1 AN ANALYSIS OF NIGERIA- US RELATIONS, 1999-2009 BY Ogbodo Stephen. PG/MSC/08/ 50180 A PROJECT REPORT SUBMITTED TO THE DEPARTMENT OF POLITICAL SCIENCE UNIVERSITY OF NIGERIA NSUKKA, IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF MASTER OF SCIENCE DEGREE (MSC) IN POLITICAL SCIENCE (Political Economy) JUNE, 2012
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1
AN ANALYSIS OF NIGERIA- US RELATIONS, 1999-2009
BY
Ogbodo Stephen.
PG/MSC/08/ 50180
A PROJECT REPORT SUBMITTED TO THE DEPARTMENT OF POLITICAL
SCIENCE UNIVERSITY OF NIGERIA NSUKKA, IN PARTIAL FULFILLMENT OF
THE REQUIREMENT FOR THE AWARD OF MASTER OF SCIENCE DEGREE
(MSC) IN POLITICAL SCIENCE (Political Economy)
JUNE, 2012
2
TITLE PAGE
AN ANALYSIS OF NIGERIA- US RELATIONS, 1999-2009
3
APPROVAL PAGE
This Project report is original and has been approved by the Department of Political Science,
University of Nigeria Nsukka for the award of Master of Science.
_________________________ _____________________
Dr. Aloysius – Michaels Okolie Date
(Supervisor)
Professor, Obasi Igwe _____________________
(Heads of Department) Date
Professor, E. O. Ezeani _______________________
(Dean of Faculty) Date
_______________________________
External Examiner
4
DEDICATION
This project report is dedicated to God Almighty.
5
ACKNOWLEDGEMENT
I am ever indebted to God Almighty for his goodness to my family and my well
wishers. In the same light I am grateful to my supervisor Dr. Aloysius -Michaels Okolie, for
his guidance and commitment to research.
To all my lecturers most worthy of mention here are Professor Miriam Ikejiani- Clark,
Professor J Onuoha, Dr. K Ifesinachi and Ezeibe Christian; you were outstanding and more
dedicated than I thought. My special thanks goes to my brother for his moral support and
encouragement. To all my siblings, I love you all.
Finally, I appreciate all my colleagues who have contributed in one way or the other to
make this programme a success.
Ogbodo Stephen
Department of Political Science
University of Nigeria Nsukka.
6
TABLE OF CONTENTS
Title Page………………………………………………………………………….ii
Approval Page……………………………………………………………………...iii
Dedication…………………………………………………………………….……iv
Acknowledgement………..…………………………………………………………v
Table of Contents…………………………………………………………………..vi
List of Tables………………………………………………………… …………viii
Abstract……………………………………………………………………………ix
CHAPTER ONE: INTRODUCTION - - - - 1
1.1 Background of the Study - - - - - - 1
1.2 Statement of the Problem - - - - - - 4
1.3 Objective of the study - - - - - -- 6
1.4 Significance of the study - - - - - - 7
1.5 Literature review - - - - - - - 7
1.6 Theoretical Framework - - - - - - - 15
1.7 Hypotheses - -- - - - - - - 18
1.8 Method of Data Collection/ Analysis - - - - - 19
CHAPTER TWO: OVERVIEW OF NIGERIA- UNITED STATES ECONOMIC
RELATION - - - - - - - - - 20
2.1 First era (1960-1967): The Era of Emerging Economic Alliance -- 20
2.2 Second Era. (1967-1970): Era of Nigerian Civil War - - 21
2.3 Third Era (1970-1983) Era of Oil Boom - - 22
2.4 Fourth Era (1983-1993) Era of Structural - - - 24
2.5 Fifth Era: (1993-1999) Era of Embargo on Nigeria oil - 25
2.6 Sixth era: (1999-2006) The Contemporary Era - - 26
CHAPTER THREE:OIL AS THE CENTRE- PIECE OF NIGERIA-UNITED
STATES ECONOMIC RELATION - - - - - - -28
3.1 Dependency in Oil as source of revenue - - - - 28
3.2 US Oil Investments in Nigeria - - - - - - 29
3.3 US-Nigeria trade relation from 1999-2009 -- - - 31
3.4 US response to conflicts in Nigeria: Variations in Oil related
7
and non-Oil related - - - - - - - 32
3.5 Linking Oil and US- Nigeria bilateral military ties - - - 36
3.6 Nigeria’s Investment on the Military/Security in readiness to Protect
the oil region - - - - - 38
CHAPTER FOUR: NIGERIA - US ECONOMIC RELATIONS AND ECONOMIC
DEVELOPMENT IN NIGERIA - - - - - - - 42
4.1 Issues of Domination - -- - -- -- - 42
4.2 Issues of Security - - - - - - 43
4.3 Issues of dependency - - - - - 44
4.4 Issues of Foreign Direct Investment and technology transfer - -45
4.5 Issues of Terms of Trade - - - - - 46
4.6 Issues of repatriation of looted funds - - - - 56
4.7 Issues of environmental crimes of oil transnational corporation
in the Niger Delta - - - - - - - - 57
CHAPTER FIVE: SUMMARY AND CONCLUSION -- - - - 64
5.1 Summary - - - - - - - 64
5.2 Conclusion - -- - - - - - - 64
5.3 Recommendations - - - - - - 65
BIBLOGRAPHY - - - - - - - - 70
8
LIST OF CHARTS AND TABLES
Chart 3.1: Nigeria‘s Export to US 1999- 2006 - - - - 32
Chart 4.2: Nigeria-US Trade 1999- 2006 - - - 48
Table 4.1 : 2011 : U.S. trade in goods with Nigeria - - - 48
Table 4.2 :2010 : U.S. trade in goods with Nigeria -- - - 49
Table 4.3 :2009 : U.S. trade in goods with Nigeria - - 49
Table 4.4 :2008 : U.S. trade in goods with Nigeria - - 50
Table 4.5 :2007 : U.S. trade in goods with Nigeria - - - 50
Table 4.6 :2006 : U.S. trade in goods with Nigeria - - - 51
Table 4.7 :2005 : U.S. trade in goods with Nigeria - - - 51
Table 4.8 :2004 : U.S. trade in goods with Nigeria - - - 52
Table 4.9: 2003 : U.S. trade in goods with Nigeria - - - 52
Table 4.10: 2002 : U.S. trade in goods with Nigeria - - - 53
Table 4.11: 2001 : U.S. trade in goods with Nigeria - - - -53
Table 4.12: 2000 : U.S. trade in goods with Nigeria - - - 54
Table 4.13: 1999 : U.S. trade in goods with Nigeria - - - 54
