'F L "Ill-, CoPY 000 0 ) RF_u,ort 1-c, :1 351 Type: (PCI?) T. tle THI E'C;NfOIqITC DEVELOPM1ENT OcF N Autlior: WJO1RLD PANI{ Ext C) Ro om r ept t C)! i,EThL1CA1 ' 1FS5 ~~~4~~ 35 014/v~~~~~~~~~~~ 'S t q <~~~~~~~~~~~USALI A~~~~~~~~ AV U, oro E G 7A rI aAsfOKUEd ff E $ 7 E R X OKQ UNJ AG~~i oOS/PE,V ABEOKUT WE ERN HA EA AV-~ ~ ~ ~~~~~~~~C A ~ ~ ~~~~B o 20 40 60 80 100 120 t40 MILES I-. AL t s 2RHARCOUR 8 _____ _I _ _I __.__.__ ) -e* t. X j , . . \LAKrE \CHA D / m~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ MAIDUGUR/I Ar R E G I I N .. AL'Ch'I f a "-'-Y ATFE MAMF r/c 4~~~~LlBAl N)EGrLDEA THE ECONOMIC DEVELOPMENT OF Nigeria Report of a Mission Organized by the International Bank for Reconstruction and Development at the Request of the Governments of Nigeria and the United Kingdom LIBRARY ECONOWC DEVELOPMENT INSTri V. ORGANIZED BY THE INTEHNAT'ONAL BANK FOR RECONSTRUCTION ANID tZVELOPM2 WASHLNGTON 25 D. C. bS THE ECONOMIC DEVELOPMENT OF Nigeria PUBLISHED FOR The International Bank for Reconstruction and Development BY The Johns Hopkins Press, Baltimore Copyright 1955, The Johns Hopkins Press Distributed in Great Britain by Geoffrey Cumberlege: Oxford University Press, London Printed in the U.S.A. by Reese Press, Baltimore Library of Congress Catalog Card Number 55-7216 THE MISSION A. Broches, Chief of Mission John H. Adler, Chief Economist and Assistant Chief of Mission Robert F. Skillings, Economist David Finch, Adviser on Money and Banking Bernard de Fontgalland, Adviser on Transportation Francis W. Godwin, Adviser on Industry David Kerr-Cross, Adviser on Mineral Resources Ilhami Masar, Adviser on Agricultural Economics F. D. Patterson, Adviser on Education Hugh C. Trumble, Adviser on Agriculture Consultants J. Attali, Consultant on Roads Paul F. Craig-Martin, Consultant on Agricultural Export Commodities J. R. de Fargues, Consultant on Water Resources Neil R. Reid, Consultant on Animal Husbandry Giuseppe Tardini, Consultant on Power Helen McLeod, Secretary PREFACE This is the report of a mission to Nigeria, organized by the Inter- national Bank for Reconstruction and Development at the request of the Governments of Nigeria and the United Kingdom. The task of the mission, as- agreed upon by the two governments and the Bank, was to assess the resources available for future development, to study the possibilities for development in the major sectors of the economy and to make recommendations for practical steps to be taken, includ- ing the timing and co-ordination of developmental activities. The mission consisted of ten full-time members and five part-time consultants. Three of the experts on agriculture were nominated by the Food and Agriculture Organization of the United Nations; one (the adviser on money and banking) is a member of the regular staff of the International Monetary Fund; six members (the experts on transportation, mineral resources, education, roads, water resources and power) were recruited by the Bank from outside its staff. The other five members are members of the Bank's regular staff. Due to illness, a consultant provided by the World Health Organization was unable to participate in the preparation of the report. The mission chief is from the Netherlands, and other mission members are from Australia, France, Italy, Turkey, the United Kingdom and the United States. The mission arrived in Nigeria late in September 1953 and remained until mid-December. Members of the mission travelled extensively in the three regions of Nigeria and in the Cameroons, reassembling at the headquarters of the Bank for the purpose of writing their report. The mission's report consists of three parts. Part I, the General Report, contains the mission's principal recommendations for the organization and financing of a five-year program of development. Part II consists of a series of Technical Reports on economic and financial resources; agriculture; water resources; industry, mining vii and power; transportation and communications; and education. Part III contains five appendices, consisting mainly of statistical data. The President of the Bank transmitted the report to the Governor of Nigeria in September 1954. In his letter of transmittal, he pointed out that since the Executive Directors and Management customarily do not review missions' recommendations in detail, the report as transmitted represented the views of the mission rather than positive recommendations of the Bank. He added, however, that the Bank believed that the findings of the report deserved most careful con- sideration and discussion. Similarly, while the other international agencies which participated in the organization of the mission were given an opportunity to comment on the portions of the report of particular interest to them, responsibility for the recommendations of the report is to be regarded solely as that of the mission. viii ACKNOWLEDGEMENT The mission wishes to express its appreciation for the interest shown in its work and for the wholehearted co-operation and warm hos- pitality extended to it by the members of the Council of Ministers and the Executive Councils, Nigerian political and community leaders, government officials, and members of the business community, Nigerian as well as foreign. Among the officials, the mission wishes to mention in particular Mr. R. F. A. Grey, O.B.E., Development Sec- retary, and Mr. H. B. Cox, Director of Commerce and Industries, who were always ready to give the mission their valuable assistance. The mission also wishes to thank Mr. D. S. Gray, M.B.E., of the Department of Commerce and Industries, for his untiring efforts as liaison officer. ix CONTENTS The Mission .......... v Preface ................ vii Acknowledgement .......... ix PART I THE GENERAL REPORT INTRODUCTION . ................ . 3 1 NIGERIA TODAY ......... ... 5 I The Country and its Organization ...... ......... 5 II The People of Nigeria ......... ............... 10 III Postwar Changes in the Economy ........ ........ 13 2 THE CONDITIONS OF NIGERIAN PROGRESS .................. ... 20 3 AN INTEGRATED DEVELOPMENT PROGRAM .................... 34 I Agriculture .............................. 36 xi Water Resources ............................. 49 II Industry . .............................. 50 iv Mining . .................................... 54 v Electric Power .............................. 56 Vi Transportation and Communications ....... ...... 59 A Railway ...... 60 B Roads ......... 62 c Ports and Inland Waterways ....... ......... 65 D Civil Aviation ................. ........... 67 E Communications .............. ............ 68 vii Education ..................................... 69 Viii Medical and Health Services ..................... 75 IX The Pattern of Expenditure ........... .......... 77 4 ORGANIZING THE DEVELOPMENT EFFORT ...... ............... 81 I Formulation and Co-ordination of Economic Policy. 81 II Marketing Boards ........................ 85 III Development Institutions ...................... 89 IV Statutory Corporations ........................ 95 v State Bank .......................... 96 Vi Staffing ......................... 101 xi 5 FINANCING NIGERIAN DEVELOPMENT .......... ............... 104 I Cost of the Program ........... ............... 106 II Financing the Program ......... .............. 109 A The Revenue Structure ........ ............. 110 B Federal Finances .......... ............... 113 c Regional Finances .......... ............... 117 D Local Finances ............. ............... 120 PART II THE TECHNICAL REPORTS 1 CAPITAL FORMATION ..................................... 129 2 INTERNATIONAL TRADE AND PAYMENTS .......... ............ 132 I Exports .................................... 132 II Imports .................................... 134 III Price Movements and Terms of Trade ..... ...... 137 IV Direction of Trade ............ ............... 139 v Trade and Payments Restrictions ...... ......... 140 vi Expatriate Companies in Trade ...... ........... 141 VII Balance of Payments Estimates ...... ........... 142 Viii Sterling Assets . ............................. 144 3 MONEY AND BANKING .................................... 147 ICurrency ................................... 147 II Banking .................................... 152 III Other Savings and Credit Institutions ..... ....... 160 4 THE PRODUCE MARKETING BOARDS ............ .............. 164 5 DEVELOPMENT INSTITUTIONS .. . 173 I Regional Production Development Boards .173 II Regional Development Boards .177 III Cameroons Development Corporation .182 6 THE PATTERN OF NIGERIAN AGRICULTURE .................... 192 I Introduction ............................ 192 ii Climatic Factors ............................ 194 III Soils ........ ................... 197 iv Land Utilization ............................ 199 v Zones of Vegetation .......................... 201 7 AGRICULTURAL EXPORT COMMODITIES ........... ............ 205 I-Produce Controlled by Marketing Boards .205 A Oil Palm Products .205 B Cocoa ...... 211 c Groundnuts and Benniseed .217 D Cotton .222 xii 1I Other Agricultural Exports ........ ............ 226 A Rubber .................................. 226 B Bananas ................................. 229 c. Hides and Skins ............ ............... 232 D Other. Products ......... .................. 233 8 DOMESTIC CROPS, LIVESTOCK AND FISHERIES ............. .... 238 I The Basis of Nutrition .......... .............. 238 x Food Crops ................................. 242 A Root Crops ........... ................... 242 B Guinea Corn, Millet and Related Grains ...... 245 c Rice .................................... 248 D Maize ................................... 251 E Pulses ................................... 253 F Fruits and Vegetables ....... ............... 254 * Sugar Cane ........... ................... 256 III Other Crops ................................. 257 A Tobacco ........ ......................... 257 B Fiber Crops ........... ................... 259 iv Livestock Production .......... ............... 260 A Introduction .............................. 260 B Animal Health .......... .................. 265 c Animal Breeding ......... ................. 268 D Pasture Improvement ....... ............... 273 E Animal Nutrition ......................... 275 F Marketing of Livestock Products ...... ....... 276 G Veterinary Medicine ......................... 279 v Fisheries ...................... 281 9 MARKETING, STORAGE AND CO-OPERATIVES ....... ............ 285 I Domestic Marketing .......................... 285 II Storage of Food Products ......... ............. 289 III Co-operatives .................... 291 10 THE. AGRICULTURAL DEVELOPMENT PROGRAM ............. .... 298 11 FORESTRY . . .317 I The Economic Significance of Nigerian Forests 317 II Public Protection and Control of Forests .318 III Timber Exports and Domestic Consumption . 321 IV A.Recommended Forestry Program .322 12 WATER RESOURCES ............ ; ........... 329 I Introduction ....................... 329 II Survey of Rivers ............... ........ 330 A General ....................... 330 xiii B Department of Hydrology ...... ............ 331 c Survey of the Niger and Benue Rivers ..... ... 333 In Flood Control, Irrigation and Drainage .......... 334 A River Areas ........... ................... 334 B Lake Chad Pilot Project ...... ............. 339 c Reclamation of Mangrove Swamps ..... ...... 342 iv Urban and Rural Water Supplies ..... .......... 343 13 INDUSTRY .............................................. 346 I Nigerian Industry Today ......... ............. 346 ix The Ingredients of Industry ........ ............ 347 iII Agencies Concerned with Industrial Development . . 355 iv Measures to Stimulate Industrial Growth ..... ... 358 v Specific Lines of Development . ............ 368 A Vegetable Oil Industries .......... .......... 369 B Food, Drink and Tobacco ......... ......... 376 c Textile and Apparel Industries ...... ........ 383 D Leather Industries ......................... 388 E Rubber Industries ......................... 390 F Pulp and Woodworking Industries ...... ..... 391 G Nonmetallic Minerals Industries ............. 396 H Metal-working Industries ................... 399 I Handicrafts and Cottage Industries ...... .... 400 j Other Industries .......................... 402 vi Government Expenditures on Industry, 1955-60 .. 403 14 MINING . . ....... 406 I Geology ............................... 406 II The Mining Industry ...................... 406 A Total Mineral Production .................. 406 B Tin and Columbite ...................... 407 c Coal . ............................... 411 D Gold ................. 416 III Minerals of Potential Economic Significance ...... 416 A Lignites ............ _ _ . 416 B Lead-Zinc ............ 417 c Iron Ores ............ 418 D Mineral Oils ............ 420 E Other Minerals ............ 421 Iv Government and the.Mining.Industry ............ 422 A Government Departments ......... .......... 422 B Mining Royalties and Taxation ...... ........ 427 c Nigerian Chamber of Mines ....... ......... 428 xiv 15 ELECTRIC POWER .................. ...................... 431 I Introduction ................................. 431 II Electricity Corporation of Nigeria ..... ......... 432 II Nigerian Electricity Supply Corporation, Ltd ...... 443 iv Future Electric Power Supplies ...... ........... 444 16 RAIL TRANSPORT .. 455 I The Railway in 1953-54 ..................... 455 II The Railway in 1955-60 ..................... 470 A Freight Forecast .................. ... 470 B Motive Power ............ ......... 472 c Track . ............................. 475 D New, Lines ........ ............. 476 E Other Improvements ..................... 479 F Cost of the Program ..................... 481 G The Railway Corporation .................. 482 H Financial Prospects ..................... 482 17 ROAD TRANSPORT .. 489 i The Road System .489 II Road Transportation .490 III Technical Features .493 Iv Administration and Personnel .500 v New Road Program .504 Vi Cost of 1955-60 Program .507 18 WATER TRANSPORT .. 512 I The Ports . 512 A History . 512 B Traffic .512 c National Ports .514 D Regional Ports .518 E Ocean-Niger Ports .520 II The Inland Waterways .521 A General . 521 B The Niger and the Benue .521 c Transportation on the Niger and the Benue,. 522 D The Cross River and the Mungo River .526 E The Creeks .527 iII Problems of Organization .528 A The Nigeria Marine .528 n Proposed Nigerian Ports Authority .529 Iv Water Transport in 1955-60 ................... 533 A Port of Lagos .......... .......... 533 xv B Port Harcourt ......... ................... 535 c Sapele-Koko .......... .................... 536 D Other Ports .......... .................... 537 E The Niger and the Benue ...... ............. 538 F Small Transports ........ ................. 539 G Recommended Capital Expenditure on Ports and Inland Waterways ...... ............. 539 19 AIR TRANSPORT ......... ................................. 542 20 COMMUNICATIONS ........ ............................... 550 I Postal System ............................... 550 II Telecommunications ........... ............... 552 A Internal Services ........ .................. 552 B External Services ........ .................. 556 c Broadcasting and Rediffusion ..... .......... 557 Iii Development Program .......... .............. 557 21 EDUCATION ... 560 I Introduction . .560 ii General Observations . .561 In Educational Programs . .565 A Primary Education .566 B Secondary Education .577 c Technical Education .582 D Higher Education .590 PART III APPENDICES A THE LEGISLATIVE LISTS ................. .................. 607 I The Federal Legislative List ............. .............. 607 II The Concurrent Legislative List .......... .............. 610 B NATIONAL INCOME DATA ............... ................... 612 C FISCAL DATA AND PROJECTIONS ........ ..................... 617 I Notes to Tables on Government Expenditure ...... ....... 617 II Notes to Tables on Government Revenue ...... .......... 644 D CAPITAL FORMATION DATA ..................... 659 E TRADE AND PAYMENTS DATA ................................ 662 I Price and Volume Indices .. . 662 II Balance of Payments Estimates ... 662 III Sterling Balances ..........................,,.... 665 iv Total Trade ... 666 INDEX .669 xvi LIST OF TABLES Part I Gross Domestic Product of Nigeria, 1952-53 ....... .............. 13 Selected Indicators of Economic Growth ....... ................. 18 Projection of Expenditure on Agricultural and Veterinary Services . . 39 Estimated Distribution of Traffic ......... ..................... 59 The Pattern of Public Expenditure ......... .................... 79 Percentage Composition of Proposed Public Expenditure ..... ..... 80 The Proposed Rise in Public Expenditure ....... ................ 106 The Cost of the Proposed Program ........ 107 Government Expenditures and Financial Resources Available, 1955-60 ................................................. 108 Structure of Tax Revenue, All Government Authorities Combined ... 111 Financial Position of Regional Governments, 1959-60 ..... ........ 117 Proposed Rise in Direct Taxes Collected by Local Authorities ...... 124 Part 11 Savings and Investment, 1950-52 ............ .................. 129 Average Annual Value of Exports by Commodity, 1949-53 ..... .... 133 Volume of Exports of Principal Commodities ...... ............. 133 Imports by Commodity Groups, 1949-53 ....... ................. 135 Volume of Imports of Selected Commodities ...... .............. 136 Prices of Exports and Imports and Terms of Trade ...... ......... 137 Direction of Trade . .......................................... 139 Balance of Payments Estimates ........... ..................... 143 Sterling Assets of Nigerian Official, Semi-Official and Banking Insti-. tutions, 1953 ............................................. 145 Currency in Circulation ................. ..................... 151 Deposits in Commercial Banks, December 31, 1953 ...... ......... 153 Liquid Reserve Ratios of Commercial Banks, December 31, 1953 .... 153 Advances of Commercial Banks . ............................... 154 Classification of Loans and Advances of Commercial Banks ..... ... 154 Post Office Savings . ......................................... 161 Price Projection of Marketing Board Produce . ................... 168 Distribution of Marketing Board Reserves ....... ............... 169 Distribution of Regional Marketing Board Reserves ..... ......... 170 Estimated Losses by the Marketing Boards Under A Fall in Prices . . 171 xvii Financial Position of Regional Production Development Boards, 1953-54 ................................................. 173 Expenditures of Regional Production Development Boards ..... .... 174 Available Funds of Loans Boards, March 31, 1953 ............... 178 Loans Granted to March 31, 1953 ....... ..................... 179 Cameroons Development Corporation, Condensed Balance Sheet .... 187 Cameroons Development Corporation, Summary of Profit and Loss Accounts .................. ................... 188 Mean Monthly Rainfall at Selected Centers ............. ......... 196 Pattern of Land Utilization . ............................. 200 Area Under Principal Field Crops ............................. 201 Exports of Miscellaneous Produce ............................. 234 Calorie and Protein Content of National Average Food Supply ..... 240 Variation in Nutritional Standards ......... .................... 241 Tobacco Production by Type of Leaf ........ ................... 258 Livestock Population, 1953 ............. ...................... 262 Development of Co-operatives ........... ...................... 291 Projection of Agricultural Expenditure: Federal Services ..... .... 300 Projection of Agricultural Expenditure: Northern Region ..... .... 301 Projection of Agricultural Expenditure: Western Region ..... ..... 305 Projection of Agricultural Expenditure: Eastern Region ..... ..... 308 Projection of Agricultural Expenditure: Southern Cameroons ...... 310 Projection of Expenditure on Veterinary Services ...... .......... 312 Projection of Expenditure on Fisheries ........ ................. 313 Projection of Government Expenditure in Support of the Co-opera- tive Movement ........................................... 315 Projection of Minimum Capital Expenditure by Development Cor- porations ............................................ 316 Regional Distribution of Forests ............. .................. 317 Exports of Timber and Wood Products ......... ................ 323 Projection of Expenditure on Forestry .......... ................ 327 Forestry Personnel in 1953-54 and Increases Proposed by 1959-60 .. 328 Projection of Expenditure on Water Resources ...... ............ 344 Projection of Government Expenditure on Industry ...... ......... 404 Mineral Production ......................................... 407 Output of Tin and Columbite Ores by Type of Production Method ... 409 Proposed Expenditure on Surveys ............ ................. 424 Cost of Proposed Expansion of Geological Survey, 1955-60 ..... ... 426 Proposed Federal Expenditure on Minerals and Mining ..... ...... 430 Power Generated and Exchanged During 1952-53 ...... .......... 432 Power Generation and Distribution by ECN Installations for 1952-53. 434 xviii Value of Tree Crops . ....................................... 614 Value of Forest Products .................. .................... 614 Value of Livestock Products ........... ....................... 615 Gross National Income of Nigeria ......... .................... 615 Per Capita Income of African Population, by Regions ..... ....... 616 Expenditures of Federal Government, 1951-60 ...... ............. 626 Expenditures of Northern Region, 1951-60 ...... ................ 628 Expenditures of Western Region, 1951-60 ...... ................ 630 Expenditures of Eastern Region, 1951-60 ....... ................ 632 Expenditures of Southern Cameroons, 1955-60 ...... ............ 634 Expenditures of Lagos Town Council, 1951-60 ...... ............ 635 Expenditures of Northern Native Treasuries, 1951-60 .............. 636 Expenditures of Western Native Treasuries and Local Governments, 1951-60 ................................................. 638 Expenditures of Eastern Native Treasuries and Local Governments, 1951-60 .................................................. 640 Expenditures of Southern Cameroons Native Treasuries, 1951-60 .. . 642 Reconciliation of Expenditures with Published Government Ac- counts, 1952-53 . .......................................... 643 Receipts of Federal Government, 1951-60 ....... ................ 651 Receipts of Northern Regional Government, 1951.60 ..... ......... 652 Receipts of Western Regional Government, 1951-60 ..... ......... 653 Receipts of Eastern Regional Government, 1951-60 ..... .......... 654 Revenues of Southern Cameroons Corresponding to Regional Re- ceipts, 1955-60 . ............................................ 655 Receipts of Native Treasuries, Local Governments and Townships, 1951-60 ................................................... 656 Receipts of Southern Cameroons ......... ................... 658 Estimated Financial Position of Federal Government, March 31, 1955 . 658 Gross Capital Expenditure on Fixed Assets, 1950-52 ...... ........ 659 Gross Capital Expenditure on Fixed Assets, by Type of Assets, 1952. 660 Total Trade, 1913, 1919-53 ................................... 666 xx Maximum Capacity Available with Largest Set Out of Operation .... 436 Electricity Consumption by Class of Consumer ...... ............. 436 Financial Results of ECN . .................................... 440 Comparative Electric Power Rates ........... .................. 442 Estimate of Peak Load Increases for ECN Undertakings ..... ...... 445 ECN: Recommended New Capital Expenditure ...... ............ 453 Locomotive Stock ........................................... 458 Staff Statistics, March 31, 1953 ............ ................... 461 Passenger Traffic ........................................... 463 Ton-Miles Per Annum by Commodity ......... ................. 465 Freight Rates ........................................... 469 Estimated Railway Traffic, 1955-60 .......... .................. 471 Estimated Distribution of Railway Traffic, 1955-60 ...... ......... 473 Summary and Comparison of Railway and Mission Capital Expen- ditures Program, 1955-60 ................ .................. 481 Regional Distribution of the Road System ........... ........... 489 Distribution of Roads by Categories and Regions ....... ......... 490 Projection of Expenditure on Roads ........................... 510 Cargo Loaded and Unloaded at Nigerian Ports, Foreign Trade ...... 513 Cargo Loaded and Unloaded at Nigerian Ports, Coastwise Trade .... 513 Prewar and Present Traffic in Foreign Trade ....... ............. 514 Lagos Wharves ......................................... 515 Niger-Benue Traffic Estimates ................. ................ 524 Benue Traffic . ......................................... 524 Recommended Capital Expenditure for Ports and Waterways, 1955-60 540 Projection of Federal Expenditure on Ports and Inland Waterways. . 541 WAAC Traffic .......................................... 545 WAAC Financial Results ..................................... 546 Projection of Federal Expenditure on Aviation ....... ........... 549 Projection of Federal Expenditure on Posts and Telecommunications. 559 Recurrent and Capital Costs of Primary Education ...... ......... 575 Recommended Expenditure for Training Primary Teachers ..... ... 578 Proposed Expenditure on Technical Education ....... ............ 590 Student Enrollment, University College ......... ............... 592 Nigerian College: Planned Courses and Enrollment ...... ........ 598 Projection of Expenditure on Education ......... ............... 602 Part III Gross Domestic Product of Nigeria ........... ................. 612 Value of Field Crops ........................................ 613 xix MAPS AND FIGURES Map facing page 1 General Transportation .............. .................... 59 2 Distribution of Field Crops .......... .................... 193 3 Average Annual Rainfall ............. .................... 195 4 Soils-Provisional . ...................................... 197 5 Geology .............................................. 198 6 Vegetation ............................................. 201 7 Distribution of Tsetse Species .......... ................... 265 8 Surplus Foods .......................................... 285 9 Generation and Distribution of Electricity ...... ............ 433 10 Railway ............................................... 455 11 Road System .................. 490 12 Heavy Traffic Arteries ................. 505 13 Water Transport ................. 512 14 Domestic Air Routes and Airports ........ ................. 542 15 VHF Multichannel Telephone and Telegraph System ..... ..... 554 Figure 1 Nigerian Coal Corporation ........... ..................... 413 2 Power Generation in Undertakings Now Operated by ECN .... 446 3 Nigerian Railway: Traffic Density ........ ................. 466 xxi EXCHANGE RATES 1 West African £ 1 £ Sterling = $ 2.80 U.S. 1 million £- $ 2.8 million U.S. $ 1.00 U.S. approximately 7 shillings and twopence =£ 0.357 Sterling Vote All references to annual periods, other than calendar years, are to the Nigerian fiscal year, beginning April 1. All references to tons are to long tons, of 2,240 Ibs, unless otherwise noted. xxii PART I THE GENERAL REPORT INTRODUCTION In the past 15 years Nigeria has experienced a remarkable trans- formation, economic, social and political. The leisurely pace of the prewar economy has accelerated, living standards generally have improved, educational facilities have expanded, and the people are participating in government in increasing measure. Yet this is only a start. Production methods are still primitive, the great majority of the population is illiterate and standards of nutrition, housing and medical care are low. The people of Nigeria are anxious to live better and hence to produce more goods, in greater variety; they want to become better educated; they show a growing willingness to modify those social institutions which hold back economic progress and to accept methods of social, economic and political organization which elsewhere have proved conducive to such progress. In all this they have the encouragement and active support of the British authorities. The mission's task was to appraise the economic development prospects of Nigeria and to recommend practical measures for their realization. We found that the prospects for economic expansion in the long run are good. But it seems equally clear that for the im- mediate future the rate of growth is not likely to be much faster than it has been for the last few years. Nigeria has two of the essentials for a development program: man- power and funds. In this respect, it is more fortunate than other countries in Africa. There is lacking, however, the supply of tech- nical and managerial skills and the knowledge of the country's re- sources necessary to carry out an accelerated program of economic development. Research, survey and extension services in agriculture, forestry, hydrology and industry, the construction of roads and schools and other public works-in short, the kinds of services cus- tomarily provided by the government-have failed to keep up with the expansion of the economy. And so although the country's wealth 3 4 THE GENERAL REPORT has grown, it could not be put to its fullest use for the benefit of the people. The most immediate need, therefore, is to overcome the shortage of skills necessary to permit an expansion of public services. To some extent this can be accomplished by recruiting personnel from over- seas. At the same time, Nigerians must be trained. It is our belief that'this is the overriding priority need for the next few years. If Nigeria's productive capacity is built up in this period, the foundation will have been laid for faster growth in the years thereafter. Because the expansion in public services will be gradual and because the government possesses substantial reserves, the develop- ment effort will not strain Nigeria's financial resources, present and potential. But unless the groundwork is laid now for a substantial increase in government revenues, they will be insufficient to finance the level of government activities which ought to be reached after the build-up period of the next five years. It is the purpose of this report to help the Nigerian people to decide for themselves how to achieve the desired economic advance- ment. It recommends the ways in which Nigeria may organize and finance the development effort, sets the goals which we think can be attained in the next five years, and suggests lines of action which, if pursued by the Government of Nigeria, the regional and local governments and the various public bodies, would, we believe, quicken the rate of development. CHAPTER 1 NIGERIA TODAY i THE COUNTRY AND ITS ORGANIZATION The largest of British dependent territories, the Colony and Pro- tectorate of Nigeria lies on the west coast of Africa, bordered on three sides by French-governed countries and on the south, about 5 degrees north of the equator, by the Gulf of Guinea. Since World War I, a portion of the former German Cameroons has been administered by Great Britain as an integral part of Nigeria, first as a mandated area and now as a U. N. trust territory. In size, Nigeria is about equal to Pakistan, or nearly four times the area of the United Kingdom. Within its 373,250 square miles lived, at the end of 1953, about 32 million people of whom all but 16,000 were Africans. Nigeria is thus the most populous country of the African continent and by far the largest unit of African racial origin in the world. In variety of climate, vegetation and topography, its 700 miles from south to north and its 650 from east to west are typical of West Africa: humid heat and mangrove swamps along the low coastal plain; tall tropical forests in the South; upland savannahs, hilly ranges and mountains in the Cameroons; a zone of low forest in the area known as the Middle Belt; and dry heat in the extreme North, fringed by the Sahara sands. Nigeria's name comes from the Niger River, which enters the country from French West Africa. Its formal title echoes its history. The "Colony" refers to Lagos Island and an area of some 1,300 square miles on the mainland; the Island was occupied by the Royal Navy in 1861 in an effort to stop the slave trade and is now Nigeria's capital and principal port. The Northern and Southern "Protec- torates" into which Nigeria was formerly divided were not united until 1914; the contemporary and unified Nigeria is young as coun- tries go. 5 6 THE GENERAL REPORT Many African tribes, religions and languages are represented in Nigeria. Among the main tribes are the Yorubas in the southwest; the Ibos and Ibibios in the southeast; and the Hausas and Fulanis in the North. The North is predominantly Moslem in religion and many of its customs; in the Middle Belt and on the Jos Plateau are found the Pagan communities which took refuge there from slaving raids; in the South, Christianity predominates. Hausa is the lingua franca of the North; in the South, the most widely spoken languages are Yoruba and Ibo. Nigeria raises foodcrops and cattle for domestic use. The great majority of Nigerians engage in small-scale farming, producing yams, cassava and palm fruit in the South, and guinea corn, millet and other grains in the North. Prevalence of the tsetse fly in the Middle Belt and the South has been largely responsible for confining cattle- raising to the North, where cattle and horses were introduced by the invading Moslem. Nigeria also has a thriving export trade. The South produces cocoa, palm oil and palm kernels; the North contributes groundnuts and cotton. From the Cameroons come bananas, rubber and palm products. The largest industrial establishment in Nigeria is the sawmill and plywood plant at Sapele, which employs nearly 3,000 persons. Large- scale mechanized production is also found in a number of other factories owned by non-Africans, producing cigarettes, beer, soap, margarine and metal drums, processing groundnuts, and extracting palm oil. Nigerian industrial enterprises include small textile mills, bottling plants, a ceramics factory, a tire retreading plant, small sawmills and soap factories. In recent years public agencies have established industrial plants, such as the Pioneer oil mills, operated either by the agencies or outside management, and they are in the process of establishing others. Mineral resources include tin and columbite, of which Nigeria is a major producer, coal, and promising deposits of lead and zinc. There are also strong possibilities of successful petroleum production and there may be potentialities for hydroelectric power generation. Nigeria has good sea and air connections with other countries. Shipping services from the principal United Kingdom, Western European and North American ports call regularly at Nigerian ports. NIGERIA TODAY 7 Nigerian airports are transit points for international services between Europe and Central and South Africa. The main internal lines of communication are by land and water. From north to south they are the railway and the Niger and Benue rivers; from east to west, the road system and a network of creeks and lagoons. The roads also serve as extensions of the railway lines in the north. As in any predominantly agricultural economy, most of the popu- lation lives in villages and small towns, although there are 18 towns of 50,000 or more inhabitants,' 11 of these being in the highly urbanized West. The words "North," "West" and "East" in Nigeria connote more than direction; they refer to the political divisions of the country, known as regions. For administrative purposes, the regions are divided into provinces. The Northern Region's 17 million people represent more than half the total population of Nigeria and its area of 282,000 square miles is three-quarters of the country's total area. The Western and Eastern Regions, together often referred to as the "South," are about equal in size. The West contains 45,000 square miles and has a population of 6.5 million. The East is 46,000 square miles in area, with a population of 7.9 million, including the 16,581 square miles and 760,000 inhabitants of the southern portion of. the Cameroons Trust Territory, known as the Southern Cameroons. The northern part of the Cameroons is administered as part of the Northern Region. The Machinery of Government As has been true of many colonial and territorial areas throughout the world, Nigeria has made rapid progress toward self-government in the years since the war. A legislative council for the whole of Nigeria was established in 1946 and constitutional changes came in rapid succession thereafter. In 1951 provision was made for sep- arate executive and legislative bodies for the central and regional governments; this was the first time regional bodies were given legis- lative authority, limited to matters specified in the constitution or declared by the central legislature to be within the competence of a regional legislature. At conferences held in London in the summer 1 Including Ibadan, Nigeria's largest city, 460,000; Lagos, 272,000; Kano, center of the groundnut trade, 131,000. 