-malaria treatments and integrated healthcare.

Mass immunisation campaigns have been carried out in 22 countries spanning the Sahel region of Africa, from Senegal in the west, to Mali in the north and the Central African Republic in the east. For a population to be at only a minor risk of polio outbreaks 85 per cent must be vaccinated; it is estimated that, in many of the at risk countries, only 50 per cent were immunised.

Improved water sources are available to 39 per cent of the population.

Welfare

The Nigerian public service schemes, the private sector self-administered and insured scheme, the National Provident Fund (NPF) and the Nigeria Social Insurance Trust Fund (NSITF) schemes, provide for old age, survivorship, invalidity and industrial injury benefits, gratuity and pension. The Workmen's Compensation Act provides for industrial injury benefits. Despite the existence of these bodies, the social security system is virtually non-existent in Nigeria.

The pensions fund management is divided into two categories: government schemes and occupational schemes. The government scheme provides basic social benefits that are not earnings-related, and earnings-related pension provisions. Such schemes are funded mainly through contributions from the government, with minimal contributions from the scheme members. The government policy allows individuals in self-employment to claim premiums paid to any insurance company, provided such premiums do not exceed 10 per cent of the individuals total income. This is in addition to any relief claimed in respect of life assurance policies. The occupational pension schemes consists of private companies' schemes, which are employment related and financed jointly by the employers and employees.

Main cities

Abuja (Federal Capital Territory in central Nigeria – estimated population 147,996 in 2005). Lagos (former capital – estimated population 8.7 million).

Capitals of the 36 states are: Kaduna (state of Kaduna) (1.4 million (m)), Kano (Kano) (3.0m), Jos (Plateau) (705,360), Sokoto (Sokoto) (455,642), Maiduguri (Borno) (854,613), Ilorin (Kogi – formerly Kwara) (735,478), Ibadan (Oyo) (2.5m), Port Harcourt (Rivers) (972,301), Calabar (Cross River) (439,656), Bauchi (Bauchi), Minna (Niger), Makurdi (Benue), Abeokuta (Ogun) (542,900), Akure (Ondo), Ikeja (Lagos), Owerri (Imo), Katsina (Katsina), Uyo (Akwa Ibom), Benin City (Edo) (1.0m), Enugu (Enugu) (563,619), Yola (Adamawa), Umuahia (Abia), Awka (Anambra), Asaba (Delta), Birnin Kebbi (Kebbi), Lokoja (Kogi), Yenogou (Bayelsa), Abakaliki (Eboniyi), Ado-Ekiti (Ekiti), Gombe (Gombe), Lafia (Nassarawa), Gusau (Zamfara), Osogbo (Osun), Jalingo (Taraba), Dutse (Jigawa), Damaturu (Yobe).

Languages spoken

English is used in business and public life. Hausa, Yoruba and Ibo are widely spoken.

English

Media

The government controls the media through a media council, which has the power to discipline journalists and bar them from working. There are also strict laws of libel and an Official Secrets Act. However, the press is officially free and is often critical of the government. The News Agency of Nigeria (NAN), the country's only news agency, is government-owned but not official.

At least 20 dailies circulate nationally. Three evening papers are published in Lagos and one in Ibadan. Principal dailies include Daily Times, National Concord, New Nigerian, The Guardian, Daily Sketch, The Punch, Vanguard, Daily Champion, Comet News, Post Express and The Tribune. Al Mizanr is published in the local language Hausa.

There are several weekly news magazines, notably Newswatch, African Concord, Abuja Mirror, Today and African Guardian.

Policy is a business and investment magazine.