Table 4.14: 1998 : U.S. trade in goods with Nigeria - - - 55
Table 4.15 Population living under poverty in Nigeria 1980-2010 - -57
9
ABSTRACT
This study examines the political economy of Nigeria –United States relations between 1999
and 2009. This study has both broad and specific objectives. The broad objective of this study
is to examine the political economy of Nigeria –United States relations between 1999 and
2009. The specific objectives are as follows: To ascertain whether oil is the centerpiece of
Nigeria –United States economic relation between 1999 and 2009; To find out if Nigeria –
United States economic relations enhanced economic development in Nigeria within the
periods under study. Though political economic framework could explain almost every situation
in interaction of states, the theoretical framework for the analysis of Nigeria - US economic
relations between 1999 and 2009 will be rooted on the dependency theory. This is because it
enables us capture at a glance the dependent status of Nigeria in her economic relation with US.
We validated the following hypotheses Oil is the centerpiece of Nigeria –United States
economic relation between 1999 and 2009; Nigeria –United States economic relations has not
enhanced economic development in Nigeria within the periods under study. The method of data
collection for this study is observation of documentary evidence that deals with Nigeria –US
relations. We heavily relied on secondary sources such as books, journals, articles, periodical,
government reports and publications, magazines, unpublished manuscript, commentaries, and
conference papers. Other data were collected through electronic sources such as television news
broadcasting and radio news broadcasting and Internet materials. Again, we relied essentially on
descriptive qualitative method as our methods of data analysis in this study. We also use simple
percentages and tables graphs to buttress the arguments in this study.
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CHAPTER ONE
INTRODUCTION
1.6 Background of Study
Nigeria-United States relations remain a critical aspect of Nigerian foreign policy. The
demands, challenges and competition of this 21st century have made it pertinent that Nigeria
review her relation with United States in order to benefit maximally from their relation. One
would have thought that Nigeria-US economic relation since 1960 would have moved Nigeria
from being a Third world nation to at least a Second world nation but like the story of any other
developing economy dealing with developed economy, Nigeria has remained the same if not
worst. Nigeria has remained just a market for the U.S. to buy her crude oil and sell her
manufactured goods.
United States, adopted the policy of globalization, democratization, free market and
liberalism. However one may say that the reason behind US democracy in Africa is to create
“FREE ATMOSPHERE” for the implementation of International Monetary Fund and World
Bank inspired Adjustment programmes, thereby reinvigorating the type of market, which made
Europe prosperous. Expediently, one can say that the free market/free trade they implement is
only free movement of capital and not free movement of labour... (Ezea 2005)
Now, wouldn‟t it be appropriate to say that more than 47 years Nigeria-United States
economic relation has not enhanced Nigeria economic development and that instead it has
plunged Nigeria deeper into the role of a mere primary producer of raw materials. Nigeria -US
economic relation has only strengthened Nigeria‟s market economy instituted by the colonial
masters.
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As soon as Nigeria got her independence and needed economic aid, US was all over her
with fund. According to Chiaka (1989), when the balance of cold-war interests shifted from
Europe to the Third world in 50s, the policy of containment embodied in the United States aid
programmes dictated a shift in emphasis towards political, economic and military support for
“friendly” less developed nations, especially those considered geographically strategic.
According to Michael Todaro (1982), most aid programmes to the third world, therefore were
oriented more towards purchasing their security and propping up their sometimes-shaky
regimes than promoting long-term social and economic development. Certainly, the United
States/Soviet competition for Third world affection had a positive impact on decolonization and
it may well have kept economic aid at higher levels than it otherwise might have been.
Unknown to Nigeria, definite benefit accrue to donor countries as a result of their aid
programmes. Typically, Nigeria believed US was a very bighearted friend but as one former
United States AID official candidly put it:
The biggest single misconception about aid programs is
that we send money abroad. We don‟t. Aid consists of
American equipment, raw materials, expert service and
food –all provided for specific development projects, which
we ourselves review and approve. Ninety-three percent of
aid fund are spend directly in the United States to pay for
these things. Just last year, some 4,000 American firms in
50 states received $1.3 billion in aid funds for products
supplied as part of the foreign aid program (Gaud 1968:8).
