IMPACT OF CIVIL WAR ON THE NIGERIAN ECONOMY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001600010011-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 24
• Document Creation Date: December 22, 2016
• Document Release Date: October 1, 2009
• Sequence Number: 11
• Publication Date: June 1, 1968
• Content Type: IM

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Secret
DIRECTORATE OF
INTELLIGENCE
Intelligence Memorandum
Impact of Civil War on the Nigerian Economy
Secret
ER IM 68-61
JUNE 1968
COPY NO. 52
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WARNING
This rloeumcnt contains information affecting the national
defctise of the United States, within the nwaning of Title
18, sections 793 and 711.1, of the US Code, as amended.
Its transmission or revelation of its contents to or re-
ceipt by an wiauthorizcd pcrsou is prohihited by law.
F. (RO MP t
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
June 1968
INTELLIGENCE MEMORANDUM
Impact of Civil War on the Nigerian Economy
Summary
The civil war and the preceding months of
deepening political crisis have halted Nigerian
economic growth and dimmed prospects for development
over the next few years. The economic and organ-
izational framework has been disrupted, massive
population shifts have occurred, and considerable
physical damage has been sustained. The war has
loosed tribal rivalries that threaten any future
political arrangements that may emerge. The short-
term economic outlook for Nigeria, or for its
component parts, is poor. The organization and
financing of the dozen newly created states into
which the country has been divided is likely to be
a long and costly process. Private, particularly
foreign, investment outside the petroleum sector
is not likely to resume in significant quantity
unless and until a modicum of political stability
has been achieved.
In secessionist Biafra, the fo:Lmer Eastern
Region, the level of economic activity in the moder.i
sector has declined much further than in the Federal
areas. Biafran plants dependent on imported raw
materials have closed as a result of the blockade
Note: This memorandum was produced solely by CIA.
It was prepared by the Office of Economic Research
and was coordinated with the Office of Current
Intelligence and the Office of National Estimates.
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imposed by the Federal Military Government (FMG) in
mid-1967. Shortages of imported consumer goods are
reportedly widespread. External trade is confined
to smuggling via the creeks and back roads supple-
mented, at least until mid-May x.968, by occasional
clandestine flights in+-n Port Harcourt. The per-
vasiveness of the extended family system has enabled
Biafra to absorb perhaps a million refugees from
elsewhere in Nigeria and to increase, or at least
maintain, the production of staple foodstuffs. This
influx of skilled workers and technicians has also
contributed to Biafra's remarkable ability to adapt
to the blockade and to innovate sufficiently to
keep a wartime economy going. Biafra's foreign
exchange earnings have been drastically cut, however,
and paying for arms and other imports will become more
difficult unless new sources of money are found.
In Federally controlled Nigeria, much of the
population lives in the traditional economy where
events outside the villages, including the civil
war, have relatively little effect. Good harvests
of many important crops have sustained farm income
and the demand for basic consumer goods. In the
more modern sector, however, economic activity has
fallen off, and some local shortages and dislocations
have occurred. Internal trade is sluggish, and
private investment and government development spending
have slowed '9own. Exports have declined more than
imports, and the trade balance turned unfavorable
in August 1967. Foreign exchange reserves are being
depleted, and the Federal budget deficit is growing
as military spending mounts. Although these problems
are severe, they do not pose insurmountable economic
difficulties for the FMG in its war against Biafra.
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Introduction
1. Nigeria, which was the largest British
colony in Africa, gained independence in 1960 as a
federation of three regions, each of which was domi-
nated by a major tribal group -- the Hausa-Fulani in
the North, the Yoruba in the West, and the Ibo in
the East. Each region also contained many lesser
tribes, most of which bitterly resented thei subor-
dinate status. The eastern part of the Western
Region, which is inhabited largely by small, non-
Yoruba related tribes, became the Mid-Western Region
in 1963 (see Figure 1).
2. The regions were self-governing and held
wide powers over such matters as regional development
plans, local taxation, and industrial development.
Federal government responsibilities included the
issuance of currency, external borrowing, defense,
control of mining and mineral extracting, and com-
munications. With more than half the total population,
the North dominated the national Parliament and the
central government, and control by the conservative
Moslem northerners became less and less palatable
to the more modern and progressive southerners.