The government-controlled Federal Radio Corporation of Nigeria (FRCN) operates Nigeria's radio network. It operates an external service but reception outside Lagos is poor. Four regional zonal services broadcast in English and appropriate local languages from stations based in Lagos, Ibadan, Kaduna and Enugu. External services broadcast in English, French, Hausa, Arabic, German, Swahili. In addition to the national service, each state runs its own commercial radio station. FRCN is divided into five zones:

Lagos (English speaking);

Enugu (English, Ibo, Izon, Efik and Tiv);

Ibadan (English, Yoruba, Edo, Urhobo and Igala);

Kaduna (English, Hausa, Kanuri, Fulfulde, and Nupe);

External Services (English, French, Hausa, Arabic, German and Swahili).

The Nigerian Television Authority (NTA) has 25 stations nationwide and claims an audience of 30 million people for its main network news bulletin at 2100. Several states also run their own stations. There are 14 companies operating private television stations.

Economy

Despite its wealth of mineral and agricultural resources, Nigeria has since the 1980s become one of the world's poorest countries. Per capita income is lower than it was before independence in 1960 and around 60 per cent of the population lives in poverty. Nigeria's economic decline, due to incompetence and corruption, has been one of the most spectacular in Africa, aggravated by the venal dictatorship of General Sani Abacha (1993–98), who effectively looted the country's oil wealth, leaving Nigeria with a huge burden of foreign debt. Annual debt repayments have been a drain on the economy.

Since 2002, the economy has begun to recover. The civilian government of Olusegun Obasanjo has pursued a programme of reform, including fuel price deregulation, privatisation, infrastructural development, and improved fiscal and monetary management. At the same time, debt reduction has been prioritised, resulting in an agreement in 2005 by the Paris Club of international sovereign lenders to eliminate US$18 billion of Nigerian debt.

Diversification is a major objective. The economy continues to be dominated by the oil and gas sector, which accounts for 20 per cent of GDP and contributes over 90 per cent of foreign exchange earnings and 65 per cent of government revenues, but the contribution of non-oil activities, such as agriculture and telecommunications, to GDP has increased. The role of the oil and gas sector has been impeded by continuing instability and damage to infrastructure. The contribution of non-oil activities is credited with driving the improvement in GDP growth in 2006.

The results of the Obasanjo government's measures met with international approval and improved Nigeria's standing, but the benefits have yet to be felt in the country. Poverty and corruption are still widespread. Food prices, rents and unemployment have risen. The power generation sector is on the verge of collapse, impacting adversely on business activity. Meanwhile, vested interests remain resistant to reform and the anti-corruption drive, while unrest and sabotage are on the rise, targeting power supplies and oil and gas installations, with a knock-on effect on export earnings and investment,

External trade

Nigeria is a member of the Economic Community of Western African States (Ecowas), which was set up to promote economic integration among members. It is a member of the Anglophone, West African Monetary Zone (WAMZ), which is due to introduce a common currency. WAMZ will eventually be merged with the Francophone-members’ currency to produce a single currency (the eco) for the region.

The oil sector is vital to the economy as it provides over 20 per cent of GDP, 95 per cent of foreign earnings and around 65 per cent of budget revenue.

As Africa’s most populous nation, Nigeria is required to import food and goods.

Principal imports include fuel (Nigeria's oil refineries are inefficient), industrial raw materials, machinery, chemicals, vehicles, manufactured goods, food and live animals.

China (10.4 per cent total, 2005), US (7.3 per cent), UK (6.7 per cent), The Netherlands (6.0 per cent), France (5.9 per cent), Germany (4.2 per cent)

Principal exports are crude oil and petroleum products (typically 95 per cent of total), cocoa, rubber, timber and manufactured goods.

US (49.7 per cent total, 2005), Brazil (10.4 per cent), Spain (7.6 per cent)

Agriculture

Contribution to GDP by the agriculture sector fell to 16.6 per cent in 2004, down from the 26.4 per cent in 2003, even though annual growth has remained steady at 6.5 per cent. It contributes just 3 per cent to exports and receives much official encouragement.

The sector has suffered a relative decline because of the dominance of oil in the economy, but it is still the main area of employment, employing around half the workforce.