Correspondently, Dean Acheson, former United States Secretary of State, once said,
when he was referring to the motive for American aid to the Third world, that “It is not
philanthropy that motivates us. But there is a hard- headed self-interest in this program”
(Department of State bulletin, Feb.4, 1952). This of course substantiates that capital aid and
technical assistance, which characterized the Nigeria-United States bilateral relation between
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1960 and 1967, was just serving more of America‟s interest than Nigeria. Remember, aid is not
a donation; it is a loan to be repaid with interest.
Nigeria civil war interrupted a steady growth in the bilateral ties between the two
countries. But between 1970 and 1983, during the oil boom, Nigeria oil became the centerpiece
of her relation with the US. It was more of a relation of interdependence than dependence until
the sharp fall in Oil price, which affected Nigeria‟s monoculture economy and plunged it back
to aids recipient. Nigeria also found herself in the position of debtor in the international
financial circles. The story of IMF and Structural Adjustment Programmes followed suit with its
adverse effect on Nigeria economy.
Since the late 1990‟s and particularly after the 9/11 hijackings in the United States, there
has been a resurgence of global strategic interest in West Africa. In spite of the seeming
leverage given by the terrorist threat to the US‟s current security cooperation in West Africa, it
should be noted that the picture is incomplete if it is not emphasized that American oil interests
are central in the US presence in a region that was described at the end of the cold war to have
fallen off the world‟s strategic map. US oil companies are at the forefront of the “new scramble
for Africa‟s oil” Obi (2005) The US is in competition against Britain, France and China in the
new scramble for West Africa‟s oil (AOPIG 2002;Leigh and Pallister 2005)
The findings between 1999 and 2006 reveals that though US offered economic
assistance to Nigeria, oil seem to be the center piece of the bilateral relation between both
countries. The amazing thing is that the buyer determines the price of oil just as they determine
the price of their manufactured goods sold in Nigeria.
Evaluating whether Nigeria has benefited economically from this relation, we hear of
foreign American foreign investments that come in the form of Multinational Corporations. The
13
impact of MNC on national industries and the capital flight they engender cannot be over
emphasized neither can the obsolete technology they transfer be overemphasized. What about
the capital-intensive investment they embark on?
Until Nigeria understands that US only intervenes where she has interest and intervenes
solely to serve that interest, Nigeria can never benefit from her economic relation with US. In
essence it is pertinent for Nigeria to revisit her national interest and constantly project it in her
relation with the US. By so doing there will be a meeting point that will benefit both countries.
This study examines the political economy of Nigeria –United States relations between 1999
and 2009.
1.2 Statement of Problem
According to United States information agency report (1985), Nigeria and United
States have enjoyed increasingly active trade since Nigeria‟s independence. Currently, the US
investment in Nigeria is larger than any other African country. The United States has remained
a major investor in Nigeria‟s oil sector with ExxonMobil, Texaco, and Chevron etc as key
players. Yet, the Nigeria -United States ties were almost negligible up till 1960. This
relationship is essential to demonstrate that the current dependence of Nigeria on the Western
capitalist economy of which the United States is its leader has its root on the pattern of political
economic links established during the colonial period. The Nigeria market was preserved for the
colonialist though there were attempts by the other European powers and United States to break
this monopoly through competition and price wars.
Between 1960 and 1970, Nigeria government attempted to diversify her economic
relation away from narrow dependence on Britain to a multilateral dependence on both Britain
14
and United States. This explained why between 1961 and 1965, United States emerged as the
largest source of capital aid to Nigeria apart from United Nations and her agencies. In spite of
the decline in the political and economic relation during the civil war years, the United States
had surpassed Britain as Nigeria‟s dominant bilateral partner in important respects like Oil and
Agricultural products. Between 1967 and 1970, the period of Nigeria- Biafra civil war, Nigeria -
US relation deteriorated. Again in 1990s, Nigeria -US relation deteriorated following the
annulment of June 12, 1993 presidential election.
It is important to state that Nigeria‟s relation with the United States has been conditioned
by the oil factor that is why the United States had maintained the policy of not intervening in
Nigeria‟s domestic crisis if such crisis does not disrupt the flow of oil. More so, Nigeria-United
States relation since Nigeria‟s independence has been raised on a tripod of democracy, trade and
foreign investment. Nigeria ranks second only to Saudi Arabia as the most important supplier of
petroleum to the United States which buys over one million barrels a day of the highly desirable
light low sulphur sweet crude. Nigeria provides about 10 percent of the US oil imports. Annual
trade amounts to US$6 billion and US companies have about US$ 7billion investment in the
country (Onuoha, 2001).
All the former colonial powers are today reliable allies of the US in the postcolonial
Africa countries including Nigeria. The US role in Africa has effectively secured the continent
for expanded penetration of Euro-American Transnational Corporation. The new unipolar world
of globalization has perfected the conditions of that penetration. The real issue from a US global
security perspective is how to ensure control over the oil-wealth in West Africa (Krueger 2002)
In the global economy, the use of technology, trade, investment, aid etc to influence the course
of events in the international system has been an important reason nations engage in
15
international economic relation. In this relation the weaker nations especially those like Nigeria
are usually subjected to manipulation by the stronger nations like US. This means that the so
called mutuality of interests of Nigeria and US has constantly depended on the preservation of
the structural conditions where the US is a dominant industrial power and Nigeria, a safe raw
material supplier and subordinate ally.
