An NEE: Nigeria » Nigeria: Industry and TNCs

Economic sectors

Every economy can be split into groups of jobs, called sectors. Geographers use these sectors to describe how a country earns its money. The balance between them tells you a lot about how developed a country is.

Key terms:

• Economic sector: a group of businesses that do a similar kind of work.
• Primary sector: taking raw materials from the land or sea, such as farming, fishing, mining and oil extraction.
• Secondary sector: making things, such as factories that process raw materials into products. This is called manufacturing.
• Tertiary sector: providing services, such as banking, shops, transport and telecoms.
• Industrial structure: how much of a country's work and income comes from each sector.

Nigeria's changing industrial structure

Nigeria's industrial structure has changed a great deal since it became independent in 1960. You can think of it in three steps.

Farming is still very important for jobs, because many people work on small farms. Oil still brings in most of Nigeria's export earnings. Manufacturing is the smallest part, at roughly a tenth of the economy. These figures are approximate and change a little each year.

The balance between sectors

A country with a large primary sector, like Nigeria, is often less wealthy than one with large secondary and tertiary sectors. Raw materials sell for less than finished goods, and their prices go up and down.

Relying on oil is risky. When the world price of oil falls, Nigeria's income falls too. Many governments want a more balanced economy, so that a problem in one sector does not damage the whole country. This is why Nigeria wants to grow its manufacturing and service sectors.

How manufacturing stimulates development

Manufacturing can stimulate economic development because a factory does much more than make products. It starts a chain of benefits.

• Jobs and wages: factories employ workers, who spend their wages in local shops and cafes. This is the multiplier effect again, as you saw in Tourism in Jamaica.
• Higher value: a finished product sells for much more than the raw material it was made from, so the country earns more.
• Taxes: companies and workers pay tax, which the government can spend on schools, hospitals and roads.
• Skills: workers learn new skills, which they can use in other jobs.
• Supply chains: factories need suppliers, transport and repair services, so other businesses grow nearby.
• Less importing: if goods are made at home, the country spends less buying them from abroad.

Nigeria has some large manufacturers, for example in cement, food, drinks and textiles. However, manufacturing faces problems. Power cuts are common, so many factories run expensive generators. Roads and ports can be slow and congested. Cheap imports also compete with Nigerian products.

Transnational corporations in Nigeria

Key terms:

• Transnational corporation (TNC): a very large company that has factories, offices or operations in more than one country.
• Host country: the country where a TNC sets up its operations.

TNCs have been important in Nigeria's industrial development. They bring money, machinery and expertise that Nigeria may not have by itself.

Advantages and disadvantages of TNCs to the host country

The environmental damage that oil extraction causes is covered in the lesson on environmental impacts, so it is not repeated here.

Exam-style question

(a) What is meant by a transnational corporation? [1 mark]

(b) Explain how manufacturing industry can stimulate economic development in a country such as Nigeria. [3 marks]

(c) Give one advantage and one disadvantage of TNCs to a host country. [2 marks]