Land suitable for arable production has been put at 25 per cent of the total area, of which about 12 per cent is currently cultivated. The country suffers from soil degradation, deforestation and water pollution.

Key government policies include food self-sufficiency and boosting non-food crops to meet demand from the agri-processing sector. The sector is still dominated by unproductive smallholders raising subsistence crops such as sorghum, maize, cassava, yams, millet, rice and increasing quantities of wheat – up to 70 per cent of which is for private consumption. Nigeria is a leading world producer of cassava and the second largest producer of ginger.

Plantations, sometimes owned by, or in partnership with, multinational corporations, are gaining ground in producing raw materials for commercial use, for example grain for breweries. Irrigation schemes, higher producer prices, the expansion of credit and improvements in the rural infrastructure are beginning to show positive results.

Cash crops include cocoa, rubber (nearly all exported), coffee, cotton and palm kernels. Cocoa is Nigeria's largest foreign exchange earner after oil. The palm oil sector is being redeveloped. Livestock farming is important, while poultry farming is rapidly increasing.

Estimated crop production in 2005 included: 22,783,000 tonnes (t) cereals in total, 3,542,000t rice, 4,779,000t maize, 4,027,000t taro, 26,587,000t yams, 6,282,000t millet, 8,028,000t sorghum, 2,516,000t sweet potatoes, 38,179,000t cassava, 8,700,000t oil palm fruit, 657,000t potatoes, 2,103,000t plantains, 2,367,000t pulses, 140,900t fibre crops, 3,250,000t citrus fruit, 2,470,360t oilcrops, 2,937,000t groundnuts in shell, 366,000t cocoa beans, 3,520t green coffee, 142,000t natural rubber, 776,000t sugar cane, 9,127,000t fruit in total, 8,270,000t vegetables in total. Livestock production included: 1,066,947t meat in total, 280,000t beef, 208,231t pig meat, 100,650t lamb, 147,066t goat meat, 211,000t poultry, 102,000t game meat, 476,000t eggs, 432,000t milk, 43,080t cattle hides, 23,160t goatskins, 18,300t sheepskins.

Over N30 billion (US$238 million) is spent annually on fish imports despite the country's large fishing potential.

There is extensive fishing in the Niger River network and along the south coast.

In 2004, the total marine fish catch was 251,232 tonnes and the total crustacean catch was 28,552 tonnes.

Nigeria has 15 per cent forest cover and an additional 54 per cent of other wooded land comprising mainly savannah. There are growing forestry operations in the tropical zones in southern Nigeria and north of Port Harcourt. The extensive network of national parks and reserves protect around 5 per cent of its forests. The average annual deforestation is around 2.5 per cent, or the equivalent of 400,000ha of forest cover.

Nigeria is one of the largest wood producers in Africa showing an annual harvest of more than 100 million cubic metres, most of which is used for fuel consumption. The large-scale industrial forestry sector produces sawn timber, plywood, particleboard and paper mostly to meet local demands.

Northern Nigeria is most threatened by deforestation and government concerns over desertification led to urgent action plans including a US$44.5 million National Tree Nursery Programme.

Timber imports in 2004 were US$241 million, while exports amounted to US$32.8 million.

Timber production in 2004 included 70,270,440 cubic metre (cum) roundwood, 9,418,000cum industrial roundwood, 2,000,000cum sawnwood, 7,100,000cum sawlogs and veneer logs, 39,000t pulpwood, 95,000cum wood-based panels, 60,852,440cum woodfuel; 3,420,800 tonnes charcoal.

Industry and manufacturing

Production costs in industry are considerably increased by a lack of basic infrastructure, which compels every factory to have its own standby electricity plant and sometimes a water borehole. Companies also find it difficult to source vital components from abroad with uncertain supplies of foreign exchange, although this situation is gradually improving thanks to the liberalisation of the economy.