Some scholars like Agada (2003) and Agbu (2000) have argued that Nigeria -US
relation has greatly undermined Nigeria national economic development and strengthened her
dependency structure since Nigeria‟s independence. They noted that President Olesugun
Obasanjo‟s administration under the democratic dispensation since 1999 maintained Nigeria –
US relation in trade, investments and military. Meanwhile it appears scholars have not
determined whether oil remained the centre piece of Nigeria –US relations between 1999 and
2009. Again, scholars appear to have not satisfactorily determined the import of Nigeria –US
relation on Nigeria‟s development. Against this background, this study seeks to provide answers
to the following questions:
1. Is there any link between crude oil endowment and intensification of economic
relation between Nigeria –United States within the period of study.
2. Has Nigeria –United States economic relations enhanced economic development in
Nigeria within the periods under study.
1.7 Objective of study
This study has both broad and specific objectives. The broad objective of this study is to
examine the political economy of Nigeria –United States relations between 1999 and 2009.
The specific objectives are as follows;
16
1. To ascertain whether there is any link between crude oil endowment and intensification of
economic relation between Nigeria –United States within the period of study.
2. To find out if Nigeria –United States economic relations enhanced economic development
in Nigeria within the periods under study.
1.4 Significance of study
This study is theoretically and practically significant. Theoretically, understanding the
nature of cooperation between both countries will greatly enhance efforts at further improving
economic relations between them. A recent review of the Nigeria –U.S. economic relation
reveals that as the US expands her economy, Nigerian comprador bourgeoisie collaborate with
US to exploit Nigerian economy. It will lead to the understanding of the place of oil in the
Nigeria –US economic relation within the period under study. The study will also unravel the
effect of the Nigeria –US economic relation on the Nigeria‟s development. The study will be
valuable to scholars and future researchers, as it will serve as a source of secondary data.
Practically, the study will suggest and advise Nigerian policy makers on steps they
should take in order to maximize their benefits from their relation with U.S.
1.5 Literature review
Available literatures on the subject matter have either taken economic or political
worldview in understanding of Nigeria US economic relation. Considering this thrust, it will be
essential to review this work under the following sub headings namely:
A. Oil and Nigeria US economic relations.
B. Nigeria- United States economic relation and Nigerian Development.
17
A. Oil and Nigeria US Economic Relations
Agada (2003) in his contribution in the discourse on oil and Nigeria US relation
highlighted that following the discovery of larger quantity of oil within the Niger Delta in 1970,
Nigeria –U.S. relations improved. According to him, Nigeria has depended on American
companies for the development of the petroleum industry. Apart from Shell (which is a British
oil Multinational Corporation) the rest of the oil Multinationals involved in oil exploration in
Nigeria are American companies. Nigeria and the United States found a mutual interest in
cooperation in economic matters. From this period, the United States became more involved in
Nigeria‟s economic issues.
Implicitly, Agada further claimed that the United States is Nigeria's largest trading
partner after the United Kingdom. The stock of US investment is nearly $7 billion, mostly in the
energy sector. Exxon-Mobil and Chevron are the two largest US corporate players in offshore
oil and gas production. Significant exports of liquefied natural gas started in late 1999 and are
slated to expand as Nigeria seeks to eliminate gas flaring by 2008. Oil dependency, and the
allure it generated inflated government contracts and spawned other economic distortions. The
country's high propensity to import means roughly 80% of government expenditures is recycled
into foreign exchange Agada (2003).
Agbu (2000) commenting on the centrality of oil in Nigeria –US economic relation
remarked that under Sani Abacha‟s era (1993-1998), Nigeria relations with the United States
was very lukewarm with both countries barely tolerating each other but that is not to say that
both countries have not been cooperating on many other fronts. Indeed, their cooperation on the
drug/money laundering problem is quite commendable. He concluded that American companies
like Texaco, Mobil and Chevron have been operating successfully in Nigeria for years.
18
Therefore this is one area that, that is, the oil industry that the U. S. government is very much
interested in. In fact, a glance at the Balance of Trade between Nigeria and the United States is
quite revealing. In 1999, the US imported goods worth $4.4 billion from Nigeria, the 99 percent
of this consisting of petroleum and petroleum products. The same year, Nigeria imported goods
worth 600 million from the U. S. made up mostly of food and live animals.
Congruously, Akinyemi et al (1989) argued that relations between Nigeria and the
United States are basically conditioned by the oil factor. He asserted that the United States have
shown much concern toward friendly relation with Nigeria as demonstrated in various bilateral
agreements between both countries. Confirming this he stated that economic relations between
Nigeria –US did not necessarily provoke political understanding and cooperation. In fact the
very condition that necessitated intense economic intercourse also necessitated some
misunderstanding of policies and politics. Though political relation between Nigeria and US
continued to be uneasy, and remained at the lowest ebb level, economic intercourse even
intensified. To demonstrate U S displeasure at Nigeria‟ s position, President Nixon refused to
receive Gowon at the White house in October 1973.
And this was exactly the period when trade in crude oil blossomed between Nigeria and
US. The Nigeria- US economic relation though it deteriorated during the civil war did not
completely rule out their economic relation.
Similarly, Onuoha (2005) argued that Nigeria relation with the US has been conditioned
by the oil factor. According to him, the United States, which has not been significant Nigeria‟s,
trading partner until 1960 became by 1970 the major consumer of Nigeria‟s oil. He summarized
19
that United States had maintained the policy of not intervening in Nigeria‟s domestic crisis if
such crisis does not disrupt the flow of oil Onuoha .
He also has noted that the US interest in Nigeria is centered on trade in crude petroleum.