3. After efforts to loosen the Northern grip or
further strengthen regional government by constitutional
means had failed, an Ibo-led group killed or otherwise
removed key Hausa-Fulani leaders and many of their
allies in January 1966. This coup resulted in the
establishment of a military regime headed by General
Iror.si, an Ibo, which in turn was overthrown in mid-
1966 by northerners. Many Ibo officers were killed,
and waves of massacres of Ibos in the Northern
Region led to a mass flight of Ibos back to their
Eastern homeland in the second half of 1966.
4. Differences between the East, headed by
its military governor, Colonel Ojukwu, and the rump
Federation, headed by General Gowon, worsened
steadily and culminated in the East's declaration
of independence as Biafra on 30 May 1967. The
Federal government decreed an increasingly tight
blockade of the East, and by early July, when war
broke out between Biafra and the Federation, the
blockade of Biafran ports was practically complete.
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Genoxat Gowan, Neap' aj the Fedenat Cotonet Ojufzwu,
M.ititany Government BLa6n,a'6 Ch e~
oU State
The Pre-Coup Economy
5. From 1951 through 1965 the Nigerian economy
appears to have-grown fairly steadily.. Rough
estimates indicate that gross domestic product (GDP)
increased at an average annual rate of about 4 per-
cent through 1960 and perhaps 5 percent per year
thereafter. The prime source of growth over the
whole period was, the expansion of production of
cash crops -- peanuts, cocoa, palm produce, rubber,
and cotton -- which averaged about 5 percent per
year by volume. Large-scale manufacturing, based
chiefly on import-substitution, increased about
15 percent per year over the period and, especially
after. 1960, the oil industry assumed a rapidly
increasing importance. In spite of their rapid
growth, large-scale manufacturing and the oil
industry still made up only a small part of the
economy. Nevertheless, the oil industry was
beginning to contribute materially to government
revenues as initial tax and depreciation privileges
were exhausted and the government's share of the
profits increased.
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Figure 1
r\J
EASTERN
Calabaro
LAGOS GOS~ ( C?genin CIO 'ASRN
BOUNDARY REPREYENTATION IE
NOT NECE8$ARILV AUTHORITATIVE
EQUATORIAL
GUINEA
(SP.)
CAMEROON
Jr B
NIGERIA
IBO SELECTED TRIBES
-- STATE BOUNDARY
0 STATE CAPITAL
BIAFRA BOUNDARY
0 50 100 Mil's
,
0 50 100 Kilometer.
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6. Economic development has been spread
unevenly over the country because the southern
area, comprising the Western Region, the Mid-Western
Region, and the Eastern Region, attracted the bulk
of domestic and foreign investment. As a result,
output per capita was considerably higher in the
south than in the north. The general level of
infrastructure, services, literacy, and skills was
also much higher in the south. Under the system
of allocating revenues between the Federal and
regional governments that prevailed before the
former Eastern Region seceded, the southern regions
were svbsidizing services and development in the
poorer Northern Region. This subsidy would have
increased under the formulas for distributing
rapidly growing revenues from the oil industry
located in the former Eastern and Mid-Western
Regions. The diminishing share of oil revenues
that the East was allowed to keep was one of
the factors contributing "Co Eastern dissatisfaction
with the Federal system before the outbreak of the
war.
7. Before the January 1966 coup, in which the
civilian politicians were overthrown, prospects for
the Nigerian economy were brighter than for many
African countries. The diversity and volume of
agricultural exports were such that Nigeria supplied
only a small part of the world market for each com-
modity, and thus the country could expand output
without adversely affecting the world price. The
size and apparent stability of the economy were
attractive to both foreign and domestic investors.
Moreover, the rapid growth of petroleum production
and of manufacturing promised further diversification
of exports and expansion of domestic industries.
8. Major economic problems existed, however,
especially rising urban unemployment and an
increasing gap between urban and rural incomes.
Ill-advised government pricing policies were
partially responsible for this situation. All
important cash crops, except rubbc!r, are handled
by government marketing boards which collect and
sell the output. The price paid the farmer is much
lower than the f.o.b. prices at the ports because
the government levies export duties and sales taxes
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and because the marketing boards often make a
sizable profit. These levies and profits contribute
substantially to government revenues and have pro-
vided much of the money used to expand government
services and finance development projects. Since
1960 the prices paid to the farmers have declined
markedly, and (at least in the case of paint oil) the
price has been so low as to discourage sales for
exports. As a result, production of export crops
has, in many cases, become relatively less attractive
than the production of food.