8 THE GENERAL REPORT of 1953 and in Lagos early in 1954 far-reaching amendments to the 1951 constitution were agreed upon, to become effective in the latter half of 1954. A federal form of government will be instituted, in which the federal government will have exclusive jurisdiction only over matters appearing on the "federal list." In matters included on the "concurrent list" 2 both the federal and regional governments will have jurisdiction, and the regions will in addition have authority over all matters on which the federal government is not specifically empowered to act. Nigeria will be known as the Federation of Nigeria; its chief executive will be the Governor-General and the regional chief execu- tives will be called Governors. The Governor-General will preside over a federal Council of Ministers, consisting of the Chief Secretary, the Attorney-General, the Financial Secretary and 10 Nigerian ministers, three from each region and one from the Southern Cameroons. All members of the Council will be members of the legislature. Subject to the collective responsibility of the Council, ministers with portfolio will, for the first time, head government departments or services and be individually responsible for their general direction and control. The same will be true of ministers of the regions. Regional Executive Councils, except in the North, will include no ex officio (i;e., colonial civil service) members other than the Governor. The federal legis- lative body, the House of Representatives, will be elected at popular elections rather than by the regional legislative bodies as at present, and will include only three ex officio members. Although no change will be made in the status of the northern part of the Cameroons, the Southern Cameroons will cease to be part of the Eastern Region and will become quasi-federal territory with its own legislature, over which the Commissioner of the Cameroons will preside. In a substantial alteration of the financial relations between the federal and regional governments, most of the principal sources of revenue will be shared and the present system of statutory grants to the regions will be terminated. Part of the reserves of the present central government will be distributed to the regions. A conference will be held in Nigeria no later than the end of 2 These lists are reproduced in Appendix A. NIGERIA TODAY 9 August 1956 at which the constitution will again be reviewed and the question of self-government examined.3 These extensive and rapid changes in Nigeria's governmental machinery and their implications in terms of self-government have absorbed the concentrated energies of many persons in Nigeria, most particularly government officials and political leaders. This has in- evitably diverted their attention from tasks more directly related to economic development. Realizing, however, that the fullest benefits of increasing degrees of self-government cannot be enjoyed unless accompanied by progress toward economic self-reliance, Nigeria shows a readiness to turn its efforts in that direction. Native Administrations and Local Governments Besides the central and regional governments, there are numerous local authorities of varying composition, powers and importance. Large parts of the Northern and Western Regions are divided into ''native administrations" built around the authority of traditional emirs and chiefs, who in recent years have acted in concert with representative councils. Their functions include police, education and health services, collection of taxes and administration of justice. They build and maintain secondary roads and urban and rural water supplies. In other parts of the country, particularly in the Eastern Region and the Pagan areas of the North, where no traditional native authorities extend beyond villages and clans, native administrations covering relatively smaller areas have been developed around the traditional authorities. Gradually, native administrations in the East- ern Region are being replaced by local, district and county councils on the British pattern of local government. In the Western Region also, local governments are coming to take the place of native ad- ministrations. Lagos is governed by a representative town council, consisting of elected members and traditional chiefs. Local gover.nments and native administrations are subject to regional law. Supervision is exercised by residents (in charge of provinces) and district officers (in charge of divisions), who are 3 See Report by the Conference on the Nigerian Constitution, London, 1953 (Cmd. 8934), paras. 27 and 28. 10 THE GENERAL REPORT responsible to the regional chief executive. In the case of the local government bodies set up under Eastern regional legislation, the func- tions of these administrative officers are purely advisory. Public Agencies Since the war, a number of autonomous public agencies has been established for a variety of purposes: Marketing Boards set the pro- ducers' prices for export crops; Regional Production Development Boards finance and operate development projects; and Regional De- velopment Boards (loans boards) make medium- and long-term agri- cultural and industrial loans. The Cameroons Development Corpo- ration operates a number of large banana, palm produce and rubber plantations. Other statutory corporations work the coal mines of Enugu and operate and develop public power facilities. The ports and the government-owned railway are shortly to be placed under autonomous corporations. Air transport is now provided by the West African Airways Corporation, an interterritorial corporation serving Nigeria, the Gold Coast, Sierra Leone and the Gambia. It THE PEOPLE OF NIGERIA Size and Growth of the Population With a population of 32 million, Nigeria's average population density is 85 persons per square mile.4 Given a gradual expansion of agricultural production and an improvement in methods of manag- ing and developing resources, the growing population should be able to enjoy a rising standard of living. In a few areas, however, espec- ially in the South, the population density of 400 to 500 per square mile has reached the limit of what the land can support under present agricultural methods and here population pressures have resulted in soil depletion and migration of the inhabitants. On the other hand, 4 Compared with 525 for the United Kingdom, 800 for the Netherlands, 390 for Italy, 250 for Denmark, 50 for the United States, 295 for India, 205 for Pakistan, 300 for Ceylon, 93 for Thailand, 53 for Egypt, 67 for Sierra Leone and 50 for the Gold Coast. NIGERIA TODAY 11 there are wide areas, as in the Northern Region and the Cameroons, which are thinly populated or virtually uninhabited. On the whole, however, Nigeria does not face the problems of other parts of Africa where population is so sparse that development activities are hampered. In the last 20 years the population has increased at an estimated rate of about 1.5% annually. It is probable that in the last few years control of epidemic diseases and improvements in maternity and child welfare and hospital facilities have lowered infant mortality and the death rate in general, and that this trend will continue. Accordingly, a development program for Nigeria must take account of the fact that the rate of population growth may accelerate. Between 1954 and 1960 the total population may increase by three million or more and by 1966 over 40 million persons may be living in Nigeria. Approximately four-fifths of the population earn a livelihood as farmers, fishermen, hunters, herdsmen or lumbermen. About seven out of 100 men are skilled craftsmen or industrial workers, while six are engaged in commerce, either as traders or employees of com- mercial firms. In some areas retail trade is largely carried on by women. But nonagricultural employment is a significant source of income only in the port cities, inland commercial centers, in the min- ing districts of Plateau Province in the North and in the Eastern Region. Literacy In Nigeria less than one person in ten of school age and over can read and write. This figure is low as compared with a number of countries in Latin America and Asia,' but it probably compares favor- ably with other areas of Africa and the Middle East. There are, however, wide differences in education and educational facilities among various parts of the country. In Lagos about half the population seven years of age and over is literate. In other urban centers of the Western and Eastern Regions the literacy rate varies between 30%o and 40%. In the "bush" areas of these regions, how- 5 Comparative figures of literacy percentages: Turkey, 30%; Nicaragua, 37%; Mexico, 46%; Colombia, 56%; Ceylon, 58%. Source: United Nations, Special Study on Educational Conditions in Non-Self-Governing Territories, New York, 1954. 12 THE GENERAL REPORT ever, and in wide stretches of the North, hardly anyone can read and write. In recent years substantial progress has been made toward the gradual elimination of illiteracy. In the South, while the literacy rate of the adult population is only about 12%, nearly one-half of all school-age children are now enrolled in schools. In the North, on the other hand, only 5%7 of the children go to school. Income The average Nigerian's standard of living is low. National income estimates for 1952-53 show a per capita income of approximately £ 21. This is of the same order of magnitude as India's and Pakistan's, and considerably higher than that of other African countries (Ethiopia, Liberia) and of several countries in the Far East and the Near East. It is very much lower than the per capita income of Western European countries, which exceeds £ 200.6 The value of all goods and services produced in the country, the gross domestic product, amounted to £ 680 million in 1952-53 (Table 1). Agriculture, including forestry, animal husbandry and fishing, accounted for almost two-thirds of the income; transport and distribu- tion, including the operations of the Marketing Boards, made up another 15% . Another principal activity was construction, both public and private. All other sources combined, including government op- erations other than construction, accounted for the remaining one- tenth of total output. Manufacturing, including handicrafts, accounts for less than 2% of the gross domestic product; even when mechan- ized processing of agricultural products is included, industry's con- tribution to total output does not exceed 3%. Close to 98% of the gross domestic product, or £ 665 million, rep- resents the income of Nigerians, the balance of £ 15 million being accounted for by net payments of dividends and interest to foreign countries and payments to non-Africans in Nigeria. 6 See for 1949 figures: National and Per Capita Incomes of Seventy Countries-1949 (Statistical Office of the United Nations, New York: 1950). NIGERIA TODAY 13 TABLE 1 Gross Domestic Product of Nigeria, 1952-53 Million £ % of Total Agriculture ...................................... 450.2 66.1 Farm Crops ...................................... 305.0 44.8 Tree Crops .77.2 11.3 Forest Products .27.3 4.0 Livestock Products .34.4 5.1 Fishing .......,. . . ............... 6.3 .9 Industry ................ 71.2 10.5 Minerals .9.5 1.4 Manufactures and Power .3.9 .6 Building and Civil Engineering .48.3 7.1 Handicraft .9.5 1.4 Services . 128.5 18.9 Transport and Distribution' .104.5 15.4 Bank, Insurance and Other Professions .1.1 .2 Missions .3.0 .4 Domestic Services .3.5 .5 Miscellaneous Services .6.4 .9 Ownership of Buildings ........................... 6.0 .9 Intrahousehold Services .4.0 .6 Government .30.4 4.5 Total .680.3 100.0 'Including operation of Marketing Boards. NOTE: More detailed data and information on sources and methods of computation will be found in Appendix B, Tables 1 to 6. III POSTWAR CHANGES IN THE ECONOMY The current state of economic development and the social and political stresses in Nigeria cannot be understood without some knowledge of the changes which have taken place in virtually every aspect of Nigerian life since the end of the war. In less than 10 years the economy has grown and strengthened to such an extent that it bears little resemblance to the prewar economy. The initial impetus for this growth came from the wartime and expanded postwar demand for Nigerian exports. World-wide shortages of vegetable fats and oils and a strong demand for cocoa, tin and columbite resulted in high 14 THE GENERAL REPORT export prices. This permitted not only a substantial rise in living standards and in the per capita consumption of a growing population, but also a large increase in government revenues and substantial sav- ings by both the government and the Marketing Boards. The govern- ment revenues and the profits of the Marketing Boards, supplemented by Colonial Development and Welfare grants from the United King- dom government, in turn permitted a substantial expansion of public health and education services and of such public facilities as roads, ports and water supplies. They made possible the setting aside of considerable sums for financing development schemes and educational and research activities. The private sector of the economy has likewise participated in and benefited from this expansion. The 'production of foodstuffs for domestic consumption has kept pace with the growth of income originating in the export sector. Foreign firms have expanded their commercial operations in Nigeria and have started manufacturing enterprises. Africans in growing numbers have entered the field of foreign trade and many have found employment in managerial and clerical positions in government and business. The number of Niger- ians trained or in training for responsible positions is growing rapidly. There are more Nigerian children in primary and secondary schools than ever before and the first institutions of higher education have been established. Under the Colonial Development and Welfare Scheme,7 there was drawn up a series of programs for the development of the Nigerian economy. In 1945 it was agreed that the British government would contribute £ 23 million to a 10-year program for Nigeria and that the Nigerian government would raise from revenues and through loans an additional £ 26.5 million.' The amounts available from these sources were allocated for a variety of projects ranging from small community improvements to construction of major health, educational and re- search facilities. By the end of 1952-53 a total of £ 28.5 million lhad been spent under the program, £ 13.5 million from contributions of the United Kingdom and £ 15 million from Nigerian funds. During 7 Sponsored and in part financed by the Government of the United Kingdom to promote the economic and social advancement of colonies and other dependent terri- tories. 8 Excluding loan charges. NIGERIA TODAY 15 1953 the Government of the United Kingdom announced that it was considering continuing the Colonial Development and Welfare Scheme for another five-year period, beginning in 1955.9 The projects undertaken and all other public expenditures for capi- tal investment and improvement of public services in the postwar period have marked a significant advance in the direction of active economic development by the government and government agencies, and' of an expansion of private business activity, particularly by Africans. Thus the development of the last few years can no longer be regarded as merely the transitory result of several boom years. The productive capacity of the economy has risen to a higher level. However, there is as yet no assurance that the pace of development can be maintained, much less accelerated, unless during the next five years the institutional and financial basis for a continuing growth of the Nigerian economy is laid. It is also possible that adverse conditions outside and beyond Nigeria's control may temporarily slow down or interrupt the growth of income and wealth. But we think the rate of growth can be maintained and eventually increased if the human and financial resources now at Nigeria's disposal are used to best advantage and are supplemented by the mobilization of new resources. The Growth of the Economy Table 2,,at the end of this chapter, shows in summary form some of the economic gains of the last 20 years. The impression conveyed by these figures is one of rapid growth and expansion, particularly in the last decade. The differences between some of the pre- and postwar figures are exaggerated by the rise in the price level and by the fact that in 1934 the export sector of the Nigerian economy was par- ticularly depressed because of the low level of export prices. The low value of exports in the prewar years is also reflected in the figures on tax collections and imports. But even with due consideration to these factors and to the population growth of six to seven million during the last 20 years, there is no question but that Nigeria as a whole, 9 There would be a one-year overlap with the first 10-year program. 16 THE GENERAL REPORT and the Nigerians as individuals, are better off now than ever before. Revenues of the central government are 10 times higher than they were 20 years ago; taking changes in the price level into account, they still amount to three or four times as much as they did prewar.'0 Currency circulation has increased eightfold since 1939, partly be- cause of higher prices but largely because of the growing use of money as a medium of exchange and larger cash holdings in the hands of Nigerians. The growth of Post Office Savings Bank deposits is only partly accounted for by increased use of this institution by local governments and native authorities; it represents a significant change in the habits of the population as a whole which promises to become an effective instrument for the future mobilization of liquid savings. The best indication of the rise in income and consumption is shown by those figures of Part II of Table 2 which relate to the physical volume of certain primary imports. Imports of such consumer goods as cotton and rayon textiles and of such durable goods as bicycles, sewing machines, corrugated sheets and cement are higher, on a per capita basis, than they were in the export boom years of 1927-29. Part III of Table 2 indicates some of the structural changes in the Nigerian economy which have taken place in the last two decades. Railway freight traffic has almost trebled; passenger traffic has doubled; the advent of motor transportation represents a major technological change which, though still in progress, has already profoundly affected the transport and distribution system of the country. The data of Table 2 also reveal certain weaknesses and thus spot- light the areas in which action is required if the growth of the economy is to be sustained. On the fiscal side, for instance, the level of the local authorities' revenues has failed to keep pace with that of the central government. The increase in tarred road mileage has been insufficient to accommodate the tremendous increase in motor and bicycle traffic. The improvements in living standards and in Nigeria's financial 10 The comparison is between the present revenues of the central governrnent (ex- cluding those of regional governments) and the revenue of the Nigerian government of 20 years ago when there were no separate regional budgets. NIGERIA TODAY 17 position are partly due to the fact that export proceeds now buy more in terms of imports and domestic goods and services than they did before the war. The well-being of the economy has remained sensitive to changes in world market conditions, although the large reserves of the Marketing Boards (see Chapter 4) provide an important safe- guard against domestic repercussions of violent price fluctuations. The strengthening of Nigeria's economy in the war and postwar period has proceeded at a rate far in excess of the rate at which the new financial resources could be absorbed and put to use for the lasting benefit. of the country. This is the fundamental economic problem; it cannot be identified with any specific sector of the economy or with a particular part of the country. While many projects undertaken under the Colonial Development and Welfare Scheme are already contributing to the material welfare and the social and cul- tural advancement of Nigeria, many important government services and such institutions as the Regional Production Development Boards have not yet had time to expand their operations to the level, and in the direction, of greatest use as an integral part of a growing economy. Until recently, delays were due largely to shortages of equipment. These have now been for the most part overcome. Scarcity of skilled personnel has come to be the principal obstacle. In some sectors, lack of basic information has prevented or delayed the execution of promising plans; in others, false starts have been made because of insufficient preparation and planning. Fiscal and Payments Surpluses Throughout the war and the postwar period Nigeria has earned more than it has spent on consumption and domestic investment. The difference between total output and total expenditure of necessity took the form of foreign assets; these have been held as sterling balances in London. At the beginning of 1953, these balances exceeded £ 150 million, not counting £ 55 million representing the estimated Nigerian share in the holdings of the West African Currency Board. Most of the balances are funds of the central and regional governments and of native administrations, the Marketing Boards and the Regional Pro- duction Development Boards. 18 THE GENERAL REPORT It is now necessary to maintain larger foreign balances than before the war, partly because of the higher level of prices, and partly be- cause of the growth of the government and government agencies. Also, some accounts, particularly those of the Marketing Boards, were established to serve as a reserve to mitigate adverse price conditions for Nigerian exports in foreign markets. But the present level of Nigerian sterling balances makes it possible to expand the volume of government expenditures to foster economic development. To accomplish this, it is necessary first to overcome those impediments to development which have so far retarded the economic progress of Nigeria and which, as a financial corollary, have prevented the full use of its fiscal and financial reserves. These are discussed in the next chapter. TABLE 2 Selected Indicators of Economic Growth periodt 1934 1939 1944 1949 1951 1953 1. Financial Data Central Government ... Million £ Total Revenue 4.9 5.8 10.9 23.8 32.8 50.9 Customs & Excise Taxes .. . . 2.2 2.5 4.9 12.6 18.2 33.9 Direct Taxes .8 .9 2.4 3.8 5.3 6.8 Revenue of Native Authorities, total n.a. 1.52 2.8 4.9 5.9 8.2 Currency in Circulation n.a. 5.9 13.5 31.8 39.2 51.4 Bank Deposits with principal Nigerian Banks ............ Million £ as of Dec. 31 n.a. n.a. 9.9 13.5 22.4 31.2 Post Office Savings .... Thousand £ Bank Deposits 71 185 879 2,254 3,239 4,059 Number of accounts. 1000 21 45 86 169 169 198 II. Foreign Trade Exports, total ......... Million £ calendar year 8.9 10.5 17.2 81.1 120.1 125.33 Cocoa .............. Thousand tons calendar year 78.0 113.8 70.1 103.6 121.5 104.7 Palm Kernels ....... 289 300 314 376 347 403 Palm Oil ......... 113 126 125 170 150 201 NIGERIA TODAY 19 Unit and 1934 1939 1944 1949 1951 1953 periodi Groundnuts ......... 245 147 156 378 141 327 Cotton ............. 5.9 4.4 4.3 10.0 15.4 17.7 Bananas .............lMillion lbs. calendar year 51.0 138.5 - 145.5 160.9 202.4 Rubber ............. " 3.6 6.2 21.1 15.4 46.7 47.6 Imports, total ......... Million £ calendar year 5.4 6.8 15.7 58.2 84.6 108.23 Imports of: Corrugated iron sheets ............ Thousand tons 6.9 5.8 1.4 14.4 19.0 34.3 Sewing machines.... Thousand 2.5 3.2 .3 19.5 32.4 37.9 Bicycles ............ " 5.2 6.6 14.1 129.6 153.4 217.0 Cotton piece goods.. Million sq. yds. 63.2 60.7 106.6 185.2 121.3 172.0 Rayon piece goods.. " 5.1 3.1 5.2 15.0 40.7 64.8 Cement ............. Thousand tons 35.1 51.1 45.8 161.9 261.1 297.4 Consumption of kerosene .......... Million imperial gallons 1.7 2.0 2.3 4.7 9.0 12.0 III. Transport and Communications Nigeria Railway Passenger traffic .... Thousand miles 1484 198 266 326 352 351 Freight traffic ....... Thousand ton- miles 2934 315 513 658 672 827 Roads, total .......... Thousand miles n.a. 21.0 24.6 26.3 27.8 28.8 Tarred roads ......... Miles n.a. n.a. 5335 937 1,114 1,631 Commercial vehicles, new registration .... Calendar year 538 559 663 2,356 2,901 4,159 Cars and Taxis, new registration ..... Calendar year 439 572 61 2,112 3,457 3,873 Motor spirit, consumption ........ Million imperial gallons 3.0 4.9 9.9 17.6 23.7 33.3 Telephone and Telegraph .......... Thousand wire miles, end of calendar year 21.5 26.7 30.6 31.8 37.66 42.16 1 Year ending March 31 unless otherwise indicated. 2 1940. 3 Preliminary figure. 4 1935. 5 1945. 6 March 31. SOURCE: Digest of Statistics, Lagos. CHAPTER 2 THE CONDITIONS OF NIGERIAN PROGRESS It is a truism that economic development efforts normally have as their objective a rise in living standards: better health and longer life, more nutritious and more abundant food, better-built houses, more and better schools and the opportunity to participate in the cultural and spiritual life of the community. It would be unusual indeed if the Nigerians did not want these things; their leaders have made it abundantly clear that they do want them. But so far they have given too little thought to how they can acquire them or how soon. Many factors affect the speed at which the Nigerian economy can be expected to develop. In this chapter we call attention to those which we consider most significant. In succeeding chapters we sug- gest the fields of development activity into which we think the Nigerian people and their government may most wisely direct their energies. Social Factors Although everyone agrees that it is desirable to improve living standards, it is not so universally realized that the growing output of goods and services, the immediate aim of an economic development program, can be accomplished only by the efforts of the people. The enthusiasm and vision of government may act as a spur, the advice of experts may serve as a guide, but by themselves leadership and advice are not productive. No progress can be made unless the people themselves are willing to assume the main burden of the development effort. The mission found this not fully appreciated in Nigeria. Nigerians in all walks of life tend to look too much to the govern- ment, more specifically to the British colonial officials, for the fulfill- ment of their aspirations. The heavy reliance on government is frequently coupled with a strong distrust of its actions and motives. To some extent this is explicable as the response of a people still 20 THE CONDITIONS OF NIGERIAN PROGRESS 21 under tutelage and exposed to the complexities of Western civilization. But whatever the basis, both attitudes, that of dependence and that of distrust, serve to retard Nigeria's development. The need for self-help is not understood by the African business- man who looks to the government, and the government alone, for financial assistance in the expansion of his business instead of joining with others in a partnership or other form of common enterprise. It is not understood by rural communities and their leaders who demand school and hospital facilities but are not ready to pay for them by increased tax assessments. It is not understood by those who deplore graft and corruption in the hospitals, in the produce inspection service, in the railway and in private business, yet are unwilling to take effective action against these abuses. Though there is much in Nigerian attitudes which may curb economic growth, there is much in the social organization which can serve its cause. Nigerians have strong local loyalties. They are closely tied to their immediate family or clan, they support local "unions" (clubs) and they take pride in local achievements. The banding together of families, clans and village communities in pro- ducers' co-operatives, in the savings clubs of the Yorubas and in the thrift societies of the Ibo "strangers" in the North are practical and promising illustrations of self-help. We think full support should be given to the co-operative movement as a vehicle for economic de- velopment, for it is a form of economic organization fully compatible with Nigerian tradition and social sentiment. We believe that through the co-operative movement, the types of land ownership associated with the village, clan and tribal system can be adapted to plantation-type agriculture. In this way Nigeria can combine the benefits of private African initiative and individual effort with the technological advantages of large-scale plantation farm- ing, up to now virtually absent from Nigeria. Other Nigerian social traditions have positive value in a period of rapid change and advancement. Respect for elders and acceptance of their counsel, if not carried to the point of becoming impediments to learning new ways, make for social restraint and stability. Respect for learning in any form and the authority enjoyed by mallams, "learned men," in the North, and by teachers, professors and even 22 THE GENERAL REPORT students in the South, suggest the key role which the teaching profes- sion can play in developing new attitudes and in the adoption of new institutions and techniques. A final favorable factor is the relatively cordial relationship between African and non-African, notably lacking in some other African countries. It is attributable to the fact that the few Europeans and Asians in Nigeria are administrators and traders and to the policy of prohibiting alienation of agricultural land to foreign settlers and restricting immigration in general. The social pattern does, however, have its drawbacks. The high standard of loyalty and morality adhered to within the family and clan does not apply to relationships with "outsiders." This double standard is reflected in many instances of apparent disregard for personal rights and private property, flouting of oral or written contractual obligations and exploitation of one Nigerian by another. It has led to a generally low level of civic responsibility, especially in cities and large settlements where local allegiance makes no de- mands and the moral restraints of family and clan have weakened. Distrust and fear of the outsider are also behind the opposition to innovations, in both method and concept, frequently encountered in the more backward areas. Another symptom of this condition is the antagonism between the peoples of the different regions, which has led to progressive political decentralization and to the emergence of three principal political parties, each drawing its largest following from one of the three regions. While agreeing that political decentralization is necessary in a country as heterogeneous as Nigeria, we caution that regionaliza- tion carried too far, as for example by exaggerated emphasis on the particular good of any one region, may retard development of Nigeria as a whole. These, then, are what wve regard as the most significant of the barriers of attitudes and social patterns which must be taken into account in assessing development prospects. It is of critical import- ance that they be broken down without destroying the social institu- tions which hold the various groups together and which may be of use in Nigeria's economic future. This is a challenge which can- not be easily or readily met and to which outside advice can provide THE CONDITIONS OF NIGERIAN PROGRESS 23 no answer. Only the Nigerian leaders can make their people under- stand that economic progress and material welfare depend on national unity and individual initiative. Technical Skills One of the most encouraging signs that these difficulties can in time be overcome is the popular enthusiasm for education. Nigeria has decided that it can better afford the cost of education than the waste of illiteracy. Although schooling is still available to only a small fraction of Nigerian youth and instruction does not yet meet the requirements of economic advancement, the expansion of educa- tional facilities has been remarkable. The spread of general elementary education can affect the speed of economic development in many ways:- by teaching the Nigerian people about their country and its resources; by eventually eliminating the notion now held by the literate few that physical labor is beneath the dignity of the man who has been to school and, most significantly, by providing productive skills. Some effort has been made in recent years to introduce technical training and instruction in crafts into the educational system. There is still lacking an appreciation of technical competence and of professional reliability and integrity; this will take time to acquire. Nigeria is seriously short of trained senior administrators and technicians for government posts and technical personnel for industry. Their skills can be acquired only through higher education and long experience; Nigeria cannot supply them in sufficient quantity for many years to come. In every branch of government, essential activity related to Nigeria's economic progress is held up for lack of qualified personnel. At the end of 1953 there were more than 5,000 "senior service" positions; approximately 3,300 were held by overseas personnel ("expatriates") and 800 by Nigerians, while over 900 were vacant.1 In addition there 1 Until recently, a distinction was made between the "senior" and "junior" services; the two services have now been combined bu't the terms are still widely used. The "junior" service included all clerical and ancillary positions and was completely staffed by Africans. 