According to him, Nigeria sells 40 percent of its oil to United States and Nigeria crude oil
export as well as related products makes up about 10 percent of total annual US imports. Ate
affirmed that American private investment in Nigeria is concentrated in the oil sector and
telecommunications .He further stated that American multinational oil companies like Chevron,
Mobil and Texaco have a great stake in economic growth, environmental well-being and
political stability of Nigeria especially in the Niger-Delta Ate (2000).
In the publication of the United States embassy in Abuja, it was confirmed that Nigeria
is the largest US trading partner in sub-Saharan Africa, based mainly on the high level of
petroleum imports from Nigeria. Total two-way trade was valued at $30.8 billion in 2006, a
19% increase over 2005. Leading U.S. exports to Nigeria were machinery, wheat, and motor
vehicles. Leading US imports from Nigeria were oil and rubber products. Nigerian exports to
the United State under the African Growth and Opportunity Act (AGOA), including its
Generalized System of Preferences (GSP) provisions, were valued at $25.8 billion during 2006,
a 15% increase over 2005, due to an increase in oil exports. Non-oil AGOA trade (leather
products, species, cassava, yams, beans, and wood products) totaled $1.4 million in 2006,
almost double the amount in 2005. The United States is the largest foreign investor in Nigeria.
The stock of US foreign direct investment (FDI) in Nigeria in 2005 was $874 million, down
from $2.0 billion in 2004. US FDI in Nigeria is concentrated largely in the mining and
wholesale trade sectors (http://abuja.usembassy.gov/). According to This Day
Newspaper of Monday July 8, 2002, Nigeria supplies United States about 900,000 barrels of oil
20
per day and hope to double its import from this figure to 1.8 million barrels per day. Asserting
this, Walter Kanstenier III US Assistant Secretary of State stated that “Africa oil is critical to us
and it will increase and become more important as we go forward (Quoted in AOPIG 2002).
A great deal of excitement has been generated by some think-tank in the US as well as
among leading American policy makers as to the prospect of maximizing their gains in the new
scramble for West Africa oil. They point to the fact that West Africa currently provides 15 per
cent of US oil (of which 10 per cent comes from Nigeria) and the figure is expected to rise to 25
per cent by 2020 Obi (2005). The implication of all this is that US interest in Nigeria be it
economic, political or military has an oil underpinning which mastermind it.
B. Nigeria- United States Economic Relation and Nigerian Development
Integration into the global economy according to a publication of USAID in
March 2003 publication titled “Building Trade Capacity in the Developing World” can be a
powerful force for economic growth and poverty reduction. Furthermore in its recent National
Security Strategy, the Bush administration established the goal of igniting a new era of global
economic growth through free markets and free trade. Trade and investment are the principal
mechanisms through which global market forces, competition, human resource development,
technology transfer, and technological innovation generate growth in developing and developed
countries. During the 1990s, developing countries that successfully integrated into the global
economy enjoyed per capita income increases averaging 5 percent annually.
The publication however, observed that countries that limited their participation
in the global economy saw their economies decline. Developing countries‟ overall share of
global trade is increasing, and the flow of foreign direct investment to poor countries has grown
21
rapidly. But this growth is concentrated in a few countries, and many of the poorest developing
countries remain on the sidelines because those countries protected their domestic markets with
tariff barriers and other measures that limited their participation in the global economy.
But has this integration of Nigeria into the global economy enhanced the overall development of
Nigeria before and between 1999-2006 even as they enjoyed increasing association and
collaboration with the US? Nigeria scholars like Ake (1981), Nnoli (1981), Offiong (1980),
Chiaka (1989) to mention but a few have in their various works argued that the development of
Nigeria is assured only on the basis of their „break away‟ from the advanced capitalist countries,
United States included. They think that Nigeria increasingly collaboration with the United
States especially in trade of raw materials and exchange of manufactured goods between 1999-
2006 would spell more underdevelopment for Nigeria. To these scholars therefore, Nigeria
United States economic relation will only enhance Nigeria underdevelopment and dependency.
As noted, sometime in history, Japan was forced to close-up its economy or
protected their domestic markets with tariff barriers and other measures that limited their
participation in the global economy in order to be self-sufficient and hasn‟t that benefited Japan
today? Why will African countries that choose to do the same be considered poor according to
the USAID publication?
President George W. Bush in his November Presidential address pointed out that developing
countries receive $50 billion a year in aid, while foreign investment inflows total almost $200
billion and annual earnings from exports exceed $2.4 trillion. The president also noted that, in
2001, trade opportunities created by the African Growth and Opportunity Act (AGOA) alone
boosted African exports to the United States by more than 1,000 percent, generated nearly $1
billion in investment, and created thousands of jobs.
22
The dilemma with this type of analysis is that if it is devoid of bias (which is
always unusual), the indices used in this analysis are simply kept secret if at all there is any.
Armchair theorizing is another expression of this type of analysis whereby foreign
officials/researchers analyze situations in their office or by mere television or newspaper report
without really involving themselves in any fieldwork. For all I care the US president might just
be making exaggerations to serve their interest.
USAID major program areas in Nigeria when it resumed its operation under the
democratic dispensation in 1999 include Transition to Democratic Civilian Governance
Sustained, Strengthen Institutional Capacity for Economic Reform and Enhance Capacity to
Revive Agricultural Growth: Develop the Foundation for Education Reform, Increased Use of
Maternal and Child Health/HIV Services and Preventive Measures within a Supportive Policy
Environment, while other program areas are: Economic Support Fund (ESF)was established to
promote economic and political stability in strategically important regions where the United
States has special security interests.