9. The failure of farm income to keep pace with
the rise in urban wares* has contributed greatly to
the serious problem of urban unemployment. As urban
wages for unskilled labor rose to over twice the
average farmer's income, many rural people, especially
those with some schooling, were attracted to the
cities. Growing urban unemployment has coincided
with a shortage of labor in some rural areas.
Economic Effects of the Coups and Civil War
Effects on Biafra
10. Although detailed information on Biafra is
lacking, the level of economic activity has Dbviously
declined sharply since mid-1967, Exports have virtually
ceased. Industries dependent on imports generally have
ceased production, and trade with the rest of Nigeria
has been greatly reduced. Although some trade with
the Mid-West continues via the creeks and back roads
of the permeable border, the introduction of separate
Nigerian and Biafran currencies early in 1968 prob-
ably reduced such trade to barter levels. Imports
from overseas have been confined to occasional flights
into-Port-Harcourt and to coastal smuggling. The loss
of the Port Harcourt airfield to FMG forces in May
1968 will reduce airborne traffic. Shortages of
consumer luxuries have been reported, but supplies of
* Taking 1950-52 as a base, an index of prices paid
southern farmers by the marketing boards dropped
from 100 to about 73 for 1961-63: the minimum wage
paid unskilled labor by the Federal government rose
from 100 to nearly 300 in the same period.
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domestically produced food and consumer goods
apparently remain fairly satisfactory. Intermit-
tent operation of the oil refinery at Port Harcourt
(until it was captured in May 1968) , combined with
previously acquired petroleum stores, has allowed
continued operation of motor vehicles. Shortages
of spare parts, tires, and batteries have been
reported, but the number of motor vehicles apparently
is large enough to allow cannibalization to keep
essential vehicles running. Although the major
textile plants are closed, cottage industry seems to
be providing the necessary minimum of cloth.
11. The million or so refugees from northern
violence who returned to the East after the September/
October 1966 massacres went mostly to their home
villages, and consequently local food production
seems to have risen. Many of the refugees are highly
skilled and have contributed greatly to Biafra's
ability to adapt to changed circumstances. Although
Biafra has shown remarkable flexibility in meeting
the demands posed first by blockade and then by
war, economic problems are certain to worsen as
fighting continues. 'Lbo civilians are retreating
into the densely populated heartland as Federal
forces advance, and shortages of protein foods and
medical supplies have become severe.
Pn.im.L-.ive Tbo Vitt age neap Enugu
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12 . When war broke out on 6 July 196 7 , Biafra
had perhaps as much as $40 million in foreign
exchange in European banks, most of which probably
has been spent by now. In addition, it had at
least $100 million in unissued Nigerian currency
stored in its bank vaults to replace notes as they
wore out. After secession, Biafra began selling
these notes overseas at substantial discounts to
get foreign exchange to pay for arms, other war
materiel, and its substantial propaganda activities.
Few, if any, of its major purchases appear to have
been on credit.
13. In early January 1968 the FMG issued new
Nigerian notes, and the opportunities for Biafra
to sell its stocks of old notes abroad were reduced.
Sales of bonds and of its new stamps and currency
to collectors may bring in additional foreign ex-
change, but these sources of revenue would be
relatively small. Biafran ability to continue tc
import sizable quantities of arms and other materiel
would thus appear to depend on the size of current
foreign exchange holdings and on whatever assistance
it may be able to obtain.
14. Logistical difficulties may soon overtake
the problem of obtaining foreign exchange, however.
The fall of Port Harcourt has reduced Biafra's
ability to receive arms shipments. The other land-
ing strips that might be available are unl.Lkely to
be able to handle the relatively large planes that
used the Port Harcourt airfield.
Effects on the Federal Economy
15. Nigeria's economic growth rate declined
in 1966 and again in 1967 when per capita inco:ae
probably dropped slightly. Overall economic
activity has been slowed down by the separation of
Biafra from the Federal economy and by the iincer-
tainties and dislocations caused by the civil war
and the 18 months of deepening crisis preceding it.
Nevertheless, the self-sufficiency of many of the
rural areas has enabled large sections of the
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population to continue much as usual. Moreover,
good harvests of many important crops in 1966 and
1967 have mitigated the effects of lower prices on
farm income, and the demand for basic consumer goods
like beer, textiles, and cigarettes has been generally
sustained.
16. The slaughter of thousands of Ibos and other
easterners in September/October 1966 and the exodus
of the remainder led to temporary but severe short-
ages of skilled labor, especially of railroad and
communications workers, in many parts of the former
Northern Region. There were further dislocations
in the transport system as the eastern branch of
i.'