The textile industry used to be one of Nigeria’s more productive sectors. However, the Kano Textile Traders Association claims that imports of finished textile materials from China, Pakistan and India have resulted in the collapse of the textile industry. WTO agreements blocking advantageous exports to the US, and Ecowas tariff reductions allowing cheaper imports from neighbouring countries, have reduced the number of textile firms from a high of 250,000 to a current 50,000 with only 65 textile mills remaining. The number of job loses amounts to around 200,000.

Industrial production increased by 4.6 per cent in 2004.

Tourism

The tourism sector is expected to account for 1.5 per cent of GDP, or US$1 billion in 2005 and employ around 6.4 per cent of the working population. While travel and tourism is only expected to attract around US$340 million or 2.4 per cent of total capital investment in 2005, overall it should generate about US$4.7 billion in total tourist exports.

Nigeria has many diverse environments and attractions to offer the intrepid traveller, as well as marketing the country as a destination for eco-tourists it also emphasises it peoples and local customs.

Environment

Drilling operations in the Niger Delta region have created huge pollution problems from oil spills and explosions. Oil exploitation has been a fact of life for many people living in the Delta, particularly the Ogoni people.

Nigeria's pollution problems are exacerbated by the fact that the country does not have a pollution control policy. Analysts have reported that during oil production, Nigeria flares more natural gas than any other country in the world, contributing to global warming. The government hopes to end gas flaring by 2008.

Mining

Nigeria used to be one of the world's largest producers of tin, with production based around the highland district of Jos. It is now the smallest of the Association of Tin Producing Countries (ATPC). The country's only tin smelter is at Makeri. Tin reserves are estimated at 16,000 tonnes.

Independent estimates place iron ore reserves at 800 million tonnes, averaging 37 per cent metal content.

Deposits of uranium, lead, zinc, tungsten and gold have not yet been exploited. There are 65 sites in Nigeria where gold has been located. The Iperindo gold project in Oshun State has a resource of some 400,000 ounces of gold.

Nigeria Mining Corp has taken up a number of projects including gold, tantalum and tin with the aim of attracting more capital in anticipation of increased private sector involvement.

Hydrocarbons

The petroleum sector is the mainstay of the economy, contributing 20 per cent to annual GDP and 75 per cent to government revenues. In 2004, Nigeria's proven oil reserves stood at 35.3 billion barrels, most of which is located in the Niger River Delta; production averaged 2.5 million barrels per day (bpd). Oil production dominates the Nigerian economy, accounting over 80 per cent of foreign earnings. At current production levels, reserves should last for approximately another 30 years. Nigeria hopes to increase production to four million bpd by 2010.

The Dutch/UK oil company Shell announced that the Bonga deepwater oil field had gone into production in November 2005. It is expected to produce 225,000bpd and add 10 per cent to Nigeria's total production.

Multinational oil companies are in partnership with the Nigerian government for oil exploration and production. While the oil located is premium light and easily extractable, domestic political and managerial problems have led to Nigeria being discribled as ‘one of the most difficult operating environments’ in the world. Corruption has been blamed for much of the squandering of US$340 billion in oil revenue earned since 1965. So much so that of the 20 million people, in 3,000 communities living in the Niger River Delta, 70 per cent live on less than US$1 per day. Oil companies claim that government investment has not been forthcoming – down by US$1 billion in 2005 – so that key environmental plans, such as ending flaring of waste gas by 1 January 2008 will probably be missed.

Oil installations are frequently vandalised and company staff taken hostage, resulting in major disruptions to oil production. Some of the attacks are motivated by those who resent the development of the oil industry, the destruction of their environment and the uneven distribution of oil wealth to the federal rather than state governments. Illegal siphoning of fuel to supply the black market has resulted in a number of major explosions with hundreds of deaths each year. The government estimates that around 300,000bpd of oil is sold illegally on to the black market each year.

Nigeria has only four refineries producing 445,000bpd, about half their full capacity. All new exploration contracts require international oil companies to make a commitment to investing in new refining capacity.