In addition, ESF has been used to support USAID's economic growth objectives,
particularly in the area of privatization of state-owned enterprises, micro-enterprise
development, and anti-corruption efforts. Democracy and Human Rights Fund (DHRF), Public-
Private Alliance (PPA): is USAID's business model for the 21st century-our commitment to
change the way we implement our assistance mandate. PPA in Nigeria supports the
development of agricultural partnerships to increase productivity, marketing and export of
crops, e.g. gum Arabic, cocoa, cassava. Also, PPA supports a new information technology
project that disseminates agriculture-marketing information to producers and many other
programs.
23
Agada contributing to the debate asserted that on Nigeria‟s economic development,
USAID is helping Nigeria towards economic reforms and agricultural growth. He went further
to say that USAID is doing this by strengthening government‟s economic management capacity
and promoting private sector participation particularly in Agriculture. USAID assistance to him
is focused on economic management and reforms, including the budget process and design and
implementation of key policies, such as the on-going privatization, export promotion,
technology and commercialization, rural sector development and micro-enterprise development.
Apart from the fact that these values being upheld by America which are liberal
economic values are more beneficial to the US than Nigeria, it remains a question of whether or
not this USAID programs have enhanced Nigeria development because when these USAID
programs are not fostering and instituting agricultural sector to the cheer detriment of industrial
sectors, it up holds welfare issues, encourages loan lending or more accessibility of the
Nigeria‟s market to the US.
Some scholars like Akinyemi (1989); Agada (2003); Agbu (2000) and Onuoha (2005)
have established that oil is at the centre piece of Nigeria US relations since the discovery of oil
in Nigeria, none of these scholars appeared to have updated this information to determine
whether oil has continued to be at the centre of the relation between the two countries. Again,
Agada (2003) and Agbu (2000) argued that Nigeria -US relation has greatly undermined
Nigeria national economic development and strengthened her dependency structure since
Nigeria‟s independence. Yet it appears they have not satisfactorily determined the import of
Nigeria –US relation on Nigeria‟s development. It is this gap that this study seeks to fill.
24
1.6 Theoretical Framework
Though political economic framework could explain almost every situation in
interaction of states, the theoretical framework for the analysis of Nigeria - US economic
relations between 1999 and 2009 will be rooted on the dependency theory. This is because it
enables us capture at a glance the dependent status of Nigeria in her economic relation with US.
Dependency theory addresses the problems of poverty and economic underdevelopment
throughout the world. Dependency theorists argue that dependence upon foreign capital, foreign
trade, technology, and expertise impedes economic development in developing countries.
Scholars associated with this theory include Baran, Cockrosft, Theotonio Dos Santos, etc (Ojo
et al 1985)
Latin American scholar propounded dependency theory to explain the inability of Latin
American countries to attain a high level of economic and industrial development after years of
independence. According to Paul Conklin, Dependency theorists believe that poverty and
underdevelopment in developing nations is a result of those nations' historical and ongoing
dependence on wealthier, Western countries for foreign trade and investment. Dependency
theorists are disenchanted with modernization theorists Microsoft Encarta, 2005.
According to Gilpin, (1979) dependency means a situation in which the economy of certain
countries is conditioned by the development and expansion of another economy to which the
former is subjected. The relation of interdependence between two or more economies, assumes
the form of dependency when countries (i.e. the dominant ones) can expand and be self
sustaining, while other countries (the dependent ones) can do this only as a reflection of that
expansion, which can have either a positive or a negative effect on their immediate development
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Dependency theorists argued that former colonial nations were underdeveloped because
of their dependence on Western industrialized nations in the areas of foreign trade and
investment. Rather than benefiting, the relationships stunted their development. Drawing upon
various Marxist ideas, dependency theorists observed that economic development and
underdevelopment were not simply different stages in the same linear march toward progress
(see Karl Marx). They argued that colonial domination had produced relationships between the
developed and the developing world that were inherently unequal.
Johan Galtung (1979) adopted the model of Centre-Periphery to explain this relationship
between developed and underdeveloped countries. As the name suggests, the model of centre-
periphery implies the division of the world into global centre and global periphery. It suggests
the extension of capital principally from the center of capitalist nations of west Europe and
North America (USA) to other parts of the world in the periphery (Nigeria).
At the economic level, the periphery is incorporated into the global capitalist system of
division of labour in a subordinate status. Consequently, the centre expropriates and
appropriates surplus value from the periphery. Meanwhile, the economy of the periphery is
export or externally oriented and disarticulated such that there is no link between the industrial
and agricultural sectors or rural and urban areas.
This incorporation into the global capitalist system as explained by Rodney (1972) is
such that the Developed capitalist countries dictate or determine the direction of change. As
such, the third world is just as their mercy. This is because the developed capitalist countries are
technologically more advanced than the underdeveloped countries. In other words, (within
certain limits) it is the technologically advanced metropoles (USA) who can decide when to end
their dependence on the colonies in a particular sphere and when that happens, it is the colonies
26
or neo colony (Nigeria) that goes begging cap in hand for a reprieve and a new quota. It is for
this reason that a formerly colonized nation has no hope of developing until it breaks effectively
with the vicious circles of dependence, which characterizes imperialism.
The dependency theory is very relevant in this work because it explains blatantly the
economic relationship between Nigeria and US. Nigeria depends so much on the US to sell her
oil. Ordinarily, without the purchase of this oil by US, Nigeria is going to be placed on the
verge of starvation. Why? Firstly, oil constitute about 90 percent of Nigerian foreign revenue
and about 70 percent of Nigeria‟s national income. Oil production revenue provides about 72
percent of the GDP, and has continued to provide more that 94 percent of exports Ukwu (2000).