24 THE GENERAL REPORT was a considerable number of vacancies in the various semi-official agencies. In 1948, the Nigerian government adopted a policy of accelerated "Nigerianization" of the civil service: overseas personnel would not be employed in any position for which a qualified Nigerian was available.2 Nigerianization of the public service is an essential part of the progression toward self-government; since self-government is the announced aim of all Nigerian political parties as well as of the Government of the United Kingdom, employment of qualified Niger- ians in responsible governmental positions must be fostered and promising young men should be recruited and trained. But just now Nigeria's problem is not to determine what positions in government should be filled by Nigerians and for what positions the services of overseas personnel should be obtained, but to find qualified persons irrespective of national or racial origin. The hard facts are that the number of Nigerians qualified for many types of government employment is limited and that the government has not been able to recruit overseas personnel in sufficient number. In Chapter 4 we make specific recommendations for recruiting overseas staff. This recruitment effort will not deprive qualified Nigerians of opportunities for employment in positions of responsibility in the public services. There will be more opportunities than Nigerian candidates for many years to come. Business Management Nigeria is equally short of men who can manage organized indus- trial activity. This is not due to a lack of capacity. Nigerians in general have good business sense; many are skillful traders. With few exceptions, retail buying of export produce and retail distribu- tion of imports is in Nigerian hands and efficiently organized.3 In- 2 Two studies of the problem of government employment have recently been made, which emphasize the objective of bringing qualified Nigerians into government service but also recognize the need to continue employment of overseas personnel. Report of the Commission appointed by His Excellency the Governor to make recommrendations about the recruitment and training of Nigerians for Senior Posts in the Government Service of Nigeria (Lagos: 1948); The Nigerianization of the Civil Service: A Review of Policy and Machinery (Lagos: 1953). 3 See P. T. Bauer, WVest African Trade (Cambridge University Press: Cambridge, 1954). THE CONDITIONS OF NIGERIAN PROGRESS 25 ternal trade, both retail and wholesale, is likewise engaged in almost exclusively by Africans. African businessmen have grown wealthy and many are now firmly established in the domestic business com- munity as well as in international trade. The business community's great weakness is its lack of managerial experience and the absence of a tradition of sound business practices. Most businesses are "one-man" enterprises. Extension of credit is impeded because the proprietor often keeps no systematic accounts. The central Department of Commerce and Industries has actively supported African business initiative, facilitating direct contacts be- tween African businessmen and exporters, importers and overseas manufacturers. It has encouraged associations of European and African firms such as the Lagos Chamber of Commerce, with the object of improving standards of business conduct and fostering a policy of self-regulation within the business community. Nigerian businessmen and political leaders have urged government financial and technical assistance for new African enterprises, but in practice the number of Nigerian businessmen willing to launch manu- facturing ventures at their own risk has been very small. This reluc- tance is due in part to the absence of an industrial tradition and in part to the fact that manufacturing enterprises generally require a larger initial capital than the individual businessman is willing or able to invest. In the circumstances, industrial growth will be slow and government assistance will not be fully effective until Nigerians are prepared to spend their energy and risk what capital they have. The creation of aptitudes and skills for managing commercial and industrial enterprises cannot take place overnight. As we point out in connection with industrial development, it can best be accomplished through the growth and multiplication of many small firms, which will slowly build up business and industrial traditions. Knowledge oj Natural Resources Nigeria's development has also been hampered by a lack of knowledge of the country's natural resources, making it difficult and sometimes impossible to assess their potential for useful development. There are well-established methods of building up depleted soil fertility but in the absence of adequate research it is not known to 26 THE GENERAL REPORT what extent they can be applied economically in Nigeria. Nigerian varieties of crops and types of livestock, though well adapted to their environment, give low yields. Research could develop higher-yielding strains. Many indigenous plants hold promise of economic use but the possibilities of such use are still to be investigated. A broad strip across the country, the Middle Belt, is sparsely populated and cannot support livestock, for it is infested with the tsetse fly, the carrier of trypanosomiasis (sleeping sickness). While research on the control of tsetse is well advanced, its results have not yet been applied on the scale necessary to pave the way for what could be an increase in production that would completely transform the area. Nigeria's water resources can undoubtedly be used much more intensively for agriculture, transportation and power. Yet the basic measurements of the rivers have not been made, nor has the basic exploration of ground water been undertaken. Until a hydrological service has gathered systematic data, schemes for irrigation, water transport and hydroelectric development must be postponed or can be undertaken only with a serious risk of failure. Many industries may develop around the processing of local raw materials. But here again considerable research needs to be done before the profitability of particular industries can be established. Some of these research and survey projects are well in hand; the mission recommends that others be undertaken promptly. Nigeria's development will not hit its stride, however, until the research has progressed far enough for its results to be translated into practical application. Private Investment Since the purpose of, this report is to suggest action by government and public agencies, it is focused primarily on their development activities, but economic and social advancement should by no means be the exclusive concern and responsibility of government. On the contrary, there are definite limitations to the extent to which govern- ment can, by direct intervention, bring about economic development and social progress. In Nigeria, as in any other country with institu- tions relying on private enterprise and initiative, the government's THE CONDITIONS OF NIGERIAN PROGRESS 27 role in economic development is essentially one of providing the basic services for, and giving encouragement and support to, private en- deavor. Government can assist economic growth by providing such communal facilities as roads, education and training, technical guid- ance and research, which are prerequisites for private business opera- tions; in circumstances common to most underdeveloped countries, it may have to supplement the financial resources of the private sector of the economy with facilities for long-term credit and equity financ- ing; it may provide such services as railways, electric power and tele- communications; and, perhaps most important of all, it can adopt policies permitting the free development of private initiative and private capital formation. Although these government activities extend widely over the economy and can go a long way to foster a process of economic advancement, the ultimate success of any development endeavor de- pends on individual initiative and enterprise-on the farmer who adopts more efficient methods of production, on the craftsman who shifts from hand to machine operations, on the lorry operator who provides better transportation for people and goods and on the busi- nessman who starts a manufacturing enterprise. During 1950-52,4 when public investment expanded appreciably, private investment still accounted for more than 60%o of total invest- ment in Nigeria. A large proportion of this investment was of an unspectacular nature. It consisted of a multitude of purchases of sewing machines and bicycles,5 lorries and cars and improvements to private buildings. Investment by large enterprises was confined to a small number of projects in manufacturing, mining and commerce. The mission makes specific recommendations as to the size and direction of public investment in the next five years and as to the government organization needed to carry it out. It cannot, of course, do the same for private investment. It seems reasonable to expect, however, that the program we recommend would lead, both directly and indirectly, to an expansion of private investment. This expansion, 4 The only years for which data are available; see Technical Report No. 1, Table 1. 5 The Nigerian Department of Statistics considers that all sewing machines and 90% of all bicycle purchases should be classified as "business investments," rather than as purchases of consumer goods. The former are used in the tailoring business and the latter are widely employed for transportation of agricultural produce. 28 THE GENERAL REPORT though relatively smaller than that of public investment (and public development expenditures in general), would further increase the rate of capital formation and enhance the growth of the economy. For example, improvements in the road network are likely to lead to an increase in private investment in transport equipment; expansion of the power supply would permit increased use of power-driven me- chanical equipment; the changes proposed in the operation of the loans boards (see Chapter 4) should facilitate the flow of private investment into agricultural and industrial enterprises. A liberal administration of the provisions of the legislation authorizing favor- able tax treatment of new industries 6 should bring an expansion of industrial investment. Nevertheless, it would be too optimistic to predict more than a moderate growth of private investment in industry. Foreign Capital An important factor determining the level of private investment in the next few years will be the volume of foreign (i.e., non- Nigerian)-financed investments. In the last years for which data are available, foreign capital financed between 12% and 25% of total private fixed investments in Nigeria. A large proportion of foreign investment is reinvestment of earnings by companies already estab- lished in Nigeria; the amount of money brought into the country by new firms is believed to be small. Perhaps even more important than the volume of foreign capital is the fact that a considerable propor- tion of foreign-financed investment is in manufacturing, which intro- duces new techniques and skills. There is no need to labor the advantages to Nigeria of an inflow of private direct investment from abroad. Foreign investment can be an important addition to the domestic capital formation of any coun- try in the process of economic development. It is of particular importance in a country like Nigeria, where there is not only a scarcity of private financial capital but also a virtual absence of the managerial experience and technical skills required in manufacturing processes. Without foreign investment, neither public nor private endeavor can achieve the rate of economic growth that the Nigerian people desire. Nigeria should be conscious, however, that foreign 6 Aid to Pioneer Industries Ordinance; see Technical Report No. 13. THE CONDITIONS OF NIGERIAN PROGRESS 29 capital is not a gift but involves a cost to the economy in the form of remittances of profits and interest abroad. Like other imported goods and services, it must be paid for. The mission on many occasions discussed with Nigerians their attitude regarding foreign capital and found a good deal of confusion on the subject. There was general agreement that efforts should be made to attract foreign capital to Nigeria. At the same time it was argued that Nigeria must be protected against "exploitation" from abroad and that "strategic" industries should not be permitted to fall into the hands of foreigners. It was also asserted that in no industrial enterprise should more than 49% of the capital be foreign-controlled. The Nigerian press reported demands for the expropriation of foreign enterprises when Nigeria obtains self-government-although nothing of the sort was said to the mission. The demand for development capital all over the world is much larger than the supply. Foreign capital is not clamoring for admission to Nigeria; it has to be attracted. The government should acquaint potential foreign investors, by direct approach and through general publicity, with the available investment opportunities. The encourage- ment of industrial activity can help to create a favorable climate for foreign investment; in Technical Report No. 13 we make specific recommendations to this encl. The problem of foreign investment in British West Africa has been dealt with at some length by Professor W. A. Lewis in a report on industrialization of the Gold Coast. After weighing its advantages and disadvantages to the economy, he concluded: "Whatever the foreigner's faults may be, the fact remains that the Gold Coast needs him more than he needs the Gold Coast. . . . The Gold Coast cannot gain by creating an atmosphere towards foreign capital which makes foreigners reluctant to invest in the Gold Coast." T The same conclusion applies to Nigeria. If foreign capital can be sure of its welcome, there should be a reasonably good prospect of attracting it, primarily from the United Kingdom but also from other countries. Nigeria offers a potentially large domestic market and has resources which can be developed for export. 7 W. A. Lewis, Report on Industrialisation and the Gold Coast (Accra: 1953), p. 26. 30 THE GENERAL REPORT The mission therefore recommends the formulation of a national policy on foreign capital and the issuance of a statement of policy, endorsed by the federal and regional legislatures and the political leaders, which will set forth clearly the terms upon which foreign capital will be admitted. We think that the basic policy should be to accord foreign investors the same treatment as local citizens, neither discriminating against them nor granting them special privi- leges. Some qualifications may be necessary or desirable. For example, foreign investors would require assurance of free transfer- ability of profits and repatriation of capital. On the other hand, we think they should accept as reasonable an obligation to train Ni- gerians in their enterprises and that they would welcome reasonable provision for participation of local capital. The desirability of partner- ship arrangements between foreign and local capital has come to be generally recognized in capital-importing as well as capital-exporting countries. A somewhat more detailed discussion of this matter will be found in Technical Report No. 13. Pace of Development Thus, the attitude of the people and their leaders toward develop- ment, the nature of social institutions, the speed at which education can be expected to spread, the availability of technological, adminis- trative and managerial skills, the acquisition of precise knowledge of Nigeria's resources and the response of private endeavor, domestic and foreign, all affect the rate at which Nigeria can increase its output of goods and services and better satisfy the popular wants. Various statistical series and national income estimates ' suggest that Nigerian per capita income has increased in real terms at an annual rate of somewhat below 2 % in the postwar years, while capital formation has run at a level of approximately 10 % of the gross national product. Part of the capital formation has taken the form of an expansion of the "plant" of the Nigerian economy-im- proved highways, new locomotives and rolling stock, school buildings and hospitals in the public sector; manufacturing plants, permanent houses, garages, lorries,. automobiles, sewing machines, oil presses and S The national income estimates are shown in Appendix B; the statistical series are shown in summary form in Chapter 1, pp. 18-19. THE CONDITIONS OF NIGERIAN PROGRESS 31 bicycles in the private sector-while other capital has been accumu- lated in the form of assets held abroad. The growth of income has been to a considerable extent the result of improvements in Nigeria's terms of trade. The country has grown richer because its exports now buy more imports. The high rate of capital formation was likewise due in part to the export boom; a portion of the increased export proceeds was "saved" by the Market- ing Boards and the government. It was suggested to the mission that its development proposals should aim at a "target" increase in total production of 10% per year, which would double total output of the economy in seven years. We are firmly convinced that a rate of growth of this magnitude is impossible now and in the foreseeable future. With few exceptions, attributable to unusually favorable circumstances, no country has in recent years achieved a rate of growth of 10% per year. There have been in fact very few underdeveloped countries able to maintain a rate of income growth in excess of 5% per year, while in high-income countries the rate of income expansion has been between 2% and 5% in recent years. Nigeria is not at this juncture in a position to effect an increase in domestic investment large enough to bring about a growth in income of more than modest proportions. In the light of all the factors which have been discussed in this chapter, and because of the probability that the terms of trade may not be as favorable as they have been in recent years, the mission believes that in the next five years Nigeria can achieve an aggregate income expansion of 15% to 20%, or an average of 3% per annum.9 This rate of expansion, though not spectacular, will be well above the rate of population growth. During that period, the institutional groundwork can and should be laid for an acceleration of economic growth in subsequent years. To achieve this expansion will call for a considerable increase in the volume of government activity in virtually all fields. And so we consider the years 1955-60 to be the time for a building up and strengthening of the machinery of government to enable it better to support and sustain the growth of the economy. The expansion of public services will require a substantial increase in capital expendi- 9 In constant prices, except for export prices. See Appendix C, Notes to Tables on Government Revenue. 32 THE GENERAL REPORT ture and also a steady rise in recurrent expenditure. Therefore the magnitude of the proposed development effort must be 'measured not only in terms of capital expenditure but also in terms of additional recurrent expenditure. We recommend an increase in capital expenditure from £ 21 million in 1955-56 to £ 35 million in 1959-60 (compared with a level of £ 17 million in 1952-53); to this should be added the recommended increase in recurrent expenditures, which would rise from £ 34 million in 1952-53 to £ 62 million by 1959-60. Thus the public development effort which the mission proposes, and which in its opinion can be successfully carried out, would in fact involve an expansion of govern- ment expenditure from a level of £ 51 million in 1952-53 to an amount of the order of £ 97 million in 1959-60. The foregoing figures do not include capital expenditure of statutory corporations from their own resources; in 1952-53 this expenditure amounted to £ 5 million and in 1959-60 it may be in the neighborhood of £ 6 million. Finally, there must be added an estimate of private investment, financed in part by loans of public funds and in part by foreign companies, but consisting mostly of many small investments by African entrepreneurs in agriculture, transportation and small industries. It is, of course, difficult to forecast the rate of private investment. In view of the new investment opportunities created and induced by public develop- ment expenditures, however, it should rise considerably. It seems reasonable to expect gross domestic investment, public and private, to rise from about 8% of the gross domestic product in 1952 to 11-12%, or £ 90 million to £ 100 million, by 1960. Such a level would be sufficient to raise the rate of income growth substantially above the 3% rate which we project for the next five years and would thus assure a more rapid expansion of the economy in the 1960's. Financial Considerations The mission is satisfied that the public expenditure it recommends is well within the limits of Nigeria's financial resources, although the new system of revenue allocation is likely to result in deficiencies in particular regions and areas. Government will have at its disposal not only current revenues but also substantial amounts of reserves, THE CONDITIONS OF NIGERIAN PROGRESS 33 proceeds of loans from the Marketing Boards and from abroad, and, in all probability, grant assistance from the United Kingdom under the new Colonial Development and Welfare Scheme. If need be, Nigeria could incur domestic and foreign debt substantially in excess of that contemplated for the next five years without endangering its fiscal stability. However, if financial considerations are not also to become a limiting factor on the rate of development by 1960, government revenues will have to be increased within the next five years. In the last few years, the share of government revenue in the national income amounted to only 7.5%, a share too small to permit government to meet its responsibilities in a period of accelerated development.'" Strengthening of the revenue structure is also a prerequisite for in- creased ability to assume additional foreign debt after 1960. Balance of payments problems have been largely absent in the last few years; we do not expect that they will appear in any serious form during the next few years. Although we do not anticipate more than a moderate decline in the terms of trade in the immediate future, the possibility of a more serious, though temporary, worsening cannot be ignored. At present, foreign reserves are more than ample to meet this contingency. It would be unwise, however, to permit them to decline past the point of a substantial margin of safety. 10 The revenue system and the mission's recommendations for the financing of the development program are discussed in Chapter 5. CHAPTER 3 AN INTEGRATED DEVELOPMENT PROGRAM In the preceding chapters we have described the conditions governing the pace of development and have concluded that much of the effort of the next five years must be directed toward strengthening the gov- ernment services which will support an expansion in production. This chapter is essentially a summary of our discussion and analysis of the various sectors of the economy and of our principal recommen- dations for their development, details of which are to be found in the Technical Reports in Part II. The Technical Reports form an integral part of the report, and they should be referred to for a complete statement of the mission's recommendations and of the reasons supporting them. Expansion in every sector is dependent upon an adequate supply of skilled manpower. Since in the long run this means Nigerian man- power, the educational expansion already begun must be stepped up. The type of instruction offered should be designed to meet the needs of the growing economy and reoriented to this end. This means in particular a changed emphasis in the technical schools. It also means an expansion of higher education, with which should be allied re- search programs in agriculture, veterinary science and forestry. Research, surveys, extension and demonstration are the priority needs in agriculture. Facilities for research into soils, plant nutrition, plant varieties and disease must be promptly expanded so that efforts to stimulate production will rest on a firmer base than they do now. Research on cattle breeds and animal disease must be joined with efforts to control the tsetse fly, if increased cattle-raising anywhere but in the northern fringe of the country is to be possible. While large-scale expansion in the output of most products must await the results of survey and fundamental research, increased production of some crops can be achieved soon if extension and demonstration services are more adequately organized to spread techniques already 34 AN INTEGRATED DEVELOPMENT PROGRAM 35 known. In the North, for example, they are needed to popularize the use of superphosphate in growing groundnuts. In the East, co-opera- tives should be encouraged to apply plantation techniques to the growing of oil palms; rice-growing in the mangrove swamps, which has proved successful on an experimental basis, should be fostered. In the West, the co-operatives and the Department of Agriculture should together systematically apply the remedies which have been developed against the spread of black pod, capsids and swollen shoot in cocoa, in order to prevent a decline in production. Industrial expansion cannot in the near future have an impact on living standards equal to that of agricultural advances but its growth should nevertheless be actively encouraged. Government should give technical and management assistance to small business, provide strengthened credit facilities and offer more and better technical edu- cation. It should also create a more favorable climate for foreign investment. Further development of mineral resources must await intensified survey and exploration; lead and zinc deposits in the East are particularly worthy of further exploration. Supplies of electric power must meet a mounting demand from-small users in urban areas. Nigeria's transport system does not require fundamental changes. Measures already in hand should make it possible for the railway to carry to the ports the expanding output, of groundnuts. To meet an anticipated expansion of agricultural production in the northeast, there will be required either an extension of the railway or a heavy- traffic highway, and facilities at Port Harcourt will have to be ex- panded. The road system, though by and large adequate in extent, needs to be improved, and so does the quality of earth road mainte- nance. The program is an integrated one: the component parts comple- ment and support each other. Development in one sector affects, and is in turn affected by, development in others. These interrelationships can be demonstrated by a few examples. The build-up of government services in agriculture, forestry, animal husbandry, industrial assist- ance, survey, geological survey and hydrology, and the improvements suggested in roads, telecommunications, power supply and public health can be accomplished only if our proposals in the field of education and for the recruitment of overseas personnel are followed. 36 THE GENERAL REPORT Even the education effort itself must initially depend on teachers from overseas to train Nigerian teachers and technicians. Little would be gained by expanding agricultural production unless the recommended improvements in the roads, the railway and the ports were carried out at the same time. On the other hand, there is no purpose in expanding these facilities beyond the point at which they are likely to be utilized. Improved inland navigation and the eventual development of hydroelectric power will depend upon intensified water surveys, and these will also markedly affect the speed of agricultural develop- ment. We have aimed at setting a realistic pace for the program in terms of personnel as well as finances, to avoid creating competing claims which cannot be met and which would lead to imbalance and a slow- ing down of the entire program. In some instances the pace we have set is not as fast as that which Nigeria has set for itself. Nevertheless, the program in its entirety will require all the organizational effort that Nigeria can command. Whether and to what extent to accept our recommendations is for Nigeria to decide. In view of their interrelation, however, we hope that in reaching its decision Nigeria will recognize that any substantial modification of a part of the program will require appropriate modifi- cations of other related parts. AGRICULTURE' Nigerian agriculture, which now produces virtually all the food consumed in the country as well as 90% of the exports, is readily capable of expansion. Climatic conditions are favorable in much of the country, many varieties of crops and some livestock are well adapted to their environment, and land is abundant. But expansion in the immediate future and over the long term will depend upon the degree to which Nigeria can succeed in overcoming or minimizing the effect of such limiting factors as soil deficiencies, inadequacy of water supply in certain areas, low-yielding plant varieties, prevalence of plant and livestock disease, and primitive cultivation methods. The I See Technical Reports Nos. 6-11. AN INTEGRATED DEVELOPMENT PROGRAM 37 priority needs in the agricultural sector are surveys and research to ascertain the precise nature of these factors, tests of possible remedies to determine their local applicability, and finally practical application and demonstration of tested findings, all with the object of expanding production of export crops and increasing the output and improving the quality of food for domestic consumption. Objectives of Agricultural Program We believe that in the next five years a substantial expansion of production of several major export crops can be achieved and that this expansion will partially compensate for the price declines which we anticipate. Specifically, we think that groundnut production can be increased by at least one-fourth and the production of palm oil by 15-20%, with the proportion of the latter processed as edible oil reaching two-thirds of total output. Cotton production can be in- creased half again, and rubber and coconut palm products can assume a more significant role among exports if rubber and coconut palm plantations are established. On the other hand, we think it will be difficult to expand cocoa production in the next five years; we recom- mend the planting of new trees to replace old stock and to increase the total of bearing trees so that there can be greater cocoa exports in the 'sixties. We are less optimistic in the case of agricultural products for domestic use. Here knowledge and scientific experience are presently inadequate to permit the formulation of production targets. A good deal of effort must be put forth to achieve a growth in production of such staples as yams, cassava and guinea corn sufficient to keep pace with population growth and to allow for a modest increase in per capita consumption. We believe, however, that in the short run a substantial expansion of rice production-from 300,000 to at least 450,000 tons-is possible and we make specific recommendations for government support in this field. We propose greater government research and extension activity for other food crops and livestock, to assure a long-run increase in supply. We also recommend specific production schemes for food crops, livestock and fisheries. Whether the expansion of production which we envisage can be achieved in the next five years, and thereafter can proceed at an 38 THE GENERAL REPORT accelerated rate, will depend to a large extent on the efforts of the 13 million Nigerian farmers and their families. We recommend that they receive every possible encouragement and technical assistance from government and that private individual efforts should be sup- plemented by partnership arrangements between the regional develop- ment corporations 2 and producers' co-operatives or rural communi- ties, and by other schemes sponsored and financed with public funds. We suggest that the national economic council which we recommend in Chapter 4 consider establishing an agricultural subcommittee, in which federal and regional representatives might discuss agricultural problems of common concern. The subcommittee might also assist the council in the formulation of national agricultural policies. We propose expanded agricultural and veterinary services for which we have projected recurrent expenditure rising from £ 2 million in 1953-54 to £ 3.7 million in 1959-60 and capital expenditure of about £5 million. Proposed government expenditures for these services are summarized in Table 1. That Table breaks down the outlays which we recommend according to the agency making the expenditure and by broad classification of projects; detailed projections for specific projects are shown in the Tables of Technical Reports Nos. 10 and 11. We also recommend increases of similar proportions in expendi- ture for forestry, fisheries and for the support of the co-operative movement (not shown in Table 1), bringing total recurrent expendi- tures for the agricultural sector of the economy to £ 5.7 million by 1959-60 and capital expenditure for the five-year period 1955-60 to over £ 6 million. In addition we have projected expenditures of the regional development corporations on agricultural projects at approxi- mately £ 10 million, the precise amount to depend upon the outcome of the technical investigations which we hope will be undertaken promptly. 2 Used throughout this chapter to refer to the Regional Production Development Boards, reconstituted as recommended in Chapter 4. AN INTEGRATED DEVELOPMENT PROGRAM 39 TABLE 1 Projection of Expenditure on Agricultural and Veterinary Services (Thousand £) Approved Projections of Mission 1963-54 1955-56 1959-60 1955-60 R C R C R C C Federal: Total ................ 223 302 300 235 445 80 755 Agricultural Research .100 13 180 150 300 20 420 Veterinary Services .93 31 85 20 110 - 30 Northern Region: Total2 .900 351 1,319 536 1,868 666 2,679 Department of Agriculture .492 263 724 428 949 411 1,863 of which: Special Projects 111 139 179 248 229 331 1,343 Veterinary Department3 .136 3 195 20 270 - 35 Northern Local Authorities 272 85 400 88 649 255 781 of which: Superphosphate Scheme - - 60 - 180 - - Veterinary Services .84 11 100 10 150 10 50 Western Region: Total2 .595 86 589 432 765 85 865 Department of Agriculture .510 77 496 417 639 85 835 of which: Special Projects 267 31 296 332 399 20 460 Veterinary Department .45 9 50 15 75 - 30 Eastern Region: Total2 .249 100 282 83 467 80 438 Department of Agriculture .209 100 244 73 405 80 418 of which: Special Projects .. 20 30 44 28 119 30 143 Veterinary Department .33 - 30 10 50 - 20 Southern Cameroons: Total2 3 - 86 76 168 14 217 Department of Agriculture - - 65 63 128 13 185 of which: Special Projects .... - - 25 3 33 3 15 Veterinary Department - - 15 12 30 - 27 Grand Total: .1,970 839 2,576 1,362 3,713 925 4,954 - r Includes expenditure in addition to that on agricultural research and veterinary services. 2 Includes expenditure by local authorities. 3 Including-tsetse control. SOURCE: Tables in Technical Report No. 10. NOTE: R = Recurrent; C = Capital. 