Peanutz Bagged {ion Expuht, Kano
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the railroad, over which about 10 percent of northern
peanut exports moved to Fort Harcourt, was closed
to non-Biafran traffic. After an initial sharp
decrease in rail service and efficiency, many of the
problems were overcome through the recruitment of
expatriate workers, by crash training programs for
northerners, and by diverting northern rail traffic
to Lagos. Shortages of fuel and other imported goods
in northern areas appear to have been largely
overcome, partly because of a rapid expansion of
north-south truck traffic. Transport costs are
now somewhat higher than prewar levels, but peanuts
and other important northern exports seem to be
moving at near normal rates. The transport system
is under considerable strain, however, and severe
port congestion at Lagos continues.
17. The sealing off of Biafra has meant a loss
of markets for many producers in the rest of Nigeria,
since the East normally accounted for at least a
quarter of the Nigerian market. In FMG-controlled
areas, sales of goods other than staples appear to
be off, in line with the general decline in economic
activity. Consumer prices rose rapidly in 1966,
largely as a result of the dislocations caused by
the flight of easterners, who controlled a large
share of local trade, and of the disruption of
interregional trade patterns and organization.
More recently, distribution has recovered somewhat,
and consumer prices have declined.
18. The rapid changes in government since early
1966, combined with decreasing revenues, have
adversely affected development spending. Foreign
aid has also declined. Official capital receipts
were estimated at $87 million in 1966, compared
with over $100 million in the previous year, and
were probably still lower in 1967.
19. The estimated net inflow of private capital
(including that of the oil companies) was about
$170 million in 1965 and dropp?:-i to about $155 million
in 1966. Domestic private investment has probably
followed the same trend. Private foreign investment,
outside the oil industry, had not been expected to
grow as rapidly in 1966 and 1967 as it did in earlier
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years, because many of the most profitable import-
substitution opportunities had already been taken
up. Investment declined appreciably, however, as
a result of political uncertainties arising from
the January 1966 coup and subsequent upheavals.
Foreign investment in the oil industry probably
remained high until mid-1967; when the full blockade
and subsequent hostilities ended exports from the
Eastern Region and caused the evacuation of most
oil company personnel from the affected areas.
The Oil Industry
20. One of the more costly aspects of the civil
war was the virtual cessation of oil production
after hostilities began. Since August 1967, produc-
tion and exports have been only about 10 percent of
the June 1967 level, as indicated in the following
tabulation showing monthly production of crude oil in
1967:
Thousand Barrels per Day
January
561
July
148
February
554
August
52
March
574
September
54
April
582
October
55
May
580
November
58
June
578
December
58
Oil exports rose rapidly throughout the 1960's and
had been expected to average about 600,000 barrels
per day in 1967. instead, they fell below the 1966
level, as shown below.
Exports
(Thousand Barrels
per Day)
Anneal Value of
Oil Exports
(Millior. US $ )
1959
10
7.6
1960
16
12.3
1961
44
32.2
1962
66
48.2
1963
72
56.6
1964
116
89.9
1965
260
190.7
1966
378
257.3
1967
320
202.0
(provisional)
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Government revenues derived from the oil industry
rose slowly in the early 1960's because of tax
concessions granted the companies and because tho,
industry was still concentrating on exploration
and development. Such revenues grew more rapidly
after 1964 as taxable profits increased and by
1966 amounted to an estimated $65 million to $70
million, or more than 10 percent of combined Federal
and regional revenues. About $45 million of this
revenue was from operations in the former Eastern
Region. In spite of the sharp drop in production
in 1967, oil revenues probably remained high
because Nigeria raised taxes and changed the capital
allowances permitted the industry.
21. Before the war, about 60 percent of the oil
produced in Nigeria came from the former Eastern
Region, but nearly 90 percent of Nigerian production
was exported through the East's terminal at Bonny.
Biafra's declaration of independence at the end of
May 1967 brought exploration to a halt as the
companies began to evacuate personnel. Shell/BP
and the French firm SAFRAP continued to export
through Bonny until July 2, when the FMG declared a
total blockade of Eastern ports. Thereafter, only
Gulf, which produces off the Mid-West coast, con-
tinued to export oil (see Figure 2).