Technologically, Nigeria is still an infant to consume the enormous oil it produces. US
understand this and they explore it to their advantage. They decide the price to buy the oil and if
Nigeria ever disagrees, they look elsewhere for other willing sellers.
Again, like Rodney rightly said, the pace of change is being dictated by the developed
capitalist nations. In the 60s, the developed countries demanded agricultural exports and Nigeria
supplied this enormously. In the 70s, crude oil became the other of the day and Nigeria
abandoned Agriculture in order to produce and sell oil. The effect of this was so great that
Nigeria had to import more than 70 percent of her food from the US. US supply Nigeria with
100 per cent of wheat.
The US dependence on Nigerian oil will end when US finds a supplement for crude oil
just like the westerners dependence on Africa‟s fabric ended when they discovered they could
make fabric through synthetic materials. Nigeria is only relevant to the US because the oil is
relevant to the US. For certainly power over the world‟s oil reserves is the ultimate symbol of
US global military might.
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No matter how dependency theory is explained, the core message of this work remains
that Nigeria is a peripheral nation and therefore structurally dependent on US and other
developed capitalist nations in the areas of trade, direct foreign investment, science and
technology. And in the words of Rodney (1972) dependent nations can never be considered
developed. Though modern conditions force all countries to be mutually interdependent in order
to satisfy the needs of their citizens, it is not incompatible with economic independence because
economic independence does not mean isolation instead it requires that a nation‟s growth at
some point become self reliant and self-sustaining.
Today, Nigeria as a peripheral nation depends on US the center nation for economic,
political and socio cultural assistance. There has been an established link between the economic
dominant class in both US and Nigeria. This is because the economic dominant classes in the
two nations under study depend on the mutual exploitation of the non-dominant class.
What more, the International division of labour has assigned the function of
manufacturing of products to US and the rest of the advanced countries while Nigeria produces
the required raw materials like oil. Within this framework we hope to examine Nigeria -US
economic relation between 1999-2009.
1.7 Hypotheses
In the light of the research questions and review of related literature, the following
hypotheses will be tested:
1. There is a link between crude oil endowment and intensification of economic
relation between Nigeria –United States within the period of study.
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2. Nigeria –United States economic relations has not enhanced economic development in
Nigeria within the periods under study.
1.8 Method of Data Collection/ Analysis
The method of data collection for this study is observation of documentary evidence that
deals with Nigeria –US relations. We heavily relied on secondary sources such as books,
journals, articles, periodical, government reports and publications, magazines, unpublished
manuscript, commentaries, and conference papers. Other data were collected through electronic
sources such as television news broadcasting and radio news broadcasting and Internet
materials.
Again, we relied essentially on descriptive qualitative method as our methods of data
analysis in this study. We also use simple percentages and tables graphs to buttress the
arguments in this study.
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CHAPTER TWO
OVERVIEW OF NIGERIA- UNITED STATES ECONOMIC RELATION
To understand the trend of Nigeria- US economic relations, one must begin with the
inception of the Nigeria- US economic relation. For easier understanding, this has been
periodized. Nigeria though an independent country but a former colony of Britain, has
economic ties with the major market-economy countries and this ties has been critical in her
economic development strategy and political process. In recent years, the strategic role of these
countries and their financial institution has become greatly emphasized.
The period of Nigeria‟s economic relations with the United States, for the purpose of
analysis, is divided into six eras. These are 1960-1967, 1967-1970, 1970-1983, 1983-1993,
1993-1999 and 1999-2006. The differences do not necessarily suggest any fundamental
structural discontinuities from one era to the next. However, each era was distinct by a
characteristic pattern within the broad structure of Nigeria-US economic relations.
2.2 First era (1960-1967): The Era of Emerging Economic Alliance.
The year 1961 was the landmark for in the development of Nigeria-US economic and
political ties. On December 12, 1961, President John F. Kennedy pledged a long-term aid
package of $222 million for Nigeria. The aid offer was in support of Nigeria‟s first independent
National Development Plan (1962-1968) the economic purpose of this act had a particular
significance Ate (1988).
The implementation of the aid offer, which proceeded howbeit unevenly until the
outbreak of the civil war, laid the foundation for the later expansion in Nigeria-US economic
30
relations. The execution of USAID projects in the country, in the framework of the six-year
development plan, served as a momentum for increased trade ties; it also provided the avenue
for the great influx of American technical assistance personnel into Nigeria, while at the same
time stimulating the interest of American companies concerning investment prospects in the
country. The pioneering and pivotal role of USAID and consequently of foreign aid, in the
development of the foundation of Nigeria-US economic ties in the period is thus underscored
Ate (1988)
The implication was that by 1966, the US had established an impressive presence in
Nigeria‟s economic development, even compared to Britain with its colonial advantage.
In summary, capital aid and technical assistance was the centerpiece of Nigeria-US
economic ties in the first phase of their relation.
2.2 Second Era. (1967-1970): Era of Nigerian Civil War
Between 1967 and 1970, which was the period of Nigeria-Biafra war, Nigeria- US
relation deteriorated. General Gowon in charge of the Nigeria Federal Government had
requested weapons from the US to prosecute the war. The United States refused to honor the
request, probably because the super power was not sure how the war would end, bearing in
mind her interest in the oil rich Biafra. The United States instead of obliging to this request gave
humanitarian assistance to Biafra in form of relief materials. Thus, from 1966 to 1970s, the
United States provided more than $600 million financial aids to provide relief material to
Biafra, eradication of small pox and control measles in Nigeria (Howard Cincott,1985).