40 THE GENERAL REPORT Federal Responsibilities We recommend that responsibility for all basic agricultural re- search,3 including research on livestock, fisheries and forests, be assumed by the federal government, and that the regions devote their efforts to the experimental application of research findings and to demonstration work. Since the resources which Nigeria can devote to research are limited, we believe that best results can be obtained in the shortest time by such a division of responsibility. To discharge the federal responsibility most effectively, we recom- mend the establishment of three new institutions and the strengthening of certain existing services. Agricultural Research Institute We propose that research on soils, the agronomy of field crops and pastures, horticulture, genetics and plant health, including the control of diseases and insects affecting economic plants be carried out by an agricultural research institute. A total capital outlay of £ 420,000 has been projected for the research institute; of this, £ 300,000 would be expended between 1955 and 1957. Recurrent expenditure in 1955-56 would be £ 180,000, which should cover appointment of key personnel; thereafter recurrent ex- penditures are projected to rise sharply, as operations and staff expand, reaching £ 300,000 in 1959-60. In Technical Reports Nos. 6 to 8 may be found suggestions for specific projects in which the proposed institute might engage, some- times alone and sometimes guiding the regional departments of agri- culture. As an illustration of the kind of activity we envisage for the institute, some of the projects to be undertaken on behalf of the regions may be mentioned here: for groundnuts, research on plant nutrition, varietal improvement and disease control, together with experimentation on mechanized planting, harvesting and decortica- tion; for benniseed, research on varietal improvement, fertilizer treat- ment and harvesting methods; for bananas, investigation into the nutri- tional requirements of the soils of the Southern Cameroons, tests of 3Apart from the specialized research being performed by interterritorial organiza- tions such as the West African Cocoa Research Institute, the West African Institute for Oil Palm Research, the West African Institute for Trypanosomiasis Research and the West African Stored Products Research Unit, and also by the Empire Cotton Growing Corporation. AN INTEGRATED DEVELOPMENT PROGRAM 41 disease control by spraying and varietal improvement, including breed- ing of disease-resistant types; for livestock, investigation into pasture and forage improvement as a basis for more effective animal nutrition. Department of Hydrology Exploration of the country's water re- sources should be undertaken by a federal department of hydrology. Our recommendations for this proposed department are set forth in Tecbnical Report No. 12. Fisheries Research and Demonstration Unit A federal fisheries re- search and demonstration unit should be established at Lagos. For this we have projected federal capital expenditure of £ 10,000, to be made, we suggest, in 1955-56; recurrent expenditure would rise from £ 20,000 in that year to £ 25,000 in 1959-60. Expansion of Services The federal veterinary service should expand its investigations into problems of animal health and husbandry and, for best results, should co-ordinate this research with experiments in pasture improvement and forage crops and with soil and water surveys being undertaken by other agencies. Facilities for training Africans to assume responsibility for technical guidance of agricultural develop- ment should be expanded by strengthening the faculty of agriculture at University College, Ibadan, adding instruction in agricultural engi- neering to its curriculum, and by establishing faculties of forestry and veterinary medicine there. The proposed expansion of veterinary services would call for addi- tional facilities. We have projected capital outlay for that purpose totaling £ 30,000 for 1955-57 and recurrent expenditure for expansion of services rising from £ 85,000 in 1955-56 to $ 110,000 in 1959-60, exclusive of expenditures involved in establishing and operating the proposed faculty of veterinary medicine at the University College. We believe that the present veterinary school should become part of the new faculty and we have incorporated its budget in our projec- tions for education (see Technical Report No. 21). Expenditure for a strengthened faculty of agriculture and for the proposed new faculty of forestry are likewise included in our projections for the educational program. For the intensification of forestry research we recommend an increase in federal recurrent expenditure from £ 25,000 42 THE GENERAL REPORT to £ 65,000 between 1955 and 1960; we also propose continued federal support of the school for forestry assistants and a moderate expansion of its physical facilities (see Technical Report No. 11). A corollary to expansion of training facilities is the need for stepping-up recruitment of agricultural personnel. Agricultural serv- ices are understaffed even for the work they are now expected to perform. At the time of the mission's visit no more than two-thirds of the agricultural service posts provided for in the Estimates were filled. Yet it was generally conceded that the country requires three times the personnel now allowed for, or between four and five times the number actually on the rolls. The long-run objective should be a strong, qualified African staff. For the short-term future, however, the employment of overseas personnel is essential. The mission recommends that a recruitment drive be started immediately and that the assistance of such international agencies as the Food and Agriculture Organization be sought in this connection. Regional Services and Programs Research findings must be tested under operational conditions before they can be translated into increased output. It should be the task of the regional departments to apply these findings first in experimental and then in pilot projects and in demonstration, exten- sion and advisory work. In the past, extension work has not been given sufficient attention. It is of crucial importance in a develop- ment plan such as that which we propose, which is based largely on raising output from many small units. Another activity which we believe should be expanded is the pro- gram of the regional development corporations for establishment of plantations, either directly or in partnership with co-operative societies or local communities. In partnership schemes, the corporations pro- vide capital equipment, management, technical guidance and, where necessary, working capital, while the co-operatives or the communities provide land and manpower. These schemes should be fostered by the regional governments and the development corporations. They bring to Nigerian agriculture the advantages of large-scale operation and modern production methods without modifying the traditional pattern of land ownership and without creating a class of landless AN INTEGRAITED DEVELOPMENT PROGRAM 43 agricultural workers. Since local systems of land tenure are of relevance in the planning and execution of these projects, the advice of the Land Department should be sought.' For all regions, the activity which we propose would require an expansion of the departments of agriculture. Table 1 summarizes our estimates of the capital and recurrent expenditures which would be necessary for each of the three regional departments if the projects we recommend for each region were carried out. It also includes our projections for establishment of a department of agriculture in the Southern Cameroons. Northern Region In the North we recommend a doubling of the activities of the agricultural and veterinary services and therefore have projected an increase in recurrent expenditure from an estimated £ 900,000 in 1953-54 to £ 1.9 million in 1959-60. We also recommend capital expenditure of £ 2.7 million, partly to provide office, laboratory and housing space for these services, and partly to finance a number of special projects and experiments. Officers of the "production division" (extension service) of the development corporation should be transferred to the agricultural department; their number should be increased to permit stationing one in each administrative district. The research, experimentation and extension activities should be directed toward three objectives: expansion of groundnut and cotton production for export; improvements in livestock production; and increase in the production of staple foods, particularly rice and guinea corn. To encourage the expansion of groundnut production we recom- mend that native treasuries participate in the financing of purchases of superphosphate fertilizer; we have projected expenditures of £ 500,000 of native treasury funds for this purpose. If necessary, additional funds should be provided by the development corporation as loans to native administrations. Since guinea corn is intercropped with groundnuts, the groundnut fertilizer program, by improving the soil, should also result in an increased output of guinea corn. We recommend further that the activities of the groundnut research cen- ter, financed, in 1954-55 by the Groundnut Marketing Board, be broadened to cover not only groundnut production, but also food crops for domestic use. 44 THE GENERAL REPORT For the expansion of cotton production we recommend a moderate increase (from £ 80,000 to £ 100,000) in the expenditures for seed selection and distribution, and modest capital expenditure (£ 20,000 per year) mainly for the setting up of cotton markets; we suggest that the responsibility for financing this program be transferred from the Cotton Marketing Board to the regional Department of Agriculture. We propose capital expenditure totaling £ 500,000 for irrigation works to be undertaken by the Department of Agriculture. Most of these funds should be used for small-scale irrigation works of the type already constructed in Sokoto and Niger Provinces for the pur- pose of expanding the cultivation of rice and other food crops. The scope of these schemes can be gradually broadened as experience in irrigated farming is acquired and more information about river be- havior becomes available through the proposed federal department of hydrology. The planned reclamation scheme on the shores of Lake Chad, if successful, would pave the way for a significant expan- sion of rice production in that area. Because we consider that rice has great potentialities in many parts of the Northern Region, we also recommend an increase in expenditures on rice research (from £ 3,000 to £ 15,000 per year). We believe, however, that the prospects of mechanization of rice production on a substantial scale are not good for the immediate future. We therefore do not recommend an immedi- ate expansion of the development corporation's mechanized plowing scheme for rice land. The development of livestock production will require close co- operation among the regional agricultural and veterinary services, local authorities and the development corporation. We attach great importance to the long-run expansion of livestock and dairy produc- tion because of the deficiency of animal protein in the Nigerian diet, which is most acute toward the South. We recommend that the prob- lem be attacked in five ways: *1. Pasture improvement should be undertaken under the direc- tion of the regional agricultural department, together with experi- ments on mechanized land clearing and fodder conservation. For this we propose regional capital expenditure of £ 340,000 over the next five years and expenditure by local authorities rising from £ 40,000 to £ 60,000. AN INTEGRATED DEVELOPMENT PROGRAM 45 2. For the preparation and technical supervision of tsetse control schemes, the Northern regional government should increase recur- rent outlay from £ 35,000 in 1955-56 to £ 50,000 in 1959-60. The regional development corporation should intensify its program of settlement schemes for mixed farming and to reduce the area of tsetse infestation. For this we recommend that it set aside £ 1 million to £ 1.5 million. 3. The cattle multiplication scheme should be expanded by the regional Department of Agriculture. For this, recurrent expendi- tures are projected to rise from £ 15,000 to £ 25,000 while capital expenditure would be £ 140,000. 4. Local authorities should set up grazing reserves, at an esti- mated capital cost of £ 300,000, and at least one grazing area for the permanent settlement of Fulani herdsmen should be financed by the regional development corporation. This scheme would in- volve estimated expenditures of £ 1 million in the next five years and a correspondingly larger amount if more than one ranch should be established. 5. The regional development corporation should set up live- stock fattening centers near railheads and dairy farms in Kano and Jos, either alone or in co-operation with private African capital or native treasuries. We have projected £ 800.000 for the fattening centers and £ 150,000 for dairy farms.4 Western Region The Western Regional Department of Agriculture will require new headquarters, separate from Moor Plantation. We recommend capital expenditure of £ 300,000 for the establishment of a sub-unit of the West African Cocoa Research Institute in Ibadan; we think that the region would greatly benefit if cocoa research were carried on in the center of Nigerian cocoa production. We propose an increase of recurrent expenditure for the agricultural services between 1955 and 1960 from £ 500,000 to £ 640,000, a large part of which-£ 210,000 by 1959-60-we suggest be allocated to extension and related activities on cocoa. The control of black pod. capsids and swollen shoot disease and the provision of technical guid- ance in the replacement of old trees and new plantings require the 4 Projections for expenditure on other, minor, activities of the agricultural and veterinary services appear in Technical Report No. 10. 46 TlIE CENERAL REPORT concentrated attention of the agricultural department. Soil surveys, for wvhich we recommend expenditures rising from £ 70,000 to £ 90,000 in the next five years, should assist in locating more land suitable for cocoa planting. We have made no provision for capital expenditure on cocoa by the regional government because we believe it can be financed by individual cocoa farmers, with the assistance of the Co-operative Bank if necessary. We recommend, however, that the Western development corporation invest £ 500,000 to £ 1 million in cocoa plantations in partnership with producers' co- operatives and local authorities. We also propose that more planta- tions, including oil palm, coconut, citrus fruit and rubber plantations, be established through partnership arrangements and that £ 2 million be allocated for this purpose. We believe that experiments with trypanosome-resistant cattle have been sufficiently successful to warrant an expansion of the livestock development program; we have therefore projected £ 50,000 as capital expenditure for regional livestock farms. We have also allocated £ 25,000 of capital expenditure and £ 12,000 of annual recurrent expenditure for the encouragement of poultry farming. We believe that livestock production deserves the attention of the regional develop- ment corporation as well, and that it should establish livestock breed- ing centers; we have projected expenditure of £ 100,000 for this purpose. We also propose that the development corporation establish a town dairy in Ibadan and expand the one at Agege, serving Lagos; for this we estimate capital requirements to be t 100,000. Eastern Region Because some areas of the East are confronted with the twofold threat of soil depletion and insufficient local food supply, ve recommend a substantial expansion of the regional agricultural department. We have therefore projected an increase in recurrent expenditures between 1955 and 1960 from £ 180,000 to £ 250,000. We recommend that the increased staff be primarily used to strengthen the extension service, which slhould give special attention to the replacement of over-age oil palm stands by more widely spaced stands, and to soil improvement, especially of the available soil nitro- gen level for the staple crops of cassava and yams intercropped in the palm stands. An oil palm-fertilizer program should have the financial support of the regional development corporation, which AN INTEGRATED DEVELOPMENT P'ROGRAMi 47 should set up partnership schemes with producers' co-operatives and rural communities for the establishment of oil palm plantations. We recommend that the corporation set aside £ 1 million for this purpose. We also propose that the corporation assist in the financing of fer- tilizer imports but suggest that it be reimbursed by the agricultural department for fertilizer used or distributed for clemonstration pur- poses. Another program which in our opinion requires the attention of both the agricultural department and the development corporation is the expansion of rice production in the mangrove swamp areas. We project an increase from £ 10,000 to £ 18,000 in recurrent expenditure by the department for technical and supervisory personnel and recom- mend that the development corporation set aside £ 1 million for bringing up to 100,000 acres of swamp land under cultivation. We also recommend that the development corporation expand its present program for the establishment of coconut, cashew nut and rubber plantations and we allocate £ 2 million for this purpose. The agricultural department should continue to run the agricul- tural school recently established in Umuahia and should make exten- sive use of the school facilities for experimental work. We project an increase in the recurrent expenditures from £ 15,000 to £ 36,000 in the next five years and recommend capital expenditure for additional facilities of £ 25,000, over and above the appropriations made to the school in 1953-54 and 1954-55. We also recommend that the agricultural department continue ex- perimentation with mechanical equipment; we propose expenditure of £ 55,000 for the importation of agricultural machinery. We also recommend allocation of £ 70,000 as capital expenditure for an expan- sion of the department's soil conservation program and a sharp rise in recurrent expenditures from £ 5,000 to £ 50,000 per year for seeds, hand labor and other outlays in connection with the preparation of pasture land. We believe that expenditure of this magnitude is necessary to permit establishing a number of pilot demonstration projects to familiarize Nigerian farmers with modern techniques of soil conservation and land preparation and to induce them to adopt these techniques. 48 THE GENERAL REPORT Southern Cameroons For the Southern Cameroons, we recommend the establishment of a department of agriculture, a veterinary depart- ment, and an agricultural school. For agricultural purposes we have allocated capital expenditure totaling £ 170,000 and recurrent expendi- ture rising from £ 50,000 to £ 95,000 in the next five years. For veterinary services we propose capital expenditure of £ 27,000 and recurrent expenditure rising from £ 15,00o to £ 30,000. A substan- tial proportion of the work of both the agricultural and veterinary services should be devoted to extension activities. The need for im- proved production methods is particularly great in some of the more remote parts of the region. In Chapter 4 we recommend the establishment of a separate develop- ment agency for the Southern Cameroons. We suggest that this insti- tution finance and manage partnership schemes for the development of rubber, banana and oil palm plantations; establish a cattle and dairy ranch in Bamenda; and take over the coffee plantation in Ba- menda Province established by the Eastern Regional Production De- velopment Board. We also recommend in Chapter 4 that the agency obtain capital funds of £ 1 million and a share of the capital of the Eastern board. We believe that the sum of these funds ( £ 1.3 million) would be sufficient to finance these projects in the next five years. Support of the Co-operative Movement The mission believes that the co-operative movement, which has grown fast in recent years, can become an effective instrument for agricultural development. We therefore recommend that government assistance in the organization of co-operative societies and the train- ing of officials be expanded as fast as personnel can be recruited. We propose that expenditures of the regional governments for these pur- poses be greatly increased in the next five years, and therefore have projected recurrent expenditures rising between 1955 and 1960 from £ 135,000 to £ 255,000. These figures include provision for strength- ening the co-operative school in the Western Region, which should serve as a training center for officials from other regions as well. However, we do not recommend that a large amount of financial assistance be given to co-operative societies because we think that AN INTEGRATED DEVELOPMENT PROGRAM 49 the growth of the co-operative movement depends primarily on mem- bership co-operation and not on financial support from the outside. We propose only that the Eastern regional government make interest- free loans totalling £ 150,000 to the regional co-operative union for establishment of a co-operative bank, and that in the Northern Region and the Southern Cameroons the appropriations of the co-operative department include £ 5,000 per annum as assistance funds to co- operative societies and unions. II WATER RESOURCES5 Nigeria as a whole has ample wvater resources, though they are subject to great regional and seasonal variation. At present, however, the planning of major irrigation, flood control, navigation and hydro- electric schemes is hampered by the paucity of data on run-off, evapo- ration, river levels and river flow. What information exists is scattered among several agencies. To expand and centralize the collection of this information, vital to major water control projects, the mission recommends the establishment of a federal department of hydrology. The department should collect detailed information about the be- havior of Nigerian rivers and should hold this information ready for studies of flood control, irrigation and reclamation projects, as well as for navigation and hydroelectric schemes. It should establish a small laboratory for salt and silt analysis of water and for the study of simple models of water control projects. Establishment of the service would, we estimate, involve a capital cost of £ 120,000, with annual recurrent costs rising to £ 130,000 in 1960. The work of the department, proceeding simultaneously with the operation of small irrigation projects by the Northern agricultural departmrent, should after a few years provide a body of data and experience which can be used in undertaking larger projects of benefit to agriculture. Because of the importance of the Niger and Benue rivers, not only for agricultural schemes but also for navigation, the collection of data about them is of special urgency. Since the proposed department of hydrology cannot be organized soon enough to undertake survey of 5 See Technical Report No. 12. 50 TFHE GENERAL REPORT these rivers in the near future, we endorse the plan to have the work performed by outside engineering consultants. Work on the Niger and Benue should be conducted in close consultation with authorities in the French territories through which the rivers pass. We there- fore recommend establishment of a Niger basin permanent advisory committee, composed of representatives of interested governments, which would collect and co-ordinate information relating to the basin, arrange for exchange of river data, co-ordinate surveys and evaluate proposed projects. iII INDUSTRY' Interest in industrialization is intense and articulate. Many Nigerian leaders are hopeful that industrial expansion can be brought about quickly and that through it there can be an early and marked improve- ment in living standards. The mission believes that these hopes over- emphasize the contribution which industry can make in the foreseeable future and that it would be unwise to count on more than a modest expansion in the next few years. Nevertheless, a balanced develop- ment program requires that every encouragement be given to the establishment of industry. Nigeria has the manpower, raw materials, capital and markets for a greater volume of industrial activity than exists today. Our principal recommendations in the industrial sphere are for measures by which the federal and regional governments and the public development agencies can help to remove the obstacles to industrial development. The low level of industrial production is the result of a combination of factors, some of which have been discussed in Chapter 2. Although the labor supply is ample, the number of skilled workmen is still small. There is a lack of technological and managerial experience and little is known about the industrial possi- bilities of many Nigerian products. Moreover, successful Nigerian businessmen are reluctant to invest in industry as contrasted to trade, which promises quicker rewards, while the smaller businessman gen- erally does not possess sufficient capital to start an enterprise by 6 See Technical Report No. 13. AN INTEGRATED DEVELOPMENT PROGRAm 51 himself. In addition, the development agencies have not always given sufficient support to private entrepreneurial initiative and they have sometimes discouraged the entry of foreign capital by their cautious attitude, reflecting the uncertainty of Nigerian political leaders about the extent to which they wish foreign capital to participate in indus- trial expansion. The main objective of industrial development policy should be to encourage the establishment of a variety of small and medium-sized enterprises. This variety of venture is necessary to build the supply of skills and of management and business experience which can form the basis of a later, more impressive industrial expansion. However, it may soon be practicable for a few larger projects, such as a cement plant and textile mills, to be undertaken. To foster industrial growth in general, we make the following recommendations: 1. Technical and Management Assistance. We recommend that government assistance be given to private industrial enterprises on problems of industrial technology and management. In the past the central Department of Commerce and Industries has given much useful help in this direction. We propose that in the future this assistance be provided by "industrial development officers" placed with each of the regional development corporations. We estimate that the annual cost of the services of these officers will rise to £ 300,000 by 1960, to be shared equally by the development cor- porations and the regional governments.' 2. Training of Skilled Manpower. It is the mission's opinion that most of the skilled workmen required by industry will have to be trained on the job. Experience of large enterprises has shown that Nigerians, when properly trained and supervised, make good industrial workers. More formal preliminary training is required for supervisory personnel. As discussed elsewhere in this chapter, we recommend for this purpose the strengthening and expansion of technical schools. 3. Technical Research. We propose the creation of an institute of applied technical research which would build up staff, labora- 7For our recommendations as to financial assistance to be offered by the develop- ment corporation, see Chapter 4, p. 94. 52 THE GENERAL REPORT tories and experimental plant to conduct research into the indus- trial uses of a variety of products. In exploring the possibilities of new industries, operating pilot plants, improving local crafts and encouraging wider use of local materials, Nigerian authorities have been drawn increasingly into applied technical research and experi- mental development. We recommend that these activities be brought together in a specialized institution. The institute, for which we recommend an expendable endow- ment of £ 480,000 from the federal government, for use over the next five years, should undertake studies requested by government agencies or private.firms on a reimbursable basis. Among the re- search projects which the institute might undertake are studies of the commercial properties of Nigerian woods; extraction of local tannins, gums, resins, dyes and drugs; commercial processing of shea butter and various lesser oil-seeds; groundnut and palm by- products; local extenders for wheat flour; mechanized gari pro- duction; improved processing of local fibers; possible uses for coastal bituminous sands; analysis and commercial use of various Nigerian brines; and beneficiation of Enugu coal. 4. Aid to Pioneer Industries. We think that the Aid to Pioneer Industries Ordinance can be a useful device for attracting both do- mestic and foreign capital to Nigerian industry, if liberally inter- preted. Under this legislation, enacted in 1952, enterprises in fields of industry not established in Nigeria, or not sufficiently represented there, may qualify for tax relief. Eligibility for this relief is de- pendent on a finding that encouragement of the industry and of the particular enterprise is "expedient in the public interest." By the end of 1953 no tax relief bad yet been granted. At the present stage of Nigerian development, the objective should be to promote the establishment of all types of industry; there is no need to be concerned about overproduction in any field. We therefore recom- mend that expediency in the public interest be interpreted to permit the benefits of the ordinance to be extended to virtually any new industrial venture. The cost to the government, at most the loss of five years' income tax, is in our view not too high a price to pay if industrial expansion is desired. 5. Industrial Estates. To encourage and assist prospective entre- AN INTEGRATED DEVELOPMENT PROGRAM 53 preneurs, especially Nigerians, we recommend the establishment by the regional development corporations of "industrial estates," fac- tory buildings to be rented out to small industries and workshops. We suggest that the Northern, Western and Eastern corporations each set aside £ 250,000 for this purpose. 6. Industrial Sites. Good industrial 'sites are hard to obtain in Nigeria. Under existing land laws foreign, and in some circum- stances Nigerian, enterprise requires government permission to occupy a site. We recommend that this permission be freely granted. We also recommend that communities take the initiative by offering suitable sites to industry. While we believe that government policy should emphasize the support and encouragement of private endeavor, we recognize that under present Nigerian conditions government and the public agencies may in some instances have to take the initiative in establishing in- dustrial projects. Such a course can accelerate industrial develop- ment, provided two general principles are observed. First, the ven- ture should be operated by experienced management, which in the case of large enterprises would have to be a foreign manufacturer, preferably one willing to contribute to the capital. Second, govern- ment should stand ready at all times to sell all or part of its interest to private investors. We believe that there are good possibilities for development in a number of industrial fields such as cement, textiles, and oilseed and food processing; a number of projects are being actively considered by potential foreign investors. In Technical Report No. 13 will be found comments on specific projects and industries. It may be necessary that the government contribute toward the financing of some of the enterprises. £ 1.2 million has already been appropriated by the cen- tral government for a proposed cement plant, for example. Since no specific projects have been developed beyond the preliminary stage and since it is not possible to forecast what proportion of the capital may be provided by participating private interests, we are unable to estimate the amount of investment in industrial projects to be made by the development corporations in the next five years. We recom- mend in Chapter 4, however, that a total of £ 12 million be made available to them by the various governments. These funds, together 54 THE GENERAL REPORT with existing resources, should enable them to engage in a substantial volume of industrial financing, in addition to the financing of agri- cultural projects recommended in the preceding section. We have projected recurrent government expenditures on industrial promotion to rise from just under £ 200,000 in 1952-53 to £ 360,000 in 1959-60. Capital expenditure over the five years 1955-60 is esti- mated at £ 6.75 million, primarily for grants to the development corporations and for the endowment of the technical research institute. iv MINING8 The Plateau area of Nigeria produces large quantities of tin and nearly all the world's output of columbite, a metal used increasingly in the manufacture of alloys capable of resisting high temperature. The high price of columbite, most of which is won in conjunction with tin, has sustained the prosperity of the mining companies even in times of falling tin prices. Nigeria is now the world's sixth largest producer of tin, producing about 8,000 tons of metallic tin annually; annual production of columbite is about 1,400 tons. The mission has no major recommendations to make with respect to the tin mining industry. It believes, however, that liaison between government and the mining industry would be considerably strength- ened by more frequent meetings between government and both Euro- pean and African mining associations. Among the current problems which could be usefully discussed at these meetings is the possibility of replacing the system of crop compensation for African occupants of mining lands. Coal deposits at Enugu in the Eastern Region are worked by the Nigerian Coal Corporation, a statutory corporation. The coal is a non-coking variety. Present output is about 600,000 tons a year, roughly two-thirds of which is consumed by the railway. The mis- sion's recommendation that the railway be gradually dieselized will not affect its coal consumption during the next decade for reasons explained in Technical Report No. 16. The condition of the Enugu coal mining industry is not good: pro- duction costs are high, productivity is declining in two of the three 8 See Technical Report No. 14. AN INTEGRATED DEVELOPIMEINT I'ROGRAM 55 mines worked, the coal being marketed is inferior in quality and labor relations have been difficult. All these factors have contributed to the loss of once-important export markets. Reduced costs are essential to the future of the industry. We believe that more efficient output could be obtained by revising the wage structure to offer an incentive for higher productivity. As an initial step toward more efficient operation, we strongly advise that the new management arrange for a careful and detailed time-cost study by outside consul- tants. We have incorporated in our financial projections the Coal Corporation's estimate of £ 385,000 for capital expenditure from 1955 to 1960. We think, however, that final decisions on new capital projects in the collieries should be postponed until the study reveals what organizational and operating changes are necessary. There are substantial deposits of lignite in the Western Region, near Asaba on the Niger. The feasibility of their commercial de- velopment has not yet been determined, and shoulcl be explored as a logical sequence to the investigations recently completed by the Geological Survey. Promising deposits of lead and zinc are found in the Eastern Re- gion. British and American mining groups explored these fields after the war, without conclusive results. We think that these deposits are worthy of further exploration and wve suggest that if private groups willing to finance the whole cost of further exploration cannot be found, the government might assume a share of the cost and perhaps eventually even a share of the cost of exploitation. £ 350,000 has already been appropriated for this purpose; this sum will probably be more than ample. There are a few other minerals which show some promise of being commercially useful. Two low-grade iron deposits (near Lokoja in the Northern Region and near Enugu in the Eastern Region) have been investigated by the Geological Survey. The next step, we think, is experimentation to determine the feasibility of smelting the ores with Enugu coal. When exploration has proceeded further, the pos- sibility of interesting the steel industries of the United Kingdom and of other countries should be investigated. Hopes of Nigeria's becoming a petroleum producer were encouraged in 1953 when oil was found in the Eastern Region by the Shell-D'Arcy Petroleum Development Company of Nigeria, Ltd., which has been 56 THE GENERAL REPORT drilling for oil in the southern part of the country. The oil was not of a commercial grade but exploration is continuing. The mission believes that there are a number of ways in which the government might encourage private mining activities in Nigeria. In particular, we recommend an expansion of survey and geological survey services and of activities of the Department of Mines. There is a dearth of accurate topographical maps, one effect of which is to slow down routine mapping by the Geological Survey. We agree with the proposals of the Inspector-General of Surveys to accelerate survey work. One great problem is likely to be the continuing diffi- culty of recruiting experienced surveyors. In Chapter 4 we make recommendations for intensifying recruitment of technical personnel. We propose that the Geological Survey be enlarged by expanding the engineering, groundwater