22. Moreover, the refinery at Port Harcourt,
which had supplied the bulk of all Nigeria's needs
for products, ceased to supply the Federally
controlled areas, and the FMG had to import pro-
ducts. The refinery continued to be operated
intermittently by the Biafrans, at least through
early 1968.
23. Exploration and development have already
resumed in the Mid-West, and production from that
area is expected to rise rapidly even if the war
continues in the eastern areas. Gulf is expanding
its operations in the Mid-West and expects pro-
duction to average about 100,000 barrels per day
in 1968. Shell/BP has begun work on a new terminal
off the Mid-West coast and on several pipelines
and expects its Mid-West production to expand rapidly
in late 1969 and the early 1970's, if current
forecasts prove correct.
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Figure 2
NIGERIA: Petroleum Concessions
MOIL%1 j 1,.1)I'll
/
~ll~lllrl Y
.(rte /p n CRY \
I`r I.. _M~D 1.1
bodoro'
Lii
LDI
I 1n.i.r of the
bonny Ler.?minral is not expecLed to tale more Lltrun
six month;;, and plans are in hamI to beg.i n work as
!;(:)on as tl;c auLho.r.i. t.a.en allow company C) FF.i.c.i al , to
return there.
25. .Import:; and exports; now are well helow the
prewar level and are not expected to recover unt.i..1.
peace in re!;bored. In the first half of: 1967, exports
ro;;e while imports remained fairly steady compared
with the first half of 1966. By August, however, the
trade balance turned unfavorable and remained so
for t: he rest of the year. Preliminary report.,; for
the full year 1967 indicate a trade surplus of only
about $50 million compared with a $75 million surplus
in the previous year.. Both i.mpor. t s and exports
were lower than in 1966. The Federal government
has imposed increasingly strict controls over imports,
and purchases of raw materials and consumer goods from
,abroad declined sharply. Imports of war materiel and
mineral fuels rose, however, especially after the war
began and the Port Harcourt refinery ceased supplying
products to Federal Nigeria.
26.
Foreign reserves fell. fairly sharply as
foreign
investment, aid, and exports declined.
Official
gold
and foreign exchange holdings
declined
from
about $246 million in December 1965
to less
than
$130 million by the end of March 1968.
Nonessential imports will proba!_)ly be further
restricted; nevertheless, the overall deficit in
Nigeria's balance of payments probably will worsen
so long as the war continues.
Public Finance
27. The estimated Federal government budget
deficit increased from about $67 million in FY
64/65* to about $142 million-in FY 66/67. The FY
67/6f> budget was prepared before the outbreak of
Year ending Afarc;i 01.
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SI?(:ItlI'll 1.,
hostilities and anticipated a deficit of $I.i!5
million. Thu actual deficit probably was abou'.-
$200 million. Since the, civil war began, Federal
revenues have declined because of the drop in
exports and imports, which are the source of more
than one-third of tax revenues. Nonmilitary
expenditures also declined appreciably. The
recently announced FY 68/69 budget envisions
further sizable deficits, at least for the first
half of the year.
28. The FMC, has resorted to short-term borrowing
to finance the budget deficits. Treasury bills
outstanding rose from the equivalent of $190
million at the end of June 1967 to over. $235
million by the end of the year. Measures
accompanying the new budget include amendment of
the Treasury Bills Act to allow up to $500 million
to be converted to two-year certificates, and
additional duties and excise taxes. But as war
expenditures continue and ec.unomic activity declines,
the budget deficit is certain to worsen.
29. Estimates of Federal military spending are
only approximate. The total military budget for FY
67/68 may have been as much as $140 million, or. ?bout
one-fourth of total government expenditures. The
most recent estimates are shown below.
Total government
expenditures
Of which:
Defense expenditures
Of which:
Foreign exchange
costs
FY FY FY FY
64/65 65/66 66/67 67/68
15 22 13 56 to 84
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30. The FMG probably paid cash for most of the
military hardware imported over the past year,
including an estimated $5 million for planes and
equipment from the USSR, armed jet trainers valued
at $2 million from Czechoslovahi.a, and perhaps $50
million for arms and materiel procured from Western
countries, mainly the United Kingdom. In recent
months, interest seems to have increased in deferred
payment arrangements for new purchases. It is not
clear whether the estimated foreign exchange costs
shown above were all disbursed in the 67/68 fiscal
year, although spending on that order is indicated
by the drop in foreign exchange holdings.