Consequently, there was an abrupt decline in the economic ties between the two
countries in foreign trade, foreign investment and capital aid. According to Ate (1988), US
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Nigeria total imports dropped from 16.2 percent to 12.8 in the first quarter of 1968, there was no
new investment by American companies during the war period and the work of USAID
virtually came to a standstill.
With the end of the war in 1970, three new trends have become apparent in the Nigeria
foreign policy. The Federal Government attempted an indigenisation of the national
economy,(American companies included), placed restrictions on the extent of external financial
input for the public sector expenditure and cultivation of economic with the Soviet Union and
her allies .This new ties between Nigeria and Soviet Union might be related to the military
assistance of the Soviet Union to the Nigeria government when US let down Nigeria. In this era,
Nigeria diversified her sphere of influence following US betrayal yet sales of oil blossomed.
2.3 Third Era (1970-1983) Era of Oil Boom.
According to Ate (1988), two facts about Nigeria‟s economic relations with the United
States and its enormous significance in this period deserved to be stressed. First, the United
States overtook Britain as the major recipient of Nigeria‟s export by 1973. Secondly, Nigeria‟s
exports to the United States were dominated by crude oil.
Relatedly, Nigeria became the second most important supplier of crude oil to the United
States in a period of critical demand for oil in the world market.
Correspondently, there was expansion of the United States investment presence in the
Nigerian economy though most of this investment was in the oil sector by American companies
such as Phillips, Exxon Mobil, Gulf, etc.
Nigeria- US relation in much of the period under review, especially in the Gowon and
Mohammed regimes, were characterized by a discernible paradox. On the one hand the two
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countries seem to enjoy a close partnership in the economic sphere while on the other hand a
persistent friction marked their political relations especially in foreign affairs. The changed
psychology could be illustrated by two specific acts of the Nigerian government. One was the
single-minded prosecution of the program of indegenization over United States protest, the
other was the prompt payment of compensation to US oil, banking and other company
following the policy of partial nationalization and state participation carried out between 1971
and 1977. Following a sharp fall in the price of crude oil in the world market and gigantic
corruption and wastage of state funds during Shagari regime, Nigeria began to experience some
financial hardship. Nigeria being a monoculture economy whose chief means of fund come
through the sale of oil was worst hit.
The effect of this crisis on Nigeria-US bilateral economic relations was negative for
Nigeria. Firstly, Nigerian oil became overpriced in the American market. Perhaps for this reason
or partly for geopolitical reasons, American companies began to patronize British, Mexican,
Canadian and Saudi-Arabian oil at the expense of Nigerian oil. Thus Nigeria was pushed from
the second position to the seventh as a major oil supplier of the United States at a time she could
least exploit alternative markets. Secondly, the trade balance which in the past had
progressively favoured Nigeria become unfavourable by 1982.Worst of all, Nigeria found
herself in the position of a debtor country in the international financial circle, unable to meet
even her short term credit obligation to her foreign trading partner (Ate). Also Nigeria found
herself dependent on large-scale importation of basic food items, mainly from the United States.
This era was centered on dependence on oil and neglect of Agricultural sector by Nigeria.
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2.4 Fourth Era (1983-1993) Era of Structural
Adjustment Dependence.
Buhari justified his coup and subsequent actions by citing lapses of the Second Republic
and the declining economy in 1983 and 1984 but when this action was extended to journalists
and others not responsible for the social decay and economic problems, the government's
popularity began to wane. Ibrahim Babangida assumed power following a bloodless coup in
August 1985.From June 1986 SAP became the focus of Nigeria –US bilateral economic
diplomacy, thus putting an end to the ambivalence that marked their relations under Shagari and
Buhari regimes.
The highlight of bilateral cooperation between Nigeria and the United States during
Babangida‟s regime was the N488.1 million debt forgiveness that the United States extended to
Nigeria as part of President Bush pledge to provide $1billion development assistance to 16
African countries though the debt forgiveness did not include interests on those loans. The
United States ambassador to Nigeria said that the action was prompted by the Nigeria‟s embrace
of the Structural adjustment policy with its emphasis on an open market. Olukotun (1990).
The SAP policy of Babangida administration, with the Second tier Foreign Exchange
Market (SFEM) as its nucleus, was in fact, an IMF agenda, which the US government had
consistently recommended for Nigeria‟s recovery Ate (1988). The US., since 1981 had been
reluctant to support Nigeria‟s application to the IMF for a standby until Nigeria accepted the
Fund‟s conditionalities, the most important being the devaluation of the Naira. But with the
introduction of SFEM, the Naira was effectively devalued by between 66 and 75 per cent.
Then, how is the US relevant in the execution of the SAP? Specifically, both Nigerian
and United States authorities expect that the US could be relevant in three basic ways. First,
34
Nigeria expected the United States to encourage its foreign creditors to negotiate a rescheduling
of its huge debt in order to quickly restore the country‟s credit worthiness and allow the
resumption of essential imports. On its part, United States rescheduled all of Nigeria official
debts on terms requested by Nigeria. United States is, moreover relevant in liaising with the
World Bank to provide funds in support of the SPEM operation. Clearly, the bilateral structure
is one of dominance and dependence. Ate (1988).
Apart from the aid mentioned above, the United States promised 100 million dollars
assistance over 5 years as well as another 11 million dollars to help the balance of payment
position as well as primary health care in 1989. That same year, US pledged aid to the tune