and drilling sections and by including a geophysical section. Again, the main difficulty in the way of this expansion will be staff recruitment. The Department of Mines should be enlarged by the addition of a mining section to engage in the ex- ploration of promising mineral occurrences, with the object of inter- esting private investors in their exploitation. We recommend that these expanded government services, geological survey and mining administration and exploration, be given recurrent appropriations rising to about £ 250,000 a year by 1960. Capital ex- penditure by government in the next five years would be about £ 500,000, including loans to the Coal Corporation. v ELECTRIC POWER' Although the 165.2 million kWh of electric power generated in 1952-53 was double the output in 1944 and four times that in 1941, it amounted to only 5 kWh per capita. By 1960 the level of consump- tion will still not be high, even for a country in an early stage of de- velopment, and consumers will be scattered throughout the country. Except for the output of a private power company supplying the tin mines (which consume 37%o of all power generated in Nigeria), and for small amounts generated by industrial enterprises for their 9 See Technical Report No. 15. AN INTEGRATED DEVELOPMENT PROGRAM 57 own use, all Nigeria's electricity is supplied by the Electricity Cor- poration of Nigeria (ECN), a statutory corporation, established in 1951 to operate publicly-owned power undertakings. Private power generation is permitted only under license, issued only when ECN is unable to provide electricity. In the expectation that the demand for power in towns now supplied by ECN will increase by an average of 15% per annum, we estimate the cost of expansion during 1955-60 at about £ 7 million, plus £ 1.4 million residual expenditure on projects now in hand. On the as- sumption that ECN will continue to raise its capital by borrowing from the federal government, we have included these amounts in our projections of government expenditure. In the first two years, new expenditure can be relatively small, for the stations now under con- struction at Lagos and at Oji River (between Enugu and Onitsha) will provide more power than will be required at those points for several years to come. Beginning in 1957, expenditure should be increased to ensure that a further extension of the station at Lagos will be in service in 1961. Much of the balance will need to be ex- pended at Ibadan and Kano, where demand from small industries is likely to grow. ECN's installations are small in size and widely separated. Only one of ECN's generating plants has an installed capacity of more than 5,000 kW. Power stations are not interconnected to any significant extent. Fifty-five per cent of ECN's sales of power are at Lagos, 12%o at Enugu and the balance is scattered among 18 towns. Most of ECN's output is from small steam or diesel plants, some old and inefficient. Our program provides for expansion of power supply by ECN in the next few years only for the purpose of meeting the demands of the smaller industrial, commercial and domestic consumers in areas already supplied with power. ECN's present policy is to decline to extend power supply to new areas; with this policy the mission agrees. Until present installations can be mnade to operate economically, it would be unwise to diffuse effort among new and untried ventures. Applications from industrial enterprises, both large and small, for licenses to generate power for their own use should be liberally granted. At the present low level of consumption, it will generally be more economical for the larger factories to be provided with their LIBRARY ECONOMIC DEVELOPMLT IN- ORGANIZED BY THE INTERNATIONAL BANK FOR DBCONSTRUCTION AND DEVELOPMENT WASHINGTON 25, D. C. 58 THE GENERAL REPORT own power plants than for ECN abruptly to expand an installation to meet the needs of a single consumer. The management of ECN has been considering several large de- velopment projects which appear to the mission to be overambitious at this stage. One is the construction of a large steam station located near the Asaba lignite deposits on the Niger, which could supply power to Lagos and the towns of the West over a 300-mile, 220 kV line. We believe that the cost of transmitting the small amounts of power likely to be required would be prohibitive for many years. A proposal to interconnect Lagos and Ibadan is subject to the same objection. ECN has also spent much time searching for suitable sites for hydroelectric development. The management has spoken of the possibility of developing the hydroelectric potential of the Southern Cameroons to feed an industrial expansion in the French Cameroons and has also been investigating the possibility of harnessing the Niger near Jebba. It is the mission's belief that many more years of flow measurement and survey will be required before major hydroelectric schemes can be undertaken without undue risk. This work should be taken over by the proposed department of hydrology (see p. 41). In addition to problems relating to future demand, ECN has un- solved operating problems, which have been reflected in large deficits for each year since it was established. It would be desirable for the independent study of ECN's affairs, about to be undertaken, to devote particular attention to the problem of costs. Some of the elements contributing to its high operating costs are beyond ECN's control, but in other respects we think the Corporation can effect economies. A prerequisite to solving this problem is to remedy accounting defi- ciencies, and, in particular, to prepare adequate cost analyses. In addition, the organization of the Corporation should be examined, to ascertain how the heavy expenses of the London headquarters and regional offices can be reduced. Rates are not high compared to those of other underdeveloped coun- tries. It may be necessary to increase them in order to stop the drain on public funds resulting from government financing of the deficit. In the long run, however, ECN must reduce its costs. MAP 1 LA GHA ,-v~~~~~~~~t I ( OR L;MY /t - uMAIUGI )z ( : ; _ aA RUA ( (-I ~ ~ F" _ YOLA; IBADAN ! IGERIA RAL TRANSPORTATION onal boundary - ads waterways air lines SCALE IN MILES 20 40 60 80 100 120 140 DECEMBER, 1953 AN INTEGRATED DEVELOPMENT PROGRAM 59 vi TRANSPORTATION AND COMMUNICATIONS'0 Except in the northeast and the Cameroons, Nigeria's transporta- tion system (shown on Map 1) is reasonably adequate in the sense that there are already extensive facilities and lines of communication. It is not adequate in the sense of being able to move, promptly and at reasonable cost, the present volume of traffic, let alone the increase anticipated during 1955-60. The volume of present traffic cannot be estimated with precision, for there are no statistics for road traffic and the figures for water transportation are incomplete. Our estimate of past and present dis- tribution of traffic among the various forms of transportation is shown in Table 2. TABLE 2 Estimated Distribution of Traffic (Million ton-miles) 1938-39 1948-49 1962-52 ,Rail ................... 315 66 658 63 827 61 Road ................... 100 21 300 29 400 30 Rivers and creeks, ........ 60 13 85 8 120 9 Air ................... - - - - 0.2 - Total ............ 475 100 1,043 100 1,347 100 It is estimated that 80% of this traffic is carried on the Niger and Benue Rivers. Improved transport facilities will have an immediately beneficial effect on the Nigerian economy and are essential for its further de- velopment. The mission therefore assigns them a high priority. The objective should be a countrywide system, adequate the year round to handle the traffic at reasonable cost. We have given first attention to the provision of facilities which are now urgently needed to round out the Nigerian transportation system. We have regarded facilities which would parallel existing ones as less urgent, without intending to suggest that such paralleling might not be desirable at some future time. For the transport portion of the development program, we propose capital expenditure totalling £ 37.9 million and recurrent expenditure 10 See Technical Reports Nos. 16-20. 60 THE GENERAL REPORT rising from £ 4.2 million in 1955-56 to £ 5.38 million in 1959-60, as compared to £ 2.8 million in 1952-53. A RAILWAY " The railway is just beginning to recover from serious postwar difficulties. Material shortages, labor troubles and greatly lowered efficiency, particularly in the locomotive workshops, so affected carry- ing capacity as to create the threat of a serious obstacle to the coun- try's development. This was most dramatically illustrated by the backlog of 185,000 tons of groundnuts piled up in tarpaulin-covered pyramids at northern stations in November 1953. Delivery of new engines and improved operating efficiency should make it possible, however, to clear this backlog by the end of 1955. We estimate a rise in traffic from 1,150 million ton-miles in 1955-56 to 1,460 million ton-miles in 1959-60. This projected increase of 5% per annum is in line with our expectation that exports of groundnuts and cotton will rise substantially, that the transport of domestic food- stuffs, including livestock, will increase and that large quantities of motor fuel will move north to satisfy the growing requirements of road transportation.'2 The principal problems to be solved during 1955-60 are how to meet these anticipated heavy traffic increases and to reduce rapidly mounting operating costs. These problems are aggravated by the fact that while northbound and southbound traffic were well balanced in 1952-53, there will be, we estimate, an annual preponderance of southbound traffic of about 230 million ton-miles between 1955 and 1960. We think these problems can and should be solved by employing more economical motive power and making maximum use of heavy trains. This will require more powerful engines, heavier track and more rolling stock than Nigeria has now. We do not believe, however, that it will be necessary to double-track any part of the system. At present, the railway is entirely steam-powered. We recommend that for more efficient and economical operation, steam traction should gradually be replaced by diesel electric traction starting in the North. 11 See Technical Report No. 16. 12 See Technical Reports Nos. 7, 8 and 17. AN INTEGRATED DEVELOPMENT PROGRAM 61 Basing our calculations on the experience of other African countries, we estimate that aggregate savings of nearly 50%o can be realized on expenditures for fuel, water and engine operation and maintenance. Ten 750 h.p. diesel engines have already been ordered for 1955 de- livery. The mission recommends the purchase of additional diesel equipment to meet 1955-60 motive power needs, at an estimated cost of £ 774,000 (13 750 h.p. engines for the main line, 10 300-400 h.p. engines for branches and shunting and five railcars). A program of gradual dieselization such as we have in mind will not affect the market for Enugu coal for another 10 years, because the stock of coal-burning locomotives will continue in service and will be fully utilized. For the heavily-travelled Enugu-Port Harcourt section, a survey should be made to determine the feasibility of electric traction over the long term, assuming that a general electrification program is instituted for that area. About 800 30-ton freight cars of various types are needed, for which we have allocated £ 2 million. It has been typical of the past operations that there has been, in stock or on order, equipment ade- quate to meet minimum needs only. As we foresee a long-term rise in traffic demand, we find no justification for such a policy. Equipment shortages should be avoided even at the risk of temporary surpluses. As for track, the main lines are for the most part laid with only 60 lb./yd. rail. As renewals become necessary, these lines should be relaid with 80 lb./yd. track, with which only the Lagos-Jebba section is now equipped. Renewal of the Port Harcourt-Enugu section, already planned, should be undertaken promptly so that it will be ready to handle the increased traffic which may be expected after completion of the proposed wharf extension at Port Harcourt."3 The railway has planned to re-lay the narrow-gauge Bauchi Light Railway between Zaria and Jos. Since this line carries very light traffic, which is un- likely to increase substantially, and since it operates at a deficit, we recommend that it be closed and replaced by a road transport service. The lack of transport facilities is impeding the development of the northeast, which has a considerable agricultural potential. There is also a need for improved facilities to serve the transit traffic with the French Chad territory. These needs could be met either by extending 13 See p. 65. 62 THE GENERAL REPORT the railway to Maiduguri or by tarring the Jos-Maiduguri road for two lanes. Three possible routes for a railway extension have been pro- posed. One of them, via Zaria-Rahama, if modified to pass through Bauchi, would seem to us to have merit. In addition we suggest con- sideration of a route via Jos-Bauchi. We recommend a survey of these routes, over both of which connections could be made with the eastern main line. When the relative advantages of these two routes are known and can be compared with the advantages of the road, either the road or the rail project should be undertaken promptly. We think the only railway extension immediately justified is one of 40 miles from Nguru to Gashua, to give better service to that part of the Northern Region where no all-weather road exists. The extension could be laid with track taken up elsewhere; no additional motive power or rolling stock would be required. We have allocated £ 400,000 for this extension. Total capital expenditures recommended by the mission (including, in addition to the items specifically discussed, expenditures on build- ings, stations, workshops, machinery, etc.) amount to £ 9 million. We estimate that £ 5.4 million of this amount can be met from the railway's profits; we have projected government loans for the balance. On the basis of our traffic estimates, and on the assumption that the efficiency of operation and maintenance will continue to improve, we foresee a substantial margin of profit over the period 1955-60. We suggest, therefore, that the railway consider the possibility of lowering rates, to aid the country's production and trade. A review of the rate structure should also take account of increasing road competition. B ROADS 14 The Nigerian road system was estimated in 1953 at 29,000 miles, approximately one mile of road per 14 square miles, a high road density for Africa. But some of this mileage consists of mere tracks and much of it is not passable during the rainy seasons. Only 1,900 miles of road were bituminous, over half of them in the West. The number of vehicles in operation at the end of 1953 was 23,000, about half commercial. We estimate that the number of vehicles will increase 14 See Technical Report No. 17. AN INTEGRATED DEVELOPMENT PROGRAM 63 by 15%o per year, so that by 1960 approximately 60,000 vehicles will be on the roads. There is a need for heavy trailer-trucks for long- distance traffic but at present they are permitted to operate only be- tween Jos, Maiduguri and Fort Lamy in the dry season. Administratively, Nigerian roads are classified as Trunk Roads A, financed by the central government; Trunk Roads B, financed by the regions; and local roads, which are the responsibility of various local governments and authorities. An adequate network of about 6,000 miles of Trunk Roads A was planned in 1946. We have allocated £ 2 million for its completion during 1955-60, but we suggest that the projected construction of about 200 miles of the Bamenda-Yola road be deferred in view of the anticipated completion of the connection via Takum. The emphasis of the 1955-60 program should be on adapting the Trunk Roads A system to denser and heavier traffic. This means widening, straightening and tarring roads, and reinforcing and re- placing prewar bridges, designed for an eight-ton load only. We pro- pose a number of arteries for heavy-weight traffic aggregating 1,700 miles, limited to the hinterland of the ports, an east-west connection and the area beyond the railway line in the North. They should be two-lane bituminous roads and should have bridges capable of carrying 12 units B.S.,"5 permitting heavy trailer-truck traffic. The many short single-lane bridges constitute a serious traffic hazard; they should be widened to two lanes. Since we think that for the time being the railway should remain the principal heavy-traffic connection between Lagos and the North. we do not recommend that the Lagos-Kano road be brought up to the above specifications. Pending a decision on the alternatives of rail versus road transport for Bornu Province, the Jos-Maiduguri road should be tarred for one lane only. We have allocated £ 10.5 million for the heavy-weight traffic arteries program and £ 1.5 million for improvement of the Lagos road network, consisting of a four-lane road connecting Carter Bridge with the port and the industrial area of Apapa, and a connection running to the west of the city between Apapa and Ikeja airport. We recommend an extension of the Trunk Roads B mileage and 15 British Standard. 64 THE GENERAL REPORT tarring of all Southern Trunk Roads B. In the North, roads should be tarred at a lower traffic density than is now the rule. The 1960 goal for the North should be 5,000 miles of Trunk Roads B, of which 1,000 would be tarred. We estimate that capital expenditures by the regional governments would total £ 7.5 million for the five-year period. The present poor quality of road surfaces is due in part to primi- tive work methods. We recommend that tarring be mechanized. Maintenance of earth roads, especially in the North, presents special problems. There is no doubt that mechanized maintenance could greatly improve the quality of the roads. However, before it is adopted for roads throughout the country, we recommend the experimental introduction of mechanized maintenance on one heavily travelled sector, to enable the authorities to become more familiar with the problems of organization and maintenance. At the same time manual maintenance should be improved, chiefly by. better supervision. The greatly increased road activities recommended for 1955-60 require, in our opinion, some organizational changes. At present, Trunk Roads A and B are the responsibility of the Public Works De- partment, which also performs a number of other tasks. We recom- mend separate road departments for the federal government and for the Northern Region. In the other regions, the regional public works departments will be able to give sufficient attention to road problems. We further recommend that the federal road department be placed under the jurisdiction of the Minister of Transport, to assure co- ordination of transport policy. Capital expenditures for roads recommended by the mission total £ 25 million. Recurrent expenditure is projected to rise from £ 2.5 million in 1955-56 to £ 3.4 million in 1959-60 as against an estimated £ 2.2 million in 1953-54. A program of this magnitude will require not only intensified training of Nigerian staff and recruitment of expatriate staff, but also a much greater reliance on private contrac- tors than has been customary heretofore. We recommend that the contracts to be let call for sufficient work and run for a sufficient period to be attractive to private contractors; international competitive bids should be invited. 66 THE GENERAL REPORT new Lagos-Benin road and the Apapa Wharf extension have been in operation for a while. We have allocated £ 5.8 million for ports and other marine improve- ments. Inland Waterways Nigeria has an extensive inland waterways system. More than 1,000 miles of the Niger and its tributary the Benue are navigable for at least part of the year and a network of navigable creeks stretches from the western border of Nigeria to Opobo in the Eastern Region. Including other waterways, a total of 4,000 miles is in regular use. Silting of the entrances of the huge Niger delta and the short period of navigability of much of the Niger and the Benue pose serious prob- lems which until recently have not received the necessary attention. In 1953, however, an independent engineering survey of the delta was undertaken with the object of finding an entrance with a satisfac- tory and maintainable draught, to be followed in 1955 by a complete survey of the two rivers (see p. 49). Year-round navigation of the Niger is possible as far as Onitsha only; the railway terminus of Baro, a transshipment port for groundnuts, can be reached for eight months. The Benue is navigable up to Yola for only four months, while Garua in the French Cameroons can be reached for no more than 10 weeks. For this reason, the river transport companies find it uneconomical to expand their fleets to a size which could take care of all traffic, but new "push-tow" tugs, recently introduced, have increased the fleet's carrying capacity. If the projected river basin study discloses the technical feasibility of major improvements, their economic justification should be judged in the light of the traffic outlook and of the possibility of co-ordinating the river improvements with irrigation schemes and the development of agricultural production in the Middle Belt. For surveys of and improvements to inland waterways, £ 800,000 has been allocated in the mission's recommended program. Organization The Nigeria Marine, a government department, is the Nigerian harbor authority. It is also responsible for inland waterways and has AN INTEGRATED DEVELOPMENT PROGRAM 65 C PORTS AND INLAND WATERWAYS 16 Ports The nine Nigerian ports open to ocean-going vessels handled a total of 3.7 million tons of cargo in 1953, three-quarters of that total at Lagos and Port Harcourt. Over the past five years, cargo in foreign trade has increased by 50% in Lagos and by 80% in Port Harcourt, seriously straining these ports' 'resources and leading to costly delays. A major program of extension and improvement of Apapa Wharf at Lagos is well under way. The planned annual capacity of 1.4 million tons should be adequate for the near future. Customs Wharf on Lagos Island is badly in need of repair, but as the volume of its traffic is likely to decrease in favor of Apapa, it may be advisable to close Customs Wharf and concentrate traffic at Apapa, which should then be further extended. We suggest that an estimate of the cost of rehabilitation be made but recommend that no extensive work be undertaken until a decision is reached as to the wharf's future. Facilities at Port Harcourt, which are already inadequate to handle present traffic, face increased demands. The port and the eastern rail- way line are growing in importance as northeastern traffic grows. Major improvements to the port, including additional pier and lighter- age berths and better road access, estimated to cost roughly £ 2 mil- lion, are being considered. These improvements are badly needed and we urge that the necessary preliminary surveys be made promptly so that the work can be begun in 1955. The other ports, which serve a limited hinterland or are transship- ment ports for river traffic, present no problem, with the exception of Sapele where traffic must use a ferry. To avoid this, it has been pro- posed to construct a port at Koko, some 30 miles away, to which would be diverted all traffic except timber now using Sapele. We are not convinced that the proposal is economically justified and we urge that a careful comparative survey be made of the cost of building a port at Koko, together with housing, roads and power, and of con- structing a wharf and warehouse on the river opposite Sapele. No final decision on either alternative should be taken until it can be seen what changes in volume and direction of traffic occur after the 16 See Technical Report No. 18. AN INTEGRATED DEVELOPMENT PROGRAM 67 a number of other functions. A Ports Authority is to be set up to take over the Marine's harbor functions and to operate the publicly- owned wharves, now operated by the railway, by the Customs Depart- ment and by other agencies. Lagos and Port Harcourt will un- doubtedly benefit from the unified and integrated port operations made possible by the new form of organization. The Marine's non-port functions will be exercised by a "Marine Department" within the Authority. In order to insure that this reorganization will not result in too little attention being paid to the inland waterways problems, we recommend the organization of a separate inland waterways section of the Marine Department as soon as possible. D CIVIL AVIATION 17 Nigerian air transport is operated by the West African Airways Corporation (WAAC), an interterritorial statutory corporation serving Nigeria, the Gold Coast, Sierra Leone and the Gambia. There are 28 airports and landing grounds in Nigeria, including the international airports of Lagos and Kano, the latter being an important transit port. We see no need for additional airpprts. We do recommend improve- ments necessary to adapt all runways to use by the B-170 planes of the WAAC fleet, and the extension of runway lighting, now installed only at Kano and Lagos, to other airports. A new terminal is planned for Kano. At other terminals only minor improvements are needed. Radio equipment will be required to extend and improve the com- munications system. We estimate the cost of the foregoing improvements at £ 1.4 million. In April 1954, WAAC substantially reorganized its Nigerian op- erations in an effort to reduce its deficit, which has grown annually despite steady increases in passenger and freight traffic. Cost of op- eration has been high, due in part to low aircraft utilization (because of short flight stages and lack of runway lighting), but in greater measure to the uneconomical use of small planes for most of the first- class services. The success of its second-class services, operated with larger planes, led WAAC in April 1954 to institute a single-class service on its main lines, operated at reduced frequencies by 45-seater B-170's. The fare of 6d. per passenger mile is slightly above the 17 See Technical Report No. 19. 68 THE GENERAL REPORT former. second-class rate. We think that this plan should reduce op- erating and maintenance costs and should soon result in self-support- ing main lines which will offer more frequent service as traffic expands. But we also think that consideration might be given to the feasibility of increasing revenue by offering some more comfortable first-class seats on these planes at higher rates. The northern secondary lines will not be self-supporting for some time to come. WAAC deficits are made up by contributions of the four territorial governments, Nigeria customarily contributing from 70% to 75%. We have allocated £ 750,000 for Nigeria's contribution to WAAC's deficit over 1955-60. To permit a more realistic allocation of the deficit, we recommend that separate operating accounts be kept for intercolonial, Nigerian main, and Nigerian secondary lines. For fleet expansion wve have allocated a token £ 200,000. E COMMUNICATIONS 8 Nigeria's comrnunications services are at the moment inefficient and slow. The postal service is handicapped by a shortage of staff and plans for extending the service by building new post offices have been held up because the Public Works Department is occupied with more urgent work. Urban telephone service has been improving but long-distance telephone service is erratic and does not connect all large centers. The Posts and Telegraphs Department has undertaken a pro- gram of expansion of the VHF (very high frequency) radio-telephone system, which should result in marked improvements. Telegraph service is very poor; we think this is largely because of a system of overtime wage payments that acts as a deterrent to efficiency. The postal service is now being surveyed by experts from the British Post Office and it is to be hoped that the survey will lead to a substantial improvement in service. The staff position can be bet- tered only by energetic training and recruitment campaigns. The building program could be speeded up by turning large portions of it bver to private contractors. Recruitment of additional skilled mainte- nance linesmen and a revision of the wage system would result in im- proved telegraph service. These steps should be taken as soon as pos- 1s See Technical Report No. 20. AN INTEGRATED DEVELOPMENT PROGRAM 69 sible, for Nigeria's economic expansion will demand much more efficient telecommunications than now exist. The Nigerian Broadcasting Service has an ambitious expansion program for the next three years. Although the mission did not ex- amine the program in detail, it feels that the plan should be stretched out over the five years to 1960 at least, to avoid competing with other claims for skilled manpower. Expansion of telecommunications and the postal service will re- quire capital expenditure of £ 3.7 million in the five years 1955-60. The capital cost of the broadcasting program is £ 1.1 million. Re- current expenditure for the operation of all these services will rise from £ 1.5 million in 1952-53 to £ 3.4 million in 1959-60. The mis- sion did not draw up a separate detailed communications program; our cost estimates are based on proposals of the government depart- ments concerned. vii EDUCATION19 Education in Nigeria has been undergoing remarkable expansion. Within the last two years both the Eastern and Western Regions have formulated plans for the early introduction of universal primary edu- cation and a rapid advance at the primary level is also being pro- posed in the North. Secondary and higher education are likewise expanding. The country's first technical schools are in the process of development. The intense and widespread desire in Nigeria for education is encouraging. Broadly-based education is an essential in providing the manpower for economic development. In the past, economic growth has been largely left to the efforts of expatriate entrepreneurs, ad- ministrators and technicians; the time has come to increase as speedily as possible the number of adequately trained Nigerians able effec- tively to contribute to that growth. However, the pace of educational advance and the formulation of a financial program for the period ahead are affected by a variety of factors, including popular interest in education,.financial resources, the extent of organizational and managerial ability and, most impor- 19 See Technical Report No. 21. 70 THlEl GENERAL REPORT tant, the number of trained teachers available. In view of the limiting effect of some of these factors, the mission doubts whether all of the currently planned educational programs can be accomplished as quickly as is desired. On the other hand, there are areas in which the mission feels that greater progress could be made. Primary Education It is estimated that at the beginning of 1953 only 20-25% of Nigeria's five million children between the ages of 7 and 14 were in school: about two out of five in the East, one out of three in the West, one out of four in the Southern Cameroons and one out of 20 in the North. The two most important limitations on progress toward universal primary education will be the rate at which trained teachers can be supplied and the magnitude of recurrent costs in relation to the pres- ent revenue levels. Our financial projections are based on our esti- mate that enrollment canl increase at a rate of 15% per year in the West, 10% in the North, 8% in the Southern Cameroons and 6% in the East. These rates mean a faster growth than heretofore. The West has set 1959 as the date by which all children of school age will be in primary school. Taking into account our estimate of a 15% annual growth, it seems improbable to the mission that the target can be reached before 1962. These rates of expansion are as high as the availability of trained teachers will allow. There are now in Nigeria some 42,000 teachers of whom less than 14,000 have had specialized teacher training; the remainder have not received an education beyond the first eight or even six years. In 1953, training centers produced only about 1,800 new teachers, to fill new posts and to serve as replacements. Programs now under way in all regions will almost double the output of trained teachers by 1958; we would favor additional expan- sion in the North and the East. In the East and in the Southern Cameroons there should also be an effort to increase the present very low ratio of trained teachers to students. Every effort should be made to make teaching as a career more attractive and to reduce the "wast- age" of trained teachers who leave the profession. To secure qualified staff for the teacher-training centers, the training departments at the AN INTEGRATED DEVELOPMENT PROGRAI%i 71 Nigerian College of Arts and at the institute of education of the University College, proposed below, should be developed promptly. Secondary Education Only 20,300 are enrolled in general secondary schools compared to over one million now in primary schools, although secondary educa- tion is the basic preparation for most responsible jobs and is manda- tory for any type of professional training. A doubling of the secondary school enrollment by 1960 would be a desirable target but we doubt its feasibility because of the difficulty of obtaining qualified teachers. We have therefore based our projec- tions on a 10% annual increase, except in the North where the dearth of secondary schools necessitates an extra effort and where we have projected an annual increase of 15%. Secondary school instruction is not now geared to the needs of the Nigerian student body and should be reoriented accordingly. Much has already been accomplished in this direction in the North but there is in the East and West a great deal of emphasis on the pattern of the English grammar school and on preparation for the Cambridge School Certificate examination. More emphasis should be placed on chem- istry, biology and physics (preparatory to training in medicine, health and nutrition), agriculture and handicrafts, and on such com- mercial and clerical subjects as bookkeeping, commercial law, short- hand and typing. Facilities for the training of secondary school teachers are ex- tremely limited. If the present dependence on expatriate staff is to be lessened, programs will have to be instituted or enlarged at the Nigerian College of Arts, Science and Technology and at the Uni- versity College. Technical Education Nigeria's 10-year plan for development and welfare has given a central place to training in technical skills. As a result, a program of technical education is now being developed in technical institutes, trade centers and handicraft centers in every region. 