The Economic Outlook
31. Whatever the outcome of the civil war and
whatever form its settlement takes, the outlook
for the economy has dimmed. The government or
governments that emerge from the war will face
immediate and pressing problems of physical recon-
struction, troop demobilization, establishment of
a nev state structure and allocation of powers and
revenues under whatever system is adopted. Exports
and government revenues are not likely to recover
for many months, and the country is likely to require
short-term assistance on a fairly massive scale to
cover budget deficits and the expected shortfall
in foreign exchange earnings. The government can
be expected to turn to the International Monetary
Fund for standby assistance and to the major
British banks operating in Nigeria for short-term
loans.
32. Demobilization, for example, would involve
many in the Federal army who expect to receive
sizable separation bonuses. Military expenditures
are expected to remain well above prewar levels
because the FMG plans to maintain a much larger
military establishment in the postwar period. If
the new states established in April 1968 evolve into
small, semiautonomous regions as some of their
leaders apparently envisage, the increased adminis-
trative costs could absorb for years to come much
of the government surplus that would otherwise
be available for investment. The quality of
administration in much of the country would deterio-
rate if the states demand exclusive use of local
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tribesmen in their civil services and technical
pos Ls. ']:'his has begun to happen in many of the
northern states where non-northerners formerly
ran the region's government and ancillary insti-
tutions like the Marketing Board and Development
Corporation. There is almost no chance that the
six states into which the Northern Region has
been divided can find trained native manpower to
properly staff their administrations over the
next few years.
33. If, as seems likely, the FMG achieves its
goal of preventing Biafran secession, the reinte-
gration of the Biafran areas into the Nigerian
economy would depend almost entirely on Federal
attitudes toward such questions as redeeming
Biafran currency, providing aid for reconstruction
and rehabilitation., and permitting Ibos to live and
work outside of their homeland. If the Federal
government is generous on all tnese points, then a
large measure of economic activity could resume
fairly rapidly. Oil probably would start flowing
within months, but tha reopening of Port Harcourt
could take longer if reports of harbor and channel
silting and sunken obstacles prove true. Palm pro-
duce and rubber exports could resume as soon as the
ports and transport system can accommodate them.
Initial efforts to this end have already begun in
the Calabar area "liberated" late in 1967. Recovery
of manufacturing is likely to be the most difficult
and will depend on the availability of funds for
repair and reconstruction of infrastructure.
34. If Federal policies towar-] the eastern area
are harsh, then recovery would be much slower and
guerrilla-like resistance couli further hamper
economic activity. The whole of the eastern area
would likely be affected. It would be difficult,
for example, to exchange the Biafran currency now
used in the rivers area without also including the
Ibo state, and the Federal government has asserted
that Biafran notes will not be redeemed. If they
are not, the liquid assets of much of the former
region would be wiped out and the inhabitants at
least temporarily reduced to barter trade.
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01LLtsha M I'I'C.t OfUt.iuq thc' P2(WCUL Pc't.1vd
Olfi.tSIla ,Mct'tkct AIltc't the 1967-6S CL iC (Ua.'t
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35. In either event, a Biafran surrender will not
result in an automatic resumption of prewar levels
of output and rates of growth. The fabric of the
Nigerian economy has changed in the two-year process
of coup, counter-coup, and civil war, and the
general climate for investment has been worsened by
the revelation of the depth of tribal and political
divisiveness. The mass movement of population, the
lees of Ibo skills in much of the Federal area, the
disruption of internal trade patterns, and the
expenditure of scarce resources on military endeavors
all have reduced prospects for the early resumption
of economic growth..
36. The longer run prospects for the economy
will depend on the level of political stability
achieved, which will in turn affect the level of
investment. Both domestic and foreign investors,
with the exception of the oil companies, are likely
to be deterred unless and until. a large measure of
political stability is regained. Aid from the United
States, the United Kingdom, and the IBRD, which
totaled about $100 million a year before the war,
is unlikely to be restored to previous levels for
some time. Nigeria will probably seek continued
assistance from the Free World, however, and will
probably also take up at least some of the Communist
offers, which total about $80 million. The bright
spot in the economic picture is oil. Oil produc-
tion, exploration, and development could be quickly
resumed; oil revenues amounting to well over $200
million a year by the early 1970's are a reasonable
prospect. Such revenues would ease the government's
financial situation. Oil development of this
magnitude, however, depends on the maintenance of
order in the oil-producing areas and on whether
the government refrains from any drastic revisions
of the tax structure affecting the oil industry.
0
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