Proven gas reserves stood at five trillion cubic metres in 2003, making Nigeria the second-largest African source of natural gas after Algeria. However there has been relatively little investment in projects to gather gas for commercial use, and Nigeria is considered to be the biggest burner of waste gas globally.

Production was 20.6 billion cubic metres in 2004. At this production rate, reserves could last for several hundred years. Nigeria would like to provide gas as its principle source of domestic energy however capital investment in the necessary infrastructure is unavailable.

Nigeria, Ghana, Togo and Benin signed a deal for a US$500 million pipeline project to pump Nigerian natural gas across the region. Construction began in 2005 and will be ongoing for several years. Chevron Texaco will build and manage the pipeline.

Nigeria has plentiful coal reserves, although production supplies only a tiny percentage of domestic energy requirements. Coal exports are negligible, due to obsolete equipment and a lack of investment following years when the coal sector was a government monopoly.

Energy

Three hydroelectric stations and five thermal stations should provide around 5,900MW of installed electric generating capacity, although neglect and a lack of funding mean that actual capacity is only 2,000MW. The government's long-term objective is to increase capacity to 25,000MW.

It is estimated that only 10 per cent of rural households and 40 per cent of the total population have access to electricity. The government aims to increase total electricity coverage to 85 per cent by 2010 by building 16 new power plants and 15,000km of transmission lines. The development of hydroelectric power stations is hampered by persistent droughts and funding difficulties. As a result the government is turning to developing a solar energy system to serve rural communities not served by the national grid.

Transmission Company of Nigeria (TCN) said it was due to complete the 70 kilometre power transmission line to Benin in February 2007. The project is part of the West African Power Pool action plan and cost US$25 million.

Financial markets

The Nigerian Stock Exchange (NSE) was established in 1960 as the Lagos Stock Exchange and became the NSE in 1977. The NSE conducts its business on six trading floors spread across the country. It has branches in Lagos, Kaduna and Port Harcourt, with the bulk of business conducted in Lagos. Most transactions are concentrated in the banking, conglomerates, breweries and food and drink sub-sectors.

The banking sector, which offers high yields, is the most active sub-sector in the NSE, representing around 46 per cent of all transactions. On 3 January 2006, 22 banks were suspended from the trading floor following the withdrawal of their licences by the regulatory authorities.

Banking and insurance

Nigeria's banking sector is the second-largest in Africa behind South Africa, but it has experienced difficulties in recent years. Since the late 1990s, the Central Bank of Nigeria (CBN) has worked towards cleaning up the banking sector. The end of military rule in 1999 saw international banks return to Nigeria, although they concentrate their operations in Lagos and Abuja supplying services for big businesses and Nigerian expatriates. The CBN does not differentiate between licensing of commercial and merchant banks, which enables merchant banks to issue cheques and allows them to access the CBN's clearing house.

In 2005 the CBN began restructuring the banking sector by setting a minimum capital requirement that has forced banks into consolidation. The IMF is advising the CBN on the banking reform programme.

A persistent obstacle to the banking sector's development is Nigeria's culture of fraud; the CBN has been keen to address, the advance fee fraud scams, run by criminal gangs. A Financial Intelligence Unit monitors the banking environment to strengthen the anti-money laundering framework that is under way.

Other problems include the federal and state governments' borrowing from domestic banks, which has severely restricted liquidity in the banking sector.

It was announced in March 2005 that the introduction of the shared currency, the Eco, in Nigeria, Ghana, Guinea, Sierra Leone and The Gambia, which was due in July 2005, would be postponed. The currency was proposed to facilitate trade and growth with an ultimate plan to merge it with the CFA franc.

On 1 January 2006 the CBN announced that 13 banks faced liquidation for failing to meet its N25 billion capitalisation target.

Central Bank of Nigeria (CBN)

Lagos

Nigeria is on the Organisation for Economic Co-operation and Development (OECD) Financial Action Task Force (FATF) list of non-co-operative countries on money laundering.