72 THE GENERAL REPORT The most advanced technical institute is at Yaba, near Lagos, which offers "senior" courses in electrical, mechanical and civil engineering, "junior" courses in subprofessional engineering, drafting, commerce, printing and woodworking, and teacher training in handicrafts, as well as shortened and part-time courses. These programs are highly effective. It is to be hoped that the similar institutes now being de- veloped at Enugu and Kaduna will be in full operation soon. Busi- ness and industry have been co-operating with the schools in providing supplementary training; there should be more of these arrangements. The mission recommends that the seven trade centers now being established should be reorganized and expanded. Instead of produc- ing a small number of skilled workmen, the centers should aim at providing the kind of training which will enable the students even- tually to hold supervisory positions. We suggest that the five-year course begin with two years of general education and that the follow- ing three years of specialized training include a year of on-the-job experience in industry. The handicraft centers and the home craft centers have been most beneficial and we suggest that additional cen- ters be set up all over the country. But technical training programs in schools, by their nature, cannot be expected to provide the type of skilled and semi-skilled workers in the mechanical and industrial trades who will be needed in increasing number as Nigeria's development proceeds. The mission believes that the most effective way of producing the required manipulative skills will be through training on the job-training within industry-as distinguished from instruction at organized trade schools. Every op- portunity should be taken to encourage the efforts of government agencies, private industry and organized labor to this end. Higher Education The establishment of the University College, Ibadan, was an im- portant step forward but Nigeria needs many times more college grad- uates than even the most optimistic plans could provide. Therefore we recommend that every effort be made to increase enrollment at the University, presently around 400, as quickly as possible. Added en- rollment would also reduce the present high operating cost per student. AN INTEGRATED DEVELOPMENT PROGRAM 73 At the same time the University College should offer a greater va- riety of courses. We recommend that an institute of education be established at the University to offer postgraduate study in education, that the faculty of agriculture be strengthened and a course in agri- cultural engineering be given, that faculties of forestry and veterinary medicine be established and that courses in applied economics be added to the curriculum. The Nigerian College of Arts, Science and Technology is a federal government institution with three branches, one in each region. It is designed to meet the need for a kind of higher education not normally offered by a university. The mission believes that it would be advan- tageous to divide the College into three parts and to vest operating responsibility in the regional governments, with the federal govern- ment contributing to the running expenses and assuring the mainte- nance of minimum standards. We also have three specific suggestions: the agricultural schools now being operated by the agriculture depart- ments of the Northern and Western Regions should be consolidated with the branches of the Nigerian College at Zaria and Ibadan; phar- macy courses should be added at all three branches; and the courses in bookkeeping and accounting should be expanded both in the regu- lar program and by offering evening extension classes. As the educational program grows, there will be a growing demand for scholarships; the cost of advanced education is high for Nigeria. The mission's projections allow for moderate expansion, 5% per year, in the funds to be made available for this purpose by the federal and regional governments. However, present policies for granting scholar- ships should be reviewed and in the future preference should be given as far as possible to students whlo will study in Nigeria rather than abroad. Cost and Financing of Educational Expansion The educational expansion which we have projected would involve a very large increase in annual recurrent expenditure by all levels of government: from £ 6.3 million in 1953-54 to over £ 14 million in 1959-60. In the last year 56% of the recurrent expenditure would be on primary schools. Total capital expenditure would be likely to approach £ 14 million over the five years 1955-60. Of this amount, 74 THE GENERAL REPORT 34% wvould be for primary schools, 23% for secondary schools, 15% for teacher training, 17% for technical education and 1]0% for higher education. Broadly speaking, higher education should be financed by federal funds, secondary education by regional funds and primary education by local funds. The regions should, however, cQntribute substantially to primary schools, and to the regionalized branches of the Nigerian College. The mission urges particularly that the cost of primary edu- cation be financed to the greatest possible extent at the local level. In general, the greater the local responsibility for the cost of educa- tion the more genuine will be the community's interest in its schools. The mission wholeheartedly supports the policy statement of the gov- ernment of the Eastern Region that the rate of progress in this field should depend on the willingness of local authorities to finance the cost of expansion. We also think that the system of "rates" adopted by those Eastern local authorities which have chosen to move rapidly ahead is the most practical device for raising the necessary revenue. However, the precise financing arrangements and in particular the im- portance of regional grants must of necessity vary according to the cir- cumstances of each region. General Recommendations Finally, there are certain observations which apply broadly to Ni- gerian education and which have provided a basis for the mission's more specific recommendations set forth in Technical Report No. 21. 1. As the educational program (levelops, continuing thought and effort must be devoted to making instruction as beneficial to Ni- gerian students as possible. The closeness with which standards and practices developed in the United Kingdom have been followed in Nigeria can be a source both of pride and of concern-pride be- cause standards have been high and concern lest courses and methods of instruction might be adapted too slowly to Nigerian needs. 2. The recent constitutional revision has placed squarely on regional and local governments the responsibility for organizing, financing and supervising primary and secondary education. The AN INTEGRATED DEVELOPMENT PROGRAM 75 mission agrees with this in principle, as long as it does not impair the maintenance of uniform standards which will assure basically sound education in all regions; these are best administered cen- trally. The mission would like to see the federal government carry out functions of inspection, including interregional co-ordination, research and the administration of a modest program of special financial assistance to the regions. The exercise of some of these functions may require the delegation of authority by the regions to the federal government. 3. The Christian Missions which pioneered in education in Ni- geria are gradually being displaced as primary education becomes more and more a matter of public responsibility. We suggest that the Missions can still serve a useful purpose by providing instruc- tion of a quality and with emphases and values which public institu- tions cannot always offer. 4. The education of women in Nigeria suffers by comparison with the opportunities for men. Educational opportunities should be expanded and diversified to provide proper training for teaching posts and for employment in industry and government. viii MEDICAL AND HEALTH SERVICES The mission has formulated no detailed recommendations for medical and health services in Nigeria. It nevertheless attaches im- portance to their development, particularly of those services which can help to prevent disease. In this category are the plans now under consideration for a public sewerage system and for slum clearance projects in Lagos. We recommend slum clearance programs for Port Harcourt and Ibadan as well. In the case of federal expenditures on medical and health facilities, official proposals for expenditure have been incorporated in our projections. In the case of regional and local governments, we have made rough projections providing for a substantial rise in recurrent expenditure and for a moderate rise in capital expenditure. Our projections call for a rise in total recurrent expenditure on medical and health services from £ 3.6 million in 1952-53 to £ 7 million in 1959-60. Capital expenditure is projected to amount to £ 21 million during 1955-60. Of this, £ 5 million is for 76 THE GENERAL REPORT Lagos sewerage, £ 4 million for Lagos slum clearance, £ 3 million for slum clearance in the Western Region, £ 1 million for slum clearance in the Eastern Region and the balance for hospitals (including ex- panded general hospital facilities for Lagos), dispensaries and small public health projects. The mission attaches considerable importance to the attainment of higher nutritional standards through the production of higher-quality home-grown foods. Earlier reference is made to the need for research on soil, plant and animal production problems; such research will have an important bearing on the future elimination of disease, the availability of milk for children and an increased production of ani- mal protein generally. Public health improvement also calls for an expansion in the water supplies available in Nigerian towns and villages, and it is unfortunate that the provision of water supplies, both urban and rural, has re- cently had to be somewhat curtailed for lack of sufficient appropria- tions. We recommend that government expenditure on water re- sources 20 include £ 4.7 million capital expenditure between 1955 and 1960 on new urban water undertakings, much of which should be provided to local authorities as loans. In addition, the renewal and expansion of existing undertakings operated by the Public Works Department may require capital expenditure of £ 900,000. The recur- rent cost of urban water undertakings would rise from about £ 140,000 in 1953-54 to about £ 350,000 in 1959-60. There is also a need to continue providing new rural water sup- plies, especially in the North, where they are required not only for public health but also to make possible increased cattle production. The Northern Regional Public Works Department has been engaged in an extensive program of digging wells and, where the water is very far from the surface, drilling bore holes. We have projected continuing capital expenditure on this program, amounting to £ 3 million in five years. In the Eastern and Western Regions, we have allocated £ 880,000 for proposed capital expenditure on rural water supplies. Recurrent expenditure by the three regional governments would rise to £ 550,000 in 1959-60, from £ 260,000 in 1953-54. Local authorities can also make a substantial contribution to im- 20 See Technical Report No. 12. AN INTEGRATED DEVELOPMENT PROGRAM 77 provement of water supplies. We propose that their capital expendi- ture, exclusive of expenditure from loans from the regional govern- ments, amount to not less than £ 650,000 between 1955 and 1960. In 1953-54 they spent about £ 90,000 for this purpose. ix THE PATTERN OF EXPENDITURE The development program which we have outlined is summarized in Table 3. It proposes a rise in the expenditures of the various levels of government from. £ 51 million in 1952-53 to just under £ 100 million in 1959-60.21 Thus in six years public outlays would be almost doubled, while Nigeria's national income is not likely to rise by more than 20% in that period. From a relatively low 7.5% of the national income in 1952-53, government expenditure would mount to some 12% in 1959-60 on the basis of our projections. This figure is more in line with the level in other underdeveloped countries,2 though much lower than that in developed ones. The mission believes this expansion to be fully warranted, for, as we have pointed out, the public services have been inadequate to serve the economic and social needs of the country. As explained in Appendix C, the projections of Table 3 represent the mission's recommended expenditure program in the case of the sectors for which the mission has formulated detailed recommenda- tions; for other sectors we have projected expenditures at a fixed rate of increase, in most cases 3%o per annum. Annual projections of re- current expenditures reflect the pace at which, in our opinion, po- sitions can be filled and services expanded. Capital expenditures are shown in the years in which they are most likely to be incurred, al- though for this type of expenditure the five-year total is more sig- nificant than the annual figures. Table 4 gives the percentage composition of actual and recom- mended public expenditure by main sectors for 1952-53, 1955-56 and 2 Exclusive of the capital expenditures from nongovernuient funds made by statu- tory corporations, which totalled £ 5 million in 1952-53; our projections provide for their spending some £ 6 million in 1959-60. 22In British Guiana the proportion has in recent years been 17%, in Burma 12%, in Ceylon 15%, in Chile 15% and in Colombia 11%. TABLE 3 The Pattern of Public Expenditure (Million £) Projections of Mission Actual1 _ Total 1952-53 1955-56 1956-57 1957-58 1958-59 1959-60 1955-60 Recur- Cap- Recur- Cap- Recur- Cap- Recur- Cap- Recur- Cap- Recur- Cap- Recur- Cap- rent ital rent ital rent ital rent ital rent ital rent ital rent ital Agriculture2 w Government ............................... 2.5 .4 4.0 2.0 4.4 1.4 4.9 2.6 5.3 3.3 5.7 3.1 24.2 12.4 Statutory corporations3 ................ - 1.2 - 1.5 - 2.0 - 1.0 - .8 - 1.5 - 6.8 Industry, mining and power Government ................................ .5 2.1 .6 2.6 .6 .9 .7 3.0. .7 4.4 .7 4.9 3.2 15.8 Statutory corporations" ............... - 2.0 - 1.0 - 1.5 - .5 - .3 - 1.0 - 4.3 t Transportation4 Government ................................ 2.8 4.9 4.2 5.5 4.5 6.1 4.8 8.5 5.1 8.7 5.4 9.2 23.9 37.9 r Statutory corporations3 ............... - 1.4 - 3.4 - 3.4 - 3.5 - 3.4 - 3.4 - 17.1 0 Telecommunications ........... ............... 1.5 .6 2.2 1.0 2.5 1.0 2.7 .9 3.0 1.0 3.4 1.0 13.8 4.8 Water supplies ................ ............... .4 1.2 .7 1.4 .8 1.8 .9 2.1 .9 2.6 1.0 2.7 4.3 10.6 Miscellaneous public works ....... ............ 3.6 2.9 3.4 3.1 3.6 3.3 3.8 3.5 4.0 3.5 4.2 3.6 19.0 16.9 Education ................................... 5.3 3.1 9.4 3.0 10.5 3.1 11.7 2.6 12.9 2.4 14.2 2.4 58.8 13.6 Medical and public health services ..... ....... 3.6 .6 5.2 1.7 5.5 2.5 5.9 3.9 6.3 6.2 6.8 7.1 29.7 21.3 Administration, security, stirvey and miscellaneous Government ................ ............... 14.2 .8 18.6 1.2 19.2 1.2 19.7 1.1 20.3 1.1 20.8 1.1 98.5 5.8 Statutory corporations3 .............. . - .5 - - - - - - - - _ _ _ _ Total5 ....... 34.3 21.6 48.4 27.4 51.7 28.0 55.1 33.2 58.4 37.6 62.1 41.0 275.4 167.2 of which: Government5 ....... 34.3 16.5 48.4 21.5 51.7 21.1 55.1 28.2 58.4 33.1 62.1 35.1 275.4 139.0 Statutory corporations3 ............... - 5.1 - 5.9 - 6.9 - 5.0 - 4.5 - 5.9 - 28.2 ' Figures for local authorities are revised Estimates. 2 Including forestry, veterinary, marketing and exports, co-operatives, and fisheries. 3 Expenditure of funds other than those received from government. 4 Roads, harbors and waterways, railways, aviation. 5 Totals may not equal sum of columns becatise of rounding. SOURCE: Tables 1-11 in Appendix C. TABLE 4 Percentage Composition of Proposed Public Expenditure 1952-53 1955-56 1959-60 Recurrent Capital Total Recurrent Capital Total Recurrent Capital Total Agriculture .................................. 7.3 7.4 7.3 8.3 12.8 9.9 9.2 11.2 10.0 M Industry, mining and power ....... ............ 1.5 18.9 8.2 1.2 13.1 5.6 1.1 14.4 6.4 : Transportation ................ .............. 8.1 29.0 16.2 8.7 32.4 17.3 8.7 30.7 17.4 ; Telecommunications .......... ................ 4.4 2.8 3.7 4.6 3.6 4.2 5.5 2.4 4.3 tMI Water supplies . ............................... 1.2 5.5 2.9 1.4 5.1 2.8 1.6 6.6 3.6 0 Miscellaneous public works ....... ............ 10.5 13.3 11.6 7.0 11.3 8.6 6.8 8.8 7.6 m Education ................................... 15.4 14.3 15.0 19.5 10.9 16.4 22.8 5.9 16.1 < Medical and public health services ..... ........ 10.5 2.8 7.5 10.8 6.2 9.1 10.9 17.3 13.5 t Administration, etc . .......................... 41.3 6.0 27.6 38.5 4.4 26.2 33.4 2.7 21.2 e Total' .......... ..................... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 M ITotals may not equal sum of columns because of rounding. - SOURCE: Table 3. 0 80 THE GENERAL REPORT 1959-1960. By 1959-60, projected expenditure on agricultural serv- ices and projects amounts to 10% of total expenditure, as against 7.3% in 1952-53. Agriculture's share in recurrent expenditure is projected to rise during 1955-60, whereas capital expenditure would become relatively less important after the initial heavy investment in research facilities and staff quarters. The industrial sector would account for 6.4% of total expenditure in 1959-60. The comparison with 1952-53, when it accounted for 8.2%, is misleading: in that year large loans were made to the Elec- tricity and Coal Corporations, while recurrent expenditures included running expenses of certain power plants, since transferred to ECN. In fact, if electric power is excluded, the proportionate share of indus- try would double from 1952-53 to 1959-60. Transportation, which already accounted for one-sixth of total ex- penditure in 1952-53, would increase further in relative importance during the years 1955-60. The greatest proportional increase is recommended for the medical and health sector. It is to be noted, however, that this increase is due largely to proposed capital expenditure on slum clearance projects in Lagos, Port Harcourt and Ibadan and on a sewerage system in Lagos. Recurrent expenditure would remain a constant percentage of the total. The share of education in total expenditure, on the other hand, would show only a slight rise, from 15% to 16%o. However, recurrent expenditure for education would rise steeply and in 1959-60 would take almost 23% of total recurrent expenditure compared to 15% in 1952-53, while capital expenditure would decline because most of the facilities for University College, Ibadan, and the Nigerian College of Arts, Science and Technology will have been completed by 1959-60. Cost of general administration, security and miscellaneous activi- ties would decline in relation to expenditures for other sectors. A greater decline would have been projected were it not for expenditures on the additional administrative apparatus necessitated by the consti- tutional changes. CHAPTER 4 ORGANIZING THE DEVELOPMENT EFFORT The preceding chapter is concerned with our recommendations for expanded development activities by the federal, regional and local governments and by the several statutory bodies. This chapter ad- dresses itself to the organization of the development effort and to the role of a number of public agencies in that effort. It also sets forth the mission's proposal for a state bank. In making our 'recommendations, which involve the creation of new institutions and changes in existing ones, we have been mindful of the desirability of keeping to a minimum any further burdening of the administrative apparatus. In each case, we have carefully weighed the advantages of a proposed change against the added administrative burden which it would initially entail. We have paid particular attention to the implications of the pro- gression towards self-government, and of the federal system intro- duced by the revised constitution which has already made necessary a great number of organizational and administrative changes. We think that most of our recommendations can be carried out as part of this general reorganization. FORMULATION AND CO-ORDINATION OF ECONOMIC POLICY The limited availability of skilled manpower and the fact that funds, though now ample, are by no means inexhaustible, make it imperative that duplication of effort be avoided, that each part of the develop- ment program be related to the needs of the economy as a whole, and that priorities be assigned among public investment projects. Ultimate decision on these matters is a responsibility of government which cannot be delegated. But cabinet action should be based on staff work, and this should be done by an economic secretariat inde- pendent of the departmental government machinery. 81 82 THE GENERAL REPORT This report is to a certain extent illustrative of the kind of analysis such a staff would make. But we have made no more than a begin- ning. Our recommendations are necessarily based on the situation as it exists and as we expect it to develop; they must be studied, kept under constant review and modified in the light of changing circum- stances. In many instances we have not been able to recommend action, in the absence of necessary information; in those cases we have recommended surveys, studies and research. When their results become available, they will form the basis for further decision and action. In our view, Nigeria's present economic problems call for the creation of a special body to advise on economic policy and to propose, analyze and co-ordinate public investment programs. The machinery which we suggest for this purpose consists of an economic secretariat within the federal government, to provide staff services for an eco- nomic committee of the federal Council of Ministers. We also propose that there be regional counterparts of the economic committee and that there be created a national economic council in which the federal and regional governments would be represented. Economic Secretariat The economic secretariat, which would be responsible to the eco- nomic committee of the Council of Ministers, which we propose below, would have three principal functions: 1. To gather, analyze and evaluate information regarding the development potential of the country as a whole; to estimate the financial requirements of development projects and programs; and, generally, to prepare such studies and documentation as may be required by the economic committee of the Council of Ministers, including an appraisal of the economic situation for use in the preparation of the annual Estimates. 2. To review departmental estimates of federal development expenditure in the light of the priority needs of the country laid down in the development program, as agreed upon from time to time, and to report thereon to the economic committee of the Council of Ministers before action by the committee. ORGANIZING THE DEVELOPMENT EFFORT 83 3. To furnish secretariat services to the national economic council. The secretariat should report to the economic committee of the Council of Ministers through the secretary of the committee, a position which we recommend be held by the secretary of the Council of Ministers. The professional staff of the secretariat, which need not be large, should be headed by a director who should be a competent economist with government experience. To ensure smooth relationships with the staffs of the ministries and departments, the statutory corporations and other agencies, to avoid duplication and to facilitate the work of the secretariat, we recom- mend that (a) the various ministries and agencies be required to make available to the secretariat staff such information as it may require in the exercise of its functions, particularly those of review; (b) the secretariat should not be asked to undertake, or be permitted to assume, administrative or operational duties beyond those set forth above, nor should it concern itself with technical aspects of develop- ment proposals, which are properly the responsibility of the heads of departments or statutory corporations, as the case may be; (c) in its research activities the secretariat should co-operate with the West African Institute of Social and Economic Research (WAISER) at Ibadan. Economic Committees In our opinion, co-ordination of development activity at the po- litical level would be furthered by placing primary responsibility for it in a body somewhat smaller than the federal Council of Ministers or the regional Executive Councils, and composed of those cabinet members most directly concerned with, and responsible for, economic development. The mission therefore recommends that an economic committee of the Council of Ministers be set up, to be charged particularly with the financial and economic aspects of federal development activity and the formulation of policy in that field. The conclusions and recommendations of the committee would require approval by the full Council. We suggest that the governor of the proposed state 84 THE GENERAL REPORT bank be invited to attend meetings of the economic committee as an observer. In the Northern Region there is already an Economic Committee of the Executive Council; we recommend that similar committees be set up in the other regions. They would have the same relation to the full executive council as the federal committee would have to the Council of Ministers. We do not anticipate that the magnitude of the problems at the regional level will be such as immediately to call for separate regional economic secretariats. We suggest that all studies of the federal secretariat which do not deal with matters wholly of federal interest be circulated to the economic committees of the regions; these committees will also be able to call upon their regular departmental staffs for advice. National Economic Council The federal and regional economic committees, the former served by the economic secretariat, can, we think, greatly strengthen policy- making in their respective governmental spheres. We think that there is need for a national body as well. It would be extremely useful for Nigeria to have a forum in wvhich the federation and the regions might meet to discuss the many economic problems common to each, notwithstanding their separate constitutior;al functions, and such of their development policies as may have consequences reaching beyond their respective constitutional spheres. We think it most important that these consultations be given a permanent organizational basis. We recommend, therefore, the establishment of a national economic council, under the chairmanship of the Governor-General, in which the federation and each region will have an equal number of representatives. The governor of the pro- posed state bank would also be a member. We would suggest that members of the economic committees serve respectively as federal and regional representatives on the council. We are fully aware that the constitution delimits the respective fields of federal and regional action, as well as an area of concurrent powers. In suggesting the setting up of the council, we do not intend that there should be any encroachment by either the federation or the regions upon the authority entrusted to the other. The council ORGANIZING THE DEVELOPMENT EFFORT 85 would be primarily consultative and should be given no administrative authority or responsibility. It is designed to give maximum encourage- ment to the development of a national policy and to close co-operation toward that end between the federal government and the regions. The council need not meet frequently; one or two regular meetings a year should suffice. Subcommittees appointed to deal with particular problems might be convened more frequently. The council and any subcommittees should draw their secretaries from the staff of the economic secretariat. We strongly recommend that the national economic council sit as the Loans Advisory Board which, under the new constitution, is to advise the federal government on external borrowing; this should be done with a reduced number of members. n MARKETING BOARDS The purchase in Nigeria and the sale abroad of the principal export crops, oil palm produce, cocoa, groundnuts and cotton,' are in the hands of four statutory marketing boards, autonomous bodies estab- lished between 1947 and 1949 to take the place of control schemes instituted during the war. At the beginning of each crop year the boards announce minimum prices at which the firms licensed as the boards' buying agents will purchase crops from producers during the year. The principal tasks of the Marketing Boards are the stabilization of producer prices, the promotion of the economic development of the producing industries and areas of production, and the encourage- ment and financing of research. During their comparatively short existence the Marketing Boards have become one of the most important factors in the economic life and the financial structure of Nigeria. Because world prices have risen more rapidly than prices paid to producers, their operations have shown very large surpluses which, after the allocation of £ 25 million for economic development and research, stood at about £ 75 million at the end of 1953. 1 And the minor crops of benniseed, soyabeans and sunflower seeds, which are under the jurisdiction of the Groundnut Marketing Board. 86 THE GENERAL REPORT At the 1954 Lagos Conference it was decided to replace the existing boards, each of which has countrywide jurisdiction over a particular product or group of products, by four regional boards,2 each with jurisdiction over all controlled commodities produced within its territory. There will also be a Central Marketing Board which will set standards of quality and arrange for transportation and marketing overseas. Price and stabilization policy will be determined by the regional boards with the advice of the central board. On the whole, the operations of the Marketing Boards have bene- fited the producers of the controlled crops and the Nigerian economy in general. We found that both the producers and the commercial community were satisfied with the working of the system. Producer prices are set and maintained for an entire crop season. Thus the producer as well as the middleman and produce buyer is protected against day-to-day fluctuations, the possibility of specula- tion is eliminated and crops are promptly collected and moved. The boards have successfully used their price-setting powers to bring about great improvements in the quality of export produce. The introduction of wide price margins between "special grade" (edible) and "grade I" (technical) oil by the Oil Palm Produce Marketing Board has resulted in a radically changed composition of the palm oil supply: in 1950, less than 1 % of the board's purchases was classified as edible, with a free fatty acid content below 4.5%7O; by 1953 more than one-half of the oil purchased was edible. The demand outlook for edible oil being considerably better than that for the lower-grade technical oil, the long-run prospects for Nigerian palm oil have been greatly improved. Similarly, the price differential between grade I and grade II cocoa resulted in 95% of 1952-53 exports being grade I, compared with only 47% in 1947-48. The Marketing Boards must also be credited with bringing more Nigerians into the trade in export produce. Before the war, virtually all of this trade was carried on by European firms. By the end of the 1952-53 buying season, the Cocoa Marketing Board had 17 Nigerian licensed buying agents compared with only 6 in 1949-50, while the number of expatriate buying agents decreased from 19 to 18. Similarly, as of November 1953, of 26 licensed buying agents 2 One for each region and one for the Southern Cameroons. ORGANIZING THE DEVELOPMENT EFFORT 87 for palm oil, 10 were Nigerians, and for palm kernels 18 out of 40. There are, on the other hand, no Nigerian cotton buyers and only two Nigerian groundnut buyers. The share of Nigerian buyers in the volume of produce purchases is still small, however. To be able to set prices for an entire crop season and to lessen the impact of year-to-year world price changes on the Nigerian producer, the boards had to accumulate large reserves. These were built up over a short period, thanks to the sterling devaluation, the raw ma- terials boom caused by the Korean war and the continuing higher- than-normal world price level thereafter. Partly as a matter of con- scious policy and partly in expectation of a price fall which did not materialize, the boards fixed producer prices at levels which regularly netted substantial additions to reserves. This course of action has been criticized as resulting in a with- holding from the producers of their equitable share of higher world prices. Although we agree that in some instances the boards' price policies have been unduily cautious, we do not think that the gen- erality of the criticism is justified. In the first place, under any stabilization scheme a period of rising prices is the time for the forma- tion of reserves. Secondly, the setting of relatively low producer prices greatly mitigated the severity of inflationary pressures, to the advantage of the country in general, the producers included, at a time when no other machinery for anti-inflationary action existed. Finally, the accumulated stabilization reserves are large enough not only to assure producers the direct benefit of reasonable and relatively stable prices for many years to come but also to enable the boards to lend large sums on a long-term basis to government for development purposes. In our opinion the marketing board system is well suited to Nigerian conditions. The combination of guaranteed prices for an entire crop year to the smallholder producers, adequate compensation for the buying agents, and price policies designed to encourage quality im- provements provides the inducements necessary for increased and improved production and for a regular and efficient flow of produce, and the joint selling arrangements 3 strengthen Nigeria's position in the world market. 3 Through the Nigeria Produce Marketing Company, Ltd. in London, owned by the several Marketing Boards. 88 THE GENERAL REPORT We recommend, however, that henceforth the boards' functions be limited to setting quality standards, fixing producer prices and purchasing and marketing crops. The financing of economic develop- ment and agricultural research is a responsibility of government and the boards should not attempt to undertake it. Nor should the level of expenditure for these purposes be left to the discretion of the boards or be dependent on the results of their operations. While the present reserves of the boards can be an important source of develop- ment capital, we recommend that the boards' contribution be made through long-term loans to government out of that portion of their funds which need not be kept liquid, as discussed below. We also recommend that in fixing producer prices, the boards should have'no object other than mitigating price fluctuations and giving an incentive to improvement of quality. The deliberate use of the price-fixing function for other purposes, such as the promotion of development or to counteract inflationary or deflationary trends, cuts across the responsibility of government. Present stabilization reserves are ample and the boards should not aim to increase them. They can afford to adopt a long-term stabilization and reserve policy which we believe will result in producer prices higher in relation to world market prices than has thus far been the case. While in fixing producer prices the boards should continue to take account of the expected trend of world market prices, the prices they set should as a rule vary no more than 10% from those set for the previous year. This principle should be applied after an initial readjustment of those purchase prices which are lower than is war- ranted by world market conditions. We have in mind particularly the price of cocoa. Details of our recommendations and the calcula- tions on which they are based are set forth in Technical Report No. 4. Our calculations indicate that to carry out this stabilization policy the boards would not need to keep more than an estimated £ 25 million as liquid reserves and that, after allowing for working capital, some £ 40 million, constituting the second-line reserves, could be loaned on a long-term basis to government for development pur- poses (see Chapter 5 for specific recommendations regarding Mar- keting Board lending). The existing boards have already agreed to ORGANIZING THE DEVELOPMENT EFFORT 89 lend £ 14 million to the Government of Nigeria, of which £ 2.7 million has been drawn to date. We believe that the foregoing recommendations would achieve a more appropriate demarcation of the functions of the Marketing Boards and of government. We also believe that the recommended price and reserve policies would enable the boards to pay the pro- ducers fair prices while giving them adequate protection against fore- seeable risks, and would at the same time permit funds already accumulated to be used to finance development. In DEVELOPMENT INSTITUTIONS The agencies most directly concerned with the promotion of Ni- geria's economic development, in addition to the central Department of Commerce and Industries, are the Regional Production Develop- ment Boards (RPDBs), the Regional Development Boards and the Colony Development Board, called loans boards. The former make direct investments; the latter provide capital primarily by way of loans, sometimes by grants. Together, they represent Nigeria's prin- cipal machinery for the financing and execution of agricultural and industrial development projects. We believe that they could perform that function more effectively than they do at present. In this section we make recommendations designed to improve the operations of both types of institution, including a proposal that in each region they be merged into a single "development corporation." The RPDBs were created in 1949 to administer funds made avail- able for development purposes by the several Marketing Boards. These funds may be used only for the development of the specific branches of agriculture from which they were derived, or for the economic benefit of the producers or the areas of production. By March 31, 1954 the RPDBs had received grants totaling nearly £ 22 million and had spent (net after investment income) some £ 6 million. Investment and operating expenditure for all boards has now reached a level of £ 3 million per annum. 