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Thursday, December 31, 1998 Published at 18:15 GMT

Business: The Economy

Nigeria's economy stagnates amid political turbulence

Nigeria's economy has stagnated since General Sani Abacha came to power in 1993.

Nigeria is Africa's largest oil producer, exporting 2 million barrels a day. OIl makes up 90% of exports, the most of any OPEC country.

But most of that money is needed to service the country's external debt, estimated at $37bn, including arrears.

In Lagos, Nigeria's biggest city, petrol is rationed and only one of the country's four oil refineries is working. Other essential parts of the modern infrastructure are also crippled. OIl-fired power stations are running at 32% of capacity, and a hydro-electric plant in the north of the country has been out of action for two years.

Corruption was well as lack of resources is a factor in the state of disrepair.

Foreign companies are increasingly reluctant to do business in Nigeria, which was selected as the most corrupt country in the world in a poll of businessmen earlier in the year.

And the dual exchange rate, which allows official institutions linked to the government access to cheaper foreign currency, also fuels corruption.

Foreign lenders have been demanding the abolition of that system as a pre-condition for the rescheduling of Nigeria's debts.

The government has had some recent economic successes. It succeeded in bringing down inflation from 72% in l995 to 8.5% last year. The government announced in January that it would privatise the national telephone company Nitel. And growth rates have been increasing, although few believe the government's target of over 6% p.a. this year.

But years of economic stagnation have left their toll.

Despite $200bn of oil exports in the past 20 years, the country's population is no better off. Per capita income has stagnated at $320 (195) per person, and according to the World Bank, Nigeria rates among the poorest 20 countries in Africa.

And the private business sector is in little better shape. The banking sector is particularly weak, with 26 banks, one-fifth of the total, in receivership. The largest bank, the United Bank of Africa, hopes to be the first Nigerian company to be listed on a stock market outside West Africa.

Business will be hoping that the new regime will help accelerate the economic reform programme and restore Nigeria's credibility with Western lenders.

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