4 Of which £ 2 million is to be reloaned to the Western and Eastern Regions. 5 For additional comments and recommendations with respect to these institutions, see Technical Report No. 5. 90 THE GENERAL REPORT The RPDBs have engaged in a variety of operations, including a number of directly productive agricultural projects (e.g., rubber, coconut, citrus, oil palm and other kinds of plantations), some in partnership with local authorities or co-operatives and one with expatriate investors, and various processing projects (e.g., oil mills, factories and a cannery). They have financed projects dealing with settlement, mixed farming, tsetse control and fertilizer and fodder distribution, and experiments with corn storage and meat canning. They have also financed certain activities of the r egional departments of agriculture, road building, and (in the North) have employed agricultural production officers. The loans boards, also created in 1949, derive their funds princi- pally from a government grant. Loans or grants have been made for agricultural projects, promotion of rural crafts and industries, trans- port equipment, industrial development of Nigerian products, public works, town planning and similar projects. Loans granted to March 31, 1953 totaled £ 1.2 million, in amounts ranging from £ 30 to £ 100,000. Forty percent of the total was lent to public bodies and nearly 20%o for the purchase of transport equipment. The remainder was lent to private entrepreneurs for both agricultural and industrial projects. The RPDBs and, to a much lesser extent, the loans boards, can point to a number of successful projects, but both have had failures, the causes of which are, in part, the same. Both have been under great pressure to showv results and neither has had adequate staff to do the job, having had to rely on such staff assistance as they could get from government departments. In the case of the RPDBs this has undoubtedly contributed to the overlapping of their operations with those of the government, evidenced .by their financing of various governmental projects. In the case of the loans boards, it has meant that loan applications have had to be investigated and evaluated by persons neither directly associated with the boards nor qualified to judge the commercial viability of projects. Regional Production Development Boards A number of projects, particularly in the field of agricultural pro- duction, has been successful or holds promise of becoming successful ORGANIZING THE DEVELOPMENT EFFORT 91 in the next few years. Others have failed because of a lack of plan- ning and insufficient preliminary investigation and research, due in part at least to the shortage of qualified technical personnel which has also resulted in delays (see Technical Report No. 13). The projects in which the RPDBs gave engaged on behalf of the govern- ment may well be of high priority in the economic development of the regions, but we think they might more appropriately be under- taken or financed by the government proper. To some extent, the use of RPDB funds for these purposes can be attributed to the fact that there has never been a clear line of demarcation between properly governmental functions and the functions of the boards. Such dis- tinction as exists has been further blurred by administrative arrange- ments under which the respective regional Development Secretaries have presided over the boards and regional Directors of Agriculture have served as members. As a consequence, the boards have been operated as a side-line of government and sometimes as a source of extra-budgetary funds. We feel that a redefinition of the functions of the boards is desirable and we make the following recommendations. We think the primary function of the RPDBs should be the pro- motion of directly productive enterprise, with maximum participation of private African and foreign capital, and the support of African entrepreneurial initiative. As a corollary, we think they should not extend either direct or indirect financial assistance to the government nor should they engage in activities customarily undertaken by gov- ernment, such as agricultural extension work. They should provide capital for commercially promising investment opportunities for which private capital and entrepreneurial skills are not available, or which are unattractive to private investors because of the risks involved. They should encourage participation in their projects by giving preference to those projects in which local interests-communities, co-operatives, or private entrepreneurs-are willing to join, and through the sale of projects to private interesis. In the latter connec- tion, the facilities of the reconstituted loans boards should be called upon (see below). The RPDBs can usefully continue to conduct pilot projects in the form of demonstration units, although research and experimentation 92 THE GENERAL REPORT work should as a rule be undertaken not by the boards but by the agricultural services and the proposed technical research institute (see Technical Report No. 13). The technical staffs which the RPDBs will require for their investment and loan operations should also be available for assistance to African entrepreneurs (see Technical Re- port No. 13, page 363). Loans Boards The loans boards have been criticized on several grounds: that their procedures are slow and complicated, that they have engaged in political favoritism and that their judgment is poor. The boards' difficulties can be ascribed at least in part to their overly broad field of action, which, as already stated, extends to loans and grants to public bodies as well as to loans to private enterprise. These two types of activity call for the application of differing cri- teria and techniques. They should preferably be undertaken by sepa- rate institutions. We recommend, therefore, that the loans boards concentrate their efforts on the provision of credit for private business. Public bodies should finance their public works projects from tax revenues and from local development funds.' The boards' procedures leave much to be desired: they meet infrequently, and because of staff shortages they have limited personal contact with the applicant. We think that frequent discussions and explanations are essential to give Nigerians an understanding of the requirements of a sound lending proposition. On occasion, types of enterprises have been declared ineligible, as a matter of policy, by one board or another. Since entrepreneurial initiative is so limited, lending policies should be kept flexible and designed to give the maximum encouragement to prospective indus- trialists. When a project appears sound and potentially productive and the borrower is responsible, an application ought generally to be given favorable consideration. On loans to industrial and agricultural enterprise, the default ratio has been high and is rising. The boards are intended to accept risks higher than normal and defaults are bound to occur. But some losses might have been avoided by better selection of projects and better 6 See Chapter 5, p. 122. ORGANIZING THE DEVELOPMENT EFFORT 93 loan supervision. Use of the loan proceeds is often unsupervised; sometimes the proceeds are used for purposes entirely unrelated to the project for which the loan was granted. The mission was informed that the Western Board has begun to supervise loan funds and pays over loan proceeds only upon proof of payment for the goods financed by the loan. This kind of supervision is essential, but it is not enough. Even after completion of the project, the boards should keep them- selves informed of the manner in which the borrower conducts his business and should advise him where necessary. We think much of the criticism of the boards' operations is justi- fied, but we believe that, if properly run, the boards can play an important role in the promotion of African enterprise. They have made a number of sound loans and many of their mistakes stem from a laudable desire to get a flow of loans to Africans under way. To improve the operations of the loans boards, a number of changes should be made. To begin with, the loans boards should be incorpo- rated into the RPDBs where they should function as separate loans departments. This will permit use of the RPDBs technical staffs and will effect administrative savings. The loans departments should have no grant authority, and should lend only to private enterprise, en- couraging especially co-operatives and other forms of business associa- tion. They should finance, on a medium- and long-term basis, both small and large projects. In the case of the latter, the closest attention should be paid to technical and commercial management, in which the large industrial projects already financed show their greatest weakness. They should not, however, make loans which commercial banks or other lenders are willing to handle on reasonable terms; their function should be to supplement, not to compete with, other sources of credit. Future Activities The reorganization of the functions of the RPDBs and of the loans boards, and the merger of the two types of institutions, will require legislation. In order more appropriately to indicate the functions of the new institutions, they might be named the Northern, Western and Eastern Development Corporations, respectively. In view of the anticipated separation of the Southern Cameroons from the Eastern 94 THE GENERAL REPORT Region, the Southern Cameroons should have its own development agency. As stated in the preceding section, the Marketing Boards should no longer be responsible for the financing of the development corpora- tions. The regional governments should henceforth assume direct financial responsibility for all development corporation activities. The mission has estimated in its financial projections that the develop- ment corporations will require government assistance amounting to £ 12 million over 1955-60 (including £ 1 million to the Cameroons development agency). This, together with the resources now on hand, would provide them with well over £ 20 million to finance their activities over the next five years. All funds of the corporations should be available for any of the following purposes: 1. Direct investment in productive agricultural and industrial projects; 2. Loans to agricultural, industrial and commercial enterprises; 3. Encouragement of agricultural and industrial development by pilot operations and, in the industrial field, by technical and man- agerial advice to entrepreneurs. At present, the funds of the RPDBs are restricted in their use to expenditures which can be deemed to benefit the producers or the areas of production of the commodities from which they were derived. We recommend that this restriction be eliminated in the proposed legislation merging the RPDBs and the loans boards. We consider it highly unrealistic; the economic well-being of producers of export produce is so closely tied to the prosperity of the regions and the country as a whole that a distinction between expenditures for the benefit of the producers and for the benefit of the country cannot justifiably be made. 7To be distinguished in name from the existing Cameroons Development Corpora- tion (see Technical Report No. 5). The activities of the latter differ from those of the development corporations a.s we define them, and should not be extended to include them. ORGANIZING THE DEVELOPMENT EFFORT 95 iv STATUTORY CORPORATIONS At various times the Nigerian government has engaged in activities which lie outside the normal administrative functions of government: the railway, most of the important port installations, the coal mines and a large number of power plants were set up and operated by the government. In recent years, plans have been made and in part already carried out to transfer these operations out of the general governmental machinery to autonomous bodies, known as statutory corporations. In 1951 the coal mines were transferred to the Nigerian Coal Corpora- tion and the electricity undertakings to the Electricity Corporation of Nigeria. Legislation is now being drafted for the establishment of a railway corporation and a ports authority. When, after World War II, the government assumed responsibility for the development of former enemy-owned plantations in the Cameroons, it delegated that respon- sibility to the Cameroons Development Corporation, created for the purpose. The statutory corporation is a legal entity, has separate finances, employs its own staff and is subject to income tax. The chairman is generally also the chief executive officer; the other members include government officials as well as members of the public. The member- ship of the railway corporation and the ports authority will, in addi- tion, include representatives of the users of their facilities. We think it has been a wise policy to entrust quasi-commercial operations to these statutory corporations. We also endorse the gen- eral policy under which they conduct their operations along com- mercial lines and seek to earn enough, after allowance for interest and depreciation, to permit building up not only adequate reserves but also a surplus out of which to finance expansion. To make fully effective, both in the interest of the corporation and of the government, the financial autonomy inherent in the system of statutory corporations, they should be so capitalized as to be enabled in due time to finance their capital needs by borrowing in the market on their own credit, rather than being a burden on the government budget. This is not now the case. The statutory corpora- tions are financed exclusively by loan capital. None has been given a permanent capital fund and, as far as we know, it is planned that the 96 THE GENERAL REPORT two corporations about to be created will issue debenture stock or other obligations to the government for the full. amount of the assets to be transferred to them. We strongly recommend that this policy be changed and that a substantial portion of the capital of the corporations be converted into a permanent capital fund.' This would increase their credit- worthiness by reducing fixed charges and by offering prospective lenders the security of the permanent capital fund. v STATE BANK9 In 1952, the Government of Nigeria requested Mr. J. L. Fisher, Adviser to the Bank of England, to examine the desirability and practicability of establishing a central bank in Nigeria as an instru- ment for promoting the economic development of the country. His report and recommendations were completed in December 1952.10 After describing the principles of central banking as developed in England and reviewing Nigeria's monetary system, Mr. Fisher concluded that it would be inadvisable to establish a central bank "at the moment." He suggested instead a program in three stages, first, the transfer of the West African Currency Board to Africa; second, the establishment of a Nigerian currency board; and third, the estab- lishment of a bank of issue which would gradually develop into a full-fledged central bank. In reviewing the monetary system of Nigeria in relation to the proposed development program, the mission has paid close attention to Mr. Fisher's analysis. On many points we are in basic agreement with his report. In particular there can be no dispute that creation of a full-fledged central bank would be premature at this time. On the other hand, the mission feels that, in the light of the increasingly 8 For additional comments relating to the Cameroons Development Corporation, see Technical Report No. 5. 9 See Technical Report No. 3 for an account of the monetary and banking system in Nigeria. 10 Report on the desirability and practicability of establishment of a Central Bank in Nigeria for promoting the economic development of the country (Government Printer, Nigeria: 1953). ORGANIZING THE DEVELOPMENT EFFORT 97 rapid strides toward self-government,1" the timing of the advance should not be as cautious as that report suggests. Therefore, the mission proposes the early creation of a "State Bank of Nigeria" with limited functions. Initially these functions should include the right to issue currency, to be the principal depositary for the funds of government and semi-governmental organizations, to accept deposits from banks and to regulate their operations, and to buy and sell government securities. At a later stage, these functions may be grad- ually broadened to enable the new institution to assume other func- tions of a central bank. The continued political and economic advancement of Nigeria is bound to lead to the establishment of a central bank. To postpone the day when functions of currency issue and the management of foreign assets are performed in Nigeria will also postpone the day when trained Nigerians will be able to perform these functions responsibly by themselves. The proposed state bank would have as its primary function the issue of Nigerian currency to replace that of the West African Cur- rency Board. The new issue, like the old, should be backed by sterling. Foreign reserves should not fall below 100% of the currency issue in the foreseeable future. Sterling would be acquired by the retirement of the West African currency in Nigeria and the paying- over by the Currency Board to the state bank of the corresponding share of the undistributed profits of the Currency Reserve Fund. Like the Currency Board, the state bank should stand ready at all times to issue or redeem local currency for sterling. In this manner the ad- vantages of a stable sterling link would be retained, ensuring par- ticularly the continuance, on present conditions, of trade with sterling area countries. The second function of the state bank would be to serve as the principal depositary of the funds of government and semi-govern- mental organizations. These assets should be centralized, as is the case in nearly every country in the world. By far the greater part of Nigerian government and semi-government reserves is now held abroad. This makes it particularly important that they be centralized in the state bank. The consolidation of these sterling assets would 11 Mr. Fisher's report was completed before the decision was taken to convene the London constitutional conference. 98 THE GENERAL REPORT have the advantage of permitting Nigeria to safeguard the external value of its currency with a smaller level of foreign reserves than is necessary when foreign assets are held individually by separate agencies. It would therefore permit maximum use of the country's accumulated capital for development.12 In acting as the depositary for official and semi-official funds, the bank should be empowered to accept demand deposits and fixed deposits. The reason for fixed deposit accounts, which would bear interest, is that a large portion of government and semi-government funds is not immediately needed by the depositors. It would be mani- festly unjust if the depositors, by transferring their funds to the state bank, would have to lose the income which they are now earning from these funds. The bank should also be empowered to offer trust account arrangements to governmental and semi-governmental deposi- tors. Under these arrangements the bank would administer and invest funds entrusted to it for the account of the depositors. The state bank should also be empowered to accept demand de- posits from commercial banks, as a service to those banks which may wish to use the facilities of the state bank as a clearing house. The transfer to the bank of official and semi-official sterling hold- ings could be made soon after its establishment. Local funds would have to be transferred gradually, with due regard to the position of the commercial banks which now hold them. Some transfers should, however, be made promptly in order to enable the bank to begin operations as banker of governmental and semi-governmental organ- izations. Working balances for services not provided by the state bank should continue to be held with European and African com- mercial banks. The bank should be empowered to buy and sell for its own account securities of the Government of Nigeria, but in the next 5 or 10 years its holdings of such securities should not, as a working rule, exceed the level of its accumulated surplus, including Nigeria's share of the profits of the West African Currency Board. Aside from loans already 12 As we point out in Technical Report No. 3, there has developed a widespread de- sire to "repatriate" Nigerian public funds and to deposit them with African commer- cial banks. We believe that the African banking and business community would be ill-served if government deposits were used as a basis for expanding credit, because the drawing-down of these reserves in the course of the next few years would then necessitate a dangerous contraction of bank credit. ORGANIZING THE DEVELOPMENT EFFORT 99 contracted for with the Marketing Boards, the federal government is most unlikely during the next five years to borrow substantial amounts in Nigeria. Some small issues of securities of various ma- turities would, however, be quite important in helping to develop the institutional framework necessary to ensure the success of security sales in later years. The issue of short-term securities, such as Treas- ury bills, would be particularly useful in providing bankers with a short-term domestic investment. In order to give publicly issued local securities the necessary marketability and to make them suitable for the trust accounts man- aged by the bank, the bank must be prepared to purchase them at all times. There should be no guaranteed purchase price, but the bank might consider initially undertaking to relate prices to those prevailing in London. This facility should also be open to the public, in order to encourage it to hold government securities. The supervision of the commercial banks which at present is the responsibility of the Financial Secretary, under the provisions of the Banking Ordinance, should be transferred to the state bank. For the time being, a modification of the provisions of the Banking Ordinance does not appear necessary, since the domestic banking system is not yet developed sufficiently to justify access by it to the resources of the state bank as a lender of last resort. The ultimate aim must be the assumption by the state bank of the normal responsibility of a central bank to assure the liquidity of the banking system, but this extension of its functions will have to await the further development of that system. Two other tasks at present undertaken by government departments might be taken over by the state bank. First, the administration of exchange controls would be a proper function of the institution re- sponsible for external solvency. Second, the bank might maintain a small statistical department responsible in particular for preparing monetary statistics and balance of payments estimates. The state bank should not undertake any private business, either by accepting deposits from the public or by making loans or ad. vances. The recently established government bank in the Gold Coast engages in commercial banking. But unlike the Gold Coast, Nigeria has, in addition to European banks, African commercial banks, and 100 THE GENERAL REPORT there is no need for a government institution in the field of commercial banking. The form of the governing body of the bank is a matter which will have to be determined at the time of its formation. Tentatively, a relatively large board might be suggested so that the state bank may benefit from the wide experience of its members and on the other side ensure a wide dissemination of knowledge of central banking problems. The board would not need to meet frequently. A suitable board might consist of the governor and deputy governor of the state bank, representatives of the federal government and nonofficial mem- bers chosen with due regard to the interests of the various regions and of the interests of the Marketing Boards. Another matter to consider at that time is the desirability of establishing separate issue and bank- ing departments. The success of the bank would depend above all on the quality of the staff selected. Initially the staff would have to be largely European, for Africans with qualifications in the field of banking are few and much in demand. But plans should be laid from the outset for the training of Africans so that they can soon assume responsibility. Particular attention should be devoted to the selection of the first governor. Such a state bank should make substantial profits. It should earn a large income from the investments backing the currency issue, while expenditures should initially be relatively small. The staff required would not be large and in part might be drawn from existing gov- ernment departments. At first the bank should operate only in Lagos and in the three regional capitals, continuing elsewhere the agency arrangements of the currency board system. The investments in Lon- don would be made through an agent, either the Bank of England or the Crown Agents for Oversea Governments and Administrations. The relatively small additional administrative expenditure as com- pared with the present system would, in the opinion of the mission, be money very well spent, since it would assist in the development of sound monetary and banking practices and in the training of Nigerians in the techniques of central banking. In the mission's view the state bank is a necessary element in the organization of the economy of a developing Nigeria, although, as ORGANIZING THE DEVELOPMENT EFFORT 101 Mr. Fisher has pointed out, its establishment would not in itself create resources for development. Its operations cannot take the place of development financing by private and government savings; they can only assist in the channeling and the most economic utiliza- tion of the country's financial resources. Our recommendations are not intended to present a complete blue- print for a state bank. In the creation of such an institution problems will arise which we have not discussed or to which we have referred only in general terms. In carrying out our recommendations, the government should seek the expert assistance of the United Kingdom monetary authorities or of the International Monetary Fund. vi STAFFING The need to draw upon the services of overseas personnel was recog- nized by the leaders of all Nigerian political parties in a statement issued at the Lagos constitutional conference, designed to reassure expatriate personnel. But the retention of present staff will not meet the problem of filling existing vacancies or the new positions which in our opinion are necessary. Energetic measures must be taken to step up recruitment of personnel. At present, overseas personnel for government service is recruited through the Colonial Office and the Crown Agents. Some of the statu- tory corporations hire overseas personnel directly. To fill current vacancies and to staff new positions may, we estimate, require as many as 2,000 additional overseas recruits, yet present recruitment arrangements have proved inadequate to meet even the requirements of the present establishment. The mission therefore recommends the setting-up of a Nigerian recruitment office in London, through which all personnel for the federal and regional governments and the statu- tory bodies would be recruited and to which all requests for overseas staff would be made directly by the government or agency concerned. The recruitment office should seek to recruit personnel both directly and through the Colonial Office and the Crown Agents; the existing arrangements would not be replaced but would be supplemented. We are aware of the possibility of duplication and of interference 102 THE GENERAL REPORT with the Colonial Office's established procedure of personnel selection. These possible disadvantages, which with skillful administration can be avoided, would be far outweighed by the increased vigor of a purely Nigerian recruiting organization and by a widening of the geographical area of recruitment. In order to match the attractiveness of other employment oppor- tunities for qualified candidates, particularly in technical fields such as agricultural research and experimentation, road construction and public health, it may be necessary in some instances to depart from prevailing standards of salary, tenure and other emoluments. The possibility that some positions cannot be filled at established rates of pay must be faced. In some instances, considerations other than salary may be important in attracting personnel: for example, oppor- tunities to engage in research or special investigations of particular interest to the employee. The mission feels that it is not in a position to make more specific recommendations regarding salary scales and other terms of employ- ment for overseas personnel. We are impressed, however, by the arguments presented in a report, of a select committee of the Legisla- tive Assembly of the Gold Coast regarding the necessity of maintaining a differential between the salaries of overseas and locally recruited personnel. We believe that the analysis of the problem presented in the report applies with equal force to Nigeria.13 We also believe that the reorganization of the Colonial Service into the Oversea Service should help to overcome the concern of overseas personnel regarding their tenure, and thus facilitate recruit- ment in the future.14 One method of securing overseas staff, which in the opinion of the mission should be pursued more vigorously than in the past, is to arrange for secondment of personnel from the United Kingdom and other Commonwealth countries. Under existing arrangements, some personnel for the Nigerian Railway, the Posts and Telegraphs De- partment and other services have been obtained through secondment from corresponding U.K. agencies, but for administrative reasons the services of staff thus obtained have been limited to relatively short 13 Report of the Select Committee on the Lidbury Report (Accra, Gold Coast: Government Printing Department, 1952). See particularly page 6, paragraph 33. 14 White Paper, June, 1954 (Colonial No. 306). ORGANIZING TIIE DEVELOPMENT EFFORT 103 periods. The mission believes that a more flexible treatment of secondment should be feasible and that the possibility of secondment should be explored in additional fields, such as agricultural research, public works and education. While most overseas personnel would come from the United King- dom and the Commonwealth, recruitment should not be confined to these countries. A wider search for suitable applicants would not only enhance the possibility of filling the personnel requirements more quickly, but would also offer a wider selection if experience in the skill sought is particularly common in a country outside the Common- wealth. For instance, it should be possible to obtain from Western European countries research and managerial personnel with experience in tropical agriculture, or road construction engineers. The assistance of international organizations such as the Food and Agriculture Or- ganization and the World Health Organization should also be sought. CHAPTER 5 FINANCING NIGERIAN DEVELOPMENT In Chapter 3 we outlined our principal recommendations for the de- velopment effort in various sectors of the economy, by the federal and regional governments, the local authorities and the statutory corpora- tions, and showed the aggregate cost of the recommended 1955-60 program. In this chapter we consider how the country and the separate government units could meet the cost of that program. We have projected government revenue and expenditure over the five-year period in order to determine how much additional financing would be likely to be required. Separate revenue and expenditure projections have been made on a year-to-year basis for the govern- ments of the Federation, the regions and the Southern Cameroons and for the local authorities under their jurisdiction.' In making these projections, we have been cognizant of the impos- sibility of forecasting with any real degree of accuracy government expenditure and revenue over a fairly long period of years. Never- theless such forecasts must be made by governments whenever they embark on any long-term program. In setting forth annual figures, rather than forecasting aggregates for the five-year period, we have undertaken a particularly hazard- ous, but in our opinion necessary, task. On the expenditure side, a five-year aggregate figure would be misleading, because it would fail to reveal that expenditure can increase only gradually. Moreover, it would not enable us to show the rate at which we think it can expand. Annual expenditure under the recommended program, far from being uniformly one-fifth of the total for the period, would not 1 These projections are set forth in Appendix C, Tables 1-18. Summary tables ap- pear in this chapter. 104 FINANCING NIGERIAN DEVELOPMENT 105 be much higher in 1955 than at present, but would be considerably higher by 1960. Of necessity our figures are indicative of orders of magnitude only and undoubtedly they will differ by a more or less wide margin from expenditures which will actually be made. Shortages of personnel may postpone recommended expansion of government services, causing annual expenditure to be lower than projected; con- versely, expansion may come sooner than we have anticipated, in which case actual expenditure will be higher. If costs should prove higher than those allowed for, or if the many surveys we recommend should disclose the feasibility of undertaking additional projects earlier than now seems possible, the projections may be found to be too low. On the revenue side, year-by-year projections are necessary to show the likely development of specific items of revenue and to provide a basis for gauging the rate at which additional financing will be re- quired. Here again, the figures should be viewed with caution. The methods employed in making the projections and the assump- tions on which they are based are explained in detail in Appendix C. Three general comments should, however, be made here. We have consolidated in our figures all government revenue and expenditure, whether shown in the main accounts of the government units or in various special funds or extra-budgetary accounts. Second, the revenue estimates have been based in part on the conservative assumption of a considerable decline in export prices below the high levels of recent years. Third, in the case of federal and regional government accounts, we have made an allowance for contingencies equal to 10% of projected revenue. This is in part intended to cover service charges on new debt and loss of interest receipts through the drawing-down of reserves, which have not been included in our detailed projections because of the impossibility of forecasting the timing and conditions of new loans. In view of the conservative nature of our revenue estimates and of the generous provisions for expenditure, the allow- ance should be adequate as well to meet possible additional expendi- ture and temporary decline in revenue. 106 THE GENERAL REPORT I COST OF THE PROGRAM The proposed development program for Nigeria contemplates a gradual build-up of annual government expenditure at all levels to about £ 100 million by 1959-60. The upward movement may be sum- marized as follows: (Million £) Expenditure 1952-53 1955-56 1959-60 Recurrent ........ 34 48 62 Capital .17 22 35 Total .51 70 97 Statutory corporations-capital expenditures'... 5 6 6 1Funds other than those received from the government. The proposed year-by-year rise in expenditure is shown in Table 1. TABLE 1 The Proposed Rise in Public Expenditure (Mlillion £) Federal Regional Native Gernt Govern- Local Govt., ment ments & Townships 1951-52 (Actual) .23.8 12.2 7.2 43.2 1952-53 (Actual) .25.4 17.2 8.21 50.8 1953-54 (Approved Estimates) 2 . 30.0 21.2 9.6 60.8 1954-55 (Preliminary Estimates) 34.53 23.3 10.14 67.9 1955-565 (Mission's projections) . . 31.7 25.9 12.2 69.9 1956-57 " 31.8 27.9 13.2 72.8 1957-58 " " 35.5 33.6 14.2 83.3 1958-59 " " 39.0 37.1 15.2 91.3 1959-60 " " 41.2 39.8 16.3 97.2 Total 1955-60c . .......... 179.2 164.2 71.1 414.4 1 Revisedi Estimates. 2 "Estimlates" is used throughout, in accordance with British usage, to refer to bud- getary projections. 3 Approved Estimates. 4 Projection of mission. 5 First year of reallocation of functions under new constitution. G Totals may not equal sum of columns because of rounding. FINANCING NIGERIAN DEVELOPMENT 107 We have limited our recommendations for expenditures to those which we believe can in fact be made within the period 1955-60. The Estimates called for a 20% increase in public expenditures between 1952-53 and 1953-54 and for an additional 12% between 1953-54 and 1954-55. For these years we have entered the latest detailed Estimates available, as approved or proposed. But we now know that 1953-54 expenditure fell short of what was budgeted, particularly in public works, and it is likely that some shortfall will also occur in 1954-55. Our projections for 1955-56, while apparently not much higher than expenditure in 1954-55, would therefore in fact represent a substantial increase. Table 2 2 shows the expenditures which are projected at the various levels of government. TABLE 2 The Cost of the Proposed Program (Illillion £) Recurrent Expenditure Cpeital diture 19G5-56 1956-57 1957-58 1958-59 1959-60 1955-60 Federal Government ............ 19.8 20.9 21.9 22.9 24.0 69.6 Lagos Town Council ..5 .5 .5 .6 .6 .7 Northern Regional Governmenit ... 6.6 7.1 7.7 8.3 8.9 20.1 Northern Native Treasuries and Townships .4.7 5.0 5.3 5.6 5.9 6.4 Western Regional Government 5.9 6.5 7.1 7.7 8.4 22.4 Western Native Treasuries and Local Governments .3.2 3.5 3.9 4.2 4.6 3.6 Eastern Regional Government 5.1 5.4 5.7 6.0 6.3 11.8 Eastern Native Treasuries, Local Governments and Townships 1.4 1.5 1.7 1.8 2.0 2.1 Southern Cameroons Government. .8 .9 1.0 1.1 1.2 2.0 Southern Cameroons Native Treasuries ..2 .2 .2 .2 .2 .3 Total .48.2 51.5 55.0 58.4 62.1 139.0 In 1951-52, central government expenditure accounted for 55% of all Nigerian public expenditure, whereas under the mission's pro- gram it would be only 45% in 1955-56. Thereafter the percentage 2 Differences in totals in Tables 1 and 2 are due to rounding. TABLE 3 Government Expenditures and Financial Resources Available, 1955-60 (Million £) Northerni Western Eastern So. Cameroons Estimates Federal Lagos Regional Local Regional Local Regional Local , Local Total _ Govern- Town Govern- Author- Govern- Author- Govern- Author- 0"" A o ment Counicil ment ities ment ities me Recurrent Expenditures ...... 109.7 2.7 38.6 26.6 35.7 19.5 28.6 8.3 5.1 0.9 275.7 Capital Expenditures ........ 69.6 0.7 20.1 6.4 22.4 3.6 11.8 2.1 2.0 0.3 139.0 t' Total' .............. 179.2 3.4 58.7 33.0 58.1 23.1 40.4 10.4 7.1 1.2 414.6 c Revenues at present revenue structure ................. 149.8 2.1 44.9 25.6 59.1 10.6 29.8 7.4 2.2 0.8 332.3 >, Borrowings planned by Federal government-Internal ...... 11.3 - - - - - - - - - 11.3 : External ..... 11.3 - - - - - - - - - 11.3 I 0 Projections of mission: Increase in Tax Revenues - 0.5 4.5 2.0 6.0 6.2 4.3 1.7 1.22 0.2 26.6 i Use of Reserves ........... 20.0 - 5.0 - 3.0 - 2.0 - - - 30.0 Additional loans from Marketing Boards ....... - - 10.0 - 10.0 - - - - - 20.0 ljiter-governmental grants: Receipts - 0.8 - 5.4 - 6.3 3,0 1.3 4.13 0.2 21.1 Payments .. -7.9 - -5.4 - -6.3 - -1.3 - -0.2 - -21.1 Contingency allowance4 . -15.0 - -4.5 - -5.8 - -3.0 - -0.2 -- -28.5 To be covered by C.D. and W. grants and additional loans 9.7 - 4.2 - (-7.9)5 - 5.6 - 6 - 19.57 Total .............. 179.2 3.4 58.7 33.0 58.1 7 23.1 40.4 10.4 7.1 1.2 414.67 I Totals may not equal sum of columns because of rounding. 2 £ 1 million represents disbursements of profits by the Cameroons Development Corporation to the Soutthern Cameroons Government; £ 200,000 represents the Cameroons' share of increased duty collections. 3£ 1.8 million of this amount represents grants to which the Soutlhern Cameroons is entitled because of its special status. 4 10% of federal and regional revenue. See p. 105. 5 Surplus. 6 Deficit offset by grant from federal government. 7 Excluding surplus of Western Region. FINANCING NIGERIAN DEVELOPMENT 109 would continue to decline, as a result of greater expansion of services in the regional fields such as agriculture, education and secondary roads. The share of expenditure of native treasuries, local govern- ments, townships and town councils 3 would remain constant at about one-sixth of total public expenditure. ii FINANCING THE PROGRAM In order to finance the proposed development program, government authorities at all levels would need £ 415 million in the next five years. There are four sources of finance for Nigerian public expenditure: government revenue, reserves of public funds, borrowing at home and abroad, and grants from the Government of the United Kingdom. We recommend drawing upon all of them: taxes should be substan- tially raised, the federal and regional governments should use a large part of their existing reserves and they should borrow substantial amounts from the Marketing Boards. The federal government should also borrow in the London market. We assume that Nigeria will con- tinue to receive grants under the Colonial Development and Welfare Scheme. A comparison of financial requirements with available or poten- tially available resources is shown in Table 3. The Table indicates that; assuming no change in the present revenue structure, antici- pated revenues for 1955-60 would fall short, by £ 82 million, of the public expenditures we propose. To this must be added the con- tingency allowance referred to earlier, in the amount of £ 28.5 million, making a total shortfall of £ 111 million.4 We propose that this difference should be met roughly as follows: £ 27 million from additional revenue, over and above the normal rate of growth, £ 30 million from reserves, £ 22 million from loans which the central government has already decided to raise, £ 20 million to be borrowed by the regions from the Marketing Boards, and the 3 Referred to collectively as "local authorities." 4 No contingency allowance has been made in the case of local authorities since ex- pansion of expenditures on the local level should be determined by the ability and willingness of local authorities to raise additional revenue. See pp. 120 et seq. 110 THE GENERAL REPORT balance from Colonial Development and Welfare grants and additional loans. We also recommend substantial grants by the federal government to the Eastern Region and the Southern Cameroons. These are shown in the Table as intergovernmental grants in addition to the normal grants from the regional governments to local authorities. The mission believes that the development program for the next five years could be financed with relative ease. But we must repeat here what has been said earlier: the over-all level of revenue is insuf- ficient for a continuing expansion of public development expenditure. If the development effort is to continue after 1960, the build-up of revenue which we recommend will have to continue at an accelerated rate. A THE REVENUE STRUCTURE Table 4 reveals the two main features of the Nigerian revenue struc- ture: its heavy reliance on indirect taxes (principally import and export duties) and the fact that an overwhelming proportion of reve- nue is collected by the central government. The first makes Nigerian revenue particularly sensitive to the vagaries of international trade; the second has made for politically difficult and technically complicated problems of revenue allocation. The central government, under the Income Tax Ordinance, taxes the income of all companies and non-African individuals, and African income earned in Lagos. African income earned outside Lagos is taxed under the Direct Taxation Ordinance. This tax is assessed and collected by local authorities. They also levy "rates," mostly for special purposes such as education or water supply. In 1952-53 these direct taxes together accounted for about one-fourth of total govern- ment revenue. Most of the balance consists of the proceeds of indirect taxes. Ex- cept for sales taxes on controlled produce, first imposed by the region- al governments in 1953 and 1954, all these are levied and collected by the central government. The reallocation of functions under the new constitution led to a review of the system of revenue allocation. A fiscal commissioner was appointed to advise on the distribution of revenue, "having TABLE 4 Structure of Tax Revenue, All Government Authorities Combined Projected Tax Collections Actual Tax 1959-60 Collec-tions t 1952-53 1955-56 excluding recommenided includinig recommended Z additional reveniue additional revenue Million Million Million Million Customs and Excise Taxes, 33.9 67.5 39.2 70.1 41.3 68.8 46.3 67.8 - Direct Taxes2 .12.5 24.9 13.2 23.6 14.9 24.8 18.2 26.6 Licenses, Fees and Fines3 2.1 4.2 2.3 4.1 2.6 4.3 2.6 3.8 Mining Royalties .1.7 3.4 1.3 2.3 1.3 2.2 1.3 1.9 Total4 .50.2 100.0 55.9 100.0 60.0 100.0 68.3 100.0 t Of which collected by central government .43.2 86.1 44.9 80.3 47.5 79.2 52.5 76.9 t o 1 Including regional produce sales taxes. 2 Inc]uding federal income taxes, taxes under the Direct Taxation Ordinance and "rates" of local authorities. 3Including "licenses and internal revenues" and "fees of court or office." 4 Totals may not equal sum of components because of rounding. 112 THE GENERAL REPORT regard on the one hand to the need to provide to the Regions and the Centre an adequate measure of fiscal autonomy within their own sphere of government and, on the other hand, to the importance of ensuring that the total revenues available to Nigeria are allocated in such a way that the principal of derivation is followed to the fullest degree compatible with meeting the reasonable needs of the Centre and each of the Regions." 5 The system recommended by the Commissioner and approved by the Lagos constitutional conference provides for the allocation to the regions, on a derivation basis, of one-half of all import and export duties and excise taxes (but the whole of the import duty on motor spirit); for distribution of mining royalties to the region of origin; for allocation of federal personal income tax proceeds to the region of the taxpayer's residence; and for the retention by the Federation of proceeds of income tax on companies and on residents of Lagos. It was also recommended and agreed that grants totalling, £ 7 million would be made to the regions as their share of federal reserves. This distribution of revenue between the Federation and the regions as a group gives each a desirable measure of fiscal autonomy. As among the regions, however, ,the application of the principle of derivation, under which revenue is distributed on the basis of its origin, tends to perpetuate regional differences in financial strength. The Fiscal Commissioner recognized this in his report by recommend- ing that the federal government should have power to make discretion- ary grants to regions. We fully agree with the recommendation of the Fiscal Commis- sioner 6 that the next review of the revenue allocation system, in con- nection with the review of the constitution in 1956, be conducted under broader terms of reference. We believe that the interests of Nigeria as a whole would best be served by a more flexible applica- tion of the derivation principle, in order to give greater recognition to the needs of the different regions. 5 Report of the Fiscal Commissioner on the Financial Effects of the Proposed New Constitutional Arrangements (Government Printer, Nigeria: 1953), p. 1. 6 Ibid., p. 17. FINANCING NIGERIAN DEVELOPMENT 113 B FEDERAL FINANCES Federal finances are sound. The Federation would need only limited resort to its borrowing capacity and accumulated reserves in order to finance the increased expenditure we have recommended and to contribute to the revenues of the Eastern Region and of the South- ern Cameroons. By the end of the five-year program, we expect annual federal revenue to have risen to £ 31 million, compared with recurrent expenditure of £ 24 million exclusive of grants. Capital expenditure of £ 17 million has been projected for 1959-60, a substantial part of which can be financed from current revenues. At that time the Fed- eration's reserves should still be considerable and its borrowing capacity ample. Customs Duties and Excise Taxes In recent years, approximately 60% of all customs and excise collections have come from import duties and excise taxes (the latter mainly on cigarettes and beer), and the remainder from export duties. Import duties are in general low, ranging between 15% and 20%o for most articles. Alcoholic beverages, tobacco and certain luxury imports pay higher rates, while machinery, tools, fertilizers and other agricultural or industrial producers' goods are duty-free. Except for duties on such essentials as salt and kerosene, the incidence of the tariff is on the whole progressive. There is considerable evidence that the lowest income groups purchase only small quantities of imports, while persons in the middle and higher income brackets, particularly in urban areas, buy a relatively large volume of imports, especially textiles. We recommend that import duties be increased-not for the pur- pose of increasing the federal revenues but as a means of alleviating the financial problems of the regions. We propose further that the full amount realized from the recommended increase be distributed among the regions. Specifically, we recommend that duties on all imports except food, tobacco, motor spirit and kerosene be increased so that revenue from this source will rise by 50%. We recommend further that certain of the inequitable or undesirable features of the existing tariff be elimi- 114 THE GENERAL REPORT nated at the same time: all imports of food except confectionery and alcoholic beverages should be exempt from duty and so should all building materials except (temporarily) cement. Exemption of con- struction materials is desirable in the interest of promoting building activity but it may be necessary to retain the present duty on cement to give initial protection to the proposed cement factory.7 We realize that this increase would make the fiscal structure even more dependent on the flow of the country's international trade. We therefore believe that it should remain in effect only until the yield of taxation on income and property rises sufficiently to take its place. Since it will take some time to put these tariff changes into effect, we have not counted on any increase in revenue from this source until 1957. On the basis of information supplied to us in Nigeria, we esti- mate that the recommended revision would yield a net of £ 15 million over the period 1957-60. Export duties on the most important agricultural products are 10% ad valorem wvith progressive surcharges if export prices exceed a "normal" level.5 Minor exports are taxed at relatively low specific rates. At the export prices anticipated during the next five years, cocoa would be the only major export subject to duty in excess of 107o. We do not recommend an increase in these duties. On the other hand, we do not believe that the export duty on cocoa should be reduced as suggested in sections of the Nigerian press, even though at presently prevailing prices it far exceeds that on other dutiable exports.' There is ample evidenec that producers of cocoa are, as a group, substantially better off than other agricultural producers. Their tax burden may therefore equitably be higher, especially if the price which they receive from the Marketing Boards is increased in accordance with our recommendation as to the price policies of the boards (see Chapter 4 and Technical Report No. 4). Income Taxes The Income Tax Ordinance taxes profits of limited liability com- panies and certain statutory corporations at the rate of 9/- in the See Technical Report No. 13. sThe price per ton at which surcharges apply is: cocoa, £ 150; groundnuts, £ 65; palm kernels, £ 50; technical palm oil, £ 65; edible palm oil, £ 75; cotton, £ 325. 9 At the June 1954 price of cocoa, the duty was 45%o. FINANCING NIGERIAN DEVELOPMENT 115 £ (45%). Non-Africans and Africans earning income in Lagos pay taxes varying from 6/- to £ 2.16.3 on income below £ 150 per year; incomes above that amount are taxed at rates rising from 41/2d. in the £ (17/8%) for the first £ 200 of "chargeable" income to 15/- in the £ (75%) on that portion of "chargeable" income which exceeds £ 10,000.'° The mission does not believe that an increase in the companies tax is advisable, for it is already at a high level and any increase would discourage investment by both Nigerian and foreign capital. Nor do we recommend an increase in the personal income tax. We do sug- gest the advisability of a change in the present provisions of the law under which the effective rate of tax may, by reason of allowances and reliefs, remain at 41/2d. in the £ for incomes which may be con- siderably in excess of £ 200.1 Reserves As indicated in Chapter 1, the Nigerian government has accumu- lated substantial reserves partly because revenues have consistently been underestimated, partly because expenditures fell behind esti- mates, and partly deliberately to mitigate inflationary pressures caused by large export surpluses and to provide a cushion against a possible decline in revenues. The reserves are held in various funds, the largest being the Revenue Equalisation Fund established with the further object of compensating for the impact of future higher recur- rent expenditures presently met out of Colonial Development and Welfare grants. On the basis of official figures, which we consider conservative, we estimate that the reserves of the federal government will be about £ 40 million in March 1955.12 We are satisfied that in the next five years the reserves, part of which has been earmarked explicitly for the purpose of financing development expenditure, can be drawn down considerably without 10 Typical tax liabilities are: £ 67.10.0 on a "chargeable" income of £ 1,000 (6.75%); i 277.10.0 on £ 2,000 (14.375%); and £ 1,402.10.0 on £ 5,000 (28.05%). 11 E.g., for married men, the effective rate remains at 41/A'd. in the £ up to an income of £ 600; and even for higher incomes if child, insurance or other "reliefs" can be claimed. 12 See Table 19 of Appendix C. 116 THE GENERAL REPORT endangering the country's long-run financial stability or impairing the liquidity of its treasury position. We think that in the next five years the government can safely draw up to £ 20 million from its reserves. In the absence of unforeseen developments, Nigeria should be able to use its reserves also after 1960 to supplement other sources of finance for development. The mission also suggests that the practice of setting up and allo- cating current revenues into a large number of special funds be dis- continued and that the principle of unity of government accounts be established. This would enable the government to work with a much lower level of reserves than the present one. There are, it is true, good reasons why the Nigerian government needs working balances and contingency reserves larger than those required by governments of other countries with a comparable level of revenue. As already stated, the level of Nigerian government revenue depends, and is likely to depend for some time, on the value of the country's inter- national trade which, by the nature of Nigeria's exports, is subject to abrupt fluctuations; moreover, the difficulties of moving funds within the country make large working balances necessary. But the government cannot afford a cushion against all conceivable contin- gencies except at the cost of a continuing insufficiency of public services, incompatible with the requirements of a growing economy. Loans At present, Nigeria's government debt is small. At the beginning of the 1954-55 fiscal year the total Nigerian foreign debt amounted to £ 21.2 million, against which £ 4.2 million was held (as of October 31, 1953) in ihe statutory sinking fund. Interest and sinking fund required £ 949,000 in 1953-54. In addition, the central government has borrowed £ 2.7 million from the Cocoa Marketing Board, on which the service cost was £ 126,000 in 1953-54. It plans to borrow an additional £ 22.6 million. Half would be raised internally and half is to be raised in the London market."3 Allowing for the retirement of a loan of £ 4.2 million due in 1955 these operations will increase 13 This does not include a loan of £ 2 million from the Marketing Boards which is to be reloaned in 1954.55, half to the Western and half to the Eastern regional govern- ments. FINANCING NIGERIAN DEVELOPMENT 117 the total Nigerian debt to about £ 40 million, with an annual debt service of less than £ 2 million. The cost of debt service will be initially offset to some extent by interest on the invested proceeds of contemplated loans. After having contracted these additional debts, the country will still be in a position prudently to borrow substantial amounts. But this borrowing potential should be kept intact for the period after 1960, when capital requirements may be expected to increase. C REGIONAL FINANCES The magnitude of the financial problem which each of the regional governments will face in 1960 if the mission's program is followed is illustrated in Table 5. TABLE 5 Financial Position of Regional Governments, 1959-60 (Million £) North West East Revenues at normal rate of growth ....... ..... 9.6 11.8 6.4 Recurrent expenditure ............. ........... 8.9 8.4 6.3 Capital expenditure ............... ........... 5.0 6.5 3.2 Balance to be covered ............. ........... 4.3 3.1 3.1 The principal,sources of regional finance consist of revenues shared with the federal government, produce sales taxes and the so-called "capitation levy," the regions' share of local direct taxes levied under the Direct Taxation Ordinance. The produce sales taxes are levied by the regions on exports controlled by the Marketing Boards and have been in effect in the North and West since 1953; 14 and our projections of revenue assume that like taxes will be imposed in the East also. The regions themselves raise little of their income. The only major sources of revenue the level of which they can control are the produce sales taxes. They are essentially export duties and as such they dupli- cate federal export duties. We realize that for the time being these 14 The rates are: cocoa £ 4 per ton; groundnuts and palm oil, £ 1 per ton; ben- niseed, 10/- per ton; and cotton, 0.ld. per lb. of seed cotton. 118 THE GENERAL REPORT taxes will have to be retained, but we do not think that they should be increased. While over the long term we expect that an increase in the tax collected by local authorities under the Direct Taxation Ordinance will result in greater revenue to the regions through their share of the additional proceeds. no substantial increase from that source is likely to come about before 1960. In order to reduce the gap between regional expenditure and reve- nue, we have proposed above that the regions receive the entire pro- ceeds of the recommended rise in import duties, estimated at £ 15 million over 1957-60. Accordingly, that sum has been included in Table 3 and, on the assumption that arrangements can be made under which the federal government will forego its 50% share of this reve- nue, we have allocated it to the regions. Following the revenue allocation scheme, we have allocated £ 6 million to the West, although, as Table 3 shows, the West actually does not need additional funds. In addition, we recommend that all three regional governments be prepared to use during 1955-60 the reserves, aggregating £ 7 million, granted to them by the Lagos conference. The North should also use another £ 2 million of its reserves, bolstered in 1952 by a special "underdevelopment grant" from the central government, while the West can draw upon an additional £ 1 million of its reserves. In Chapter 4, we recommend that the "second-line reserves" of the Marketing Boards be made available for long-term, lending to gov- ernment for development purposes. On the basis of our appraisal of the reserve position of the boards as reorganized (see Technical Re- port No. 4), we recommend that the West and the North each borrow up to £ 10 million from their Marketing Boards. The figure of £ 10 million (shown in Table 3) merely indicates the order of magnitude of loans which can safely be made in these two regions without im- pairing the financial position of either the boards as creditors or the regions as debtors. Also, loans in such amounts would leave sufficient funds with the respective boards for lending at a later date. We think the second-line reserves of the Marketing Board in the Eastern Region are insufficient to permit their use for long-term loans during 1955-60. Among the regions, only the West can mobilize sufficient funds to meet the cost of the program which we propose. The Eastern Region, FINANCING NIGERIAN DEVELOPMENT 119 even taking into consideration probable financial assistance under the new Colonial Development and Welfare Scheme, would not be able to meet the cost of the program without financial assistance from the federal government. The North should just be able to meet the demands of the recommended program with Colonial Development and Welfare assistance. Under the new revenue allocation system, regional revenues will be more sensitive than federal revenues to price and volume fluctuations of individual export crops. This is so because each of the principal export crops is for the most part concentrated in a single region and because export duties are a significant part of regional receipts. During 1955-60, we expect the price of cocoa to remain at a high level in relation to the last few years and prices of groundnuts and palm produce to decline to lower levels. As a result, the revenues of the West are likely to be higher than was anticipated when the allocation system was devised, while those of the North and East are likely to be somewhat lower. In the Northern Region, the expected price decline of groundnuts is likely to be partially offset by an increase in export volume, partly because of large shipments of accumulated stocks ancl partly because of good prospects for a sizeable expansion of pro- duction. There are no important compensating factors in sight for the Eastern Region. The Trust Territory of the Southern Cameroons has a special financial relationship with the Federation, explained in the Notes on Government Revenue in Appendix C. To increase Cameroons revenue, we recommend that the federal government consider the practicability of increasing the export duty on bananas and of introducing export duties on other products such as coffee. We further recommend a substantial addition to revenue through larger profit distributions to the government of the Southern Came- roons by the Cameroons Development Corporation. We have projected these at £ 1 million for 1955-60.'5 The Southern Cameroons has no reserves to draw on and the reserve position of its Marketing Board will not, in our view, permit any lending to the government. The insufficiency of Eastern Region revenues and of those of the 15 See Technical Report No. 5 for our views on the future financial policy of the CDC. 120 THE GENERAL REPORT Southern Cameroons was anticipated by the recommendation of the Fiscal Commissioner that the East and the Southern Cameroons be given some grant assistance by the federal government. Table 3 indi- cates that the East may need £ 3 million in grants during 1955-60 and that grants to the Southern Cameroons may exceed £ 4 million."6 These grants would be a heavy burden on federal revenue, but we think they must be made if these two regions are not to fall behind the others in economic development. The mission has not taken into consideration funds of the Cus- todian of Enemy Property totaling £ 1.6 million, derived from the disposal of enemy assets in Nigeria and the Cameroons. At the time of the mission's visit, no decision had been taken regarding the disposition of the balance of these funds remaining after the payment of claims. It is to be assumed, however, that this balance will be made available to Nigeria and the Southern Cameroons. As more than half of the Custodian's holdings was derived from the sale of enemy assets in the Cameroons a substantial sum wvould thus become available for the Southern Cameroons. D LOCAL FINANCES Although only one-sixth of public expenditure is accounted for by local authorities, we believe that local authority finances deserve the closest attention. Under the present system of taxation, taxes on the Nigerian population outside Lagos are assessed by local authorities. We are inclined to believe that for many years to come it will be impossible to assess income or property taxes on Africans on any but the local authority level. Since we believe that in Nigeria, as in other countries, taxes on income and property are the most equitable form of taxation, we recommend that taxation at the local level be increased in order to pay for the increased government services which we propose. The proceeds of such taxation should be sufficient not only to pay for local government but eventually to permit the appli- 16 The special financial arrangements of the Southern Cameroons may entitle it to grants of £ 1.8 million, so that "discretionary" grants by the federal government, in- cluding the Southern Cameroons' share of C.D. and W. funds, would amount to £ 2.3 million only. See Appendix C. The figure for grants to the Cameroons does not in- clude £ 1 million for the Southern Cameroons development agency which we have recommended in Chapter 4. This amount is included in federal expenditure. FINANCING NIGERIAN DEVELOPMENT 121 cation of income tax proceeds to the cost of regional government. As and to the extent that this becomes possible, local expenditure should be met increasingly through property taxes. While this should be the long-term objective of tax policy, we be- lieve that during 1955-60 the objective will have to be limited to making the local authorities assume an increasing share of the cost of their operations, most particularly in health and education. At present, local authorities collect taxes under the Direct Taxation Ordinance. A share of the proceeds of these taxes, the "capitation levy," is turned over to the regional governments. But these payments to the regions are more than offset by grants by the regional govern- ments to the local authorities. In 1952-53 about 62%o of local authorities' revenue came from direct taxes and local "rates." Although administration of the Direct Taxation Ordinance varies considerably from one part of Nigeria to another, in principle there are two classes of direct tax. The first amounts to a flat-rate poll tax to be levied on low-income taxpayers only. In many parts of the North this head tax is apportioned by village chiefs according to a rough estimate of ability to pay. Rates generally vary between 10/- to 30/- per adult male. The second class applies to "wealthy" persons, and to salaried persons whose income is easily ascertainable; in theory, it is a progressive tax on income. In practice, the direct tax is often administered in a manner which makes it regressive. Most authorities assess all but a few taxpayers at the flat rate although incomes vary considerably. Methods of assessing income taxes at the progressive rate are crude. It is under- stood that generally local assessment committees grossly underassess incomes of farmers, traders, craftsmen, etc., with the result that the latter may pay a lower share of their actual incomes than persons subject to the flat rate. Local authorities are aware of this shortcoming and recently some areas have made great progress toward more accu- rate assessment of larger incomes. Many taxpayers have been shifted from the flat to the progressive rate. This improved administration should continue and should be extended. Moreover, sooner or later local governments must squarely face the politically difficult problem of taxing the incomes of women. We recognize, however, that it will be a long time before income assessment on western standards will be achieved. 122 THE GENERAL REPORT Local authorities are also empowered to levy "rates" on a property or other basis, for special purposes or to increase their general funds. These have been extensively introduced in the East, commonly to finance education. Proceeds of rates in that region rose from an estimated £ 134,000 in 1952-53 to £ 309,000 in 1953-54. New rates for specified purposes seem to be far more acceptable to taxpayers than other kinds of tax increases and we recommend their adoption by all local authorities. We believe, however, that they should to an increasing extent be levied in accordance with income and wealth. In urban areas they should be based on property values, as is already done in Lagos. Property assessments made or in progress in many towns for the purpose of levying water rates can be used as a basis for property or other rates. Grants are received from the regional (and in the case of the Lagos Town Council, the federal) government for a variety of pur- poses. In 1952-53, they accounted for 15%o of local revenues. All regions reimburse local authorities for a large share of their expendi- tures on education.'7 Police, roads, medical services and, in the Northern Region, agriculture, forestry and veterinary services are also partly grant-financed. The East has a system of matching grants for local capital works projects. Both the West and the East make "Com- munity Development Grants" out of funds supplied under the Colonial Development and Welfare Scheme. Aside from education grants, the mission makes two proposals with respect to regional grants to local authorities. Each region should establish a local development fund, to provide grants and loans for meritorious capital works projects. In the East and in the West these funds should continue the type of assistance supplied by Community Development Funds.'" In the North, where we have projected a relatively smaller sum for the purpose, the local development fund should be used to assist native treasuries unable to finance desirable development projects from their current revenue surpluses. These funds should be administered by the departments responsible for local finance, i.e., the Ministries of Local Government in the East and the West and by the Financial Secretary's office in the North. 1- For our recommendations on the future of thiese grants see Technical Report No. 21. 1s And in the East by "special grants" and Up to 1954-55 by "code grants." FINANCING NIGERIAN DEVELOPMENT 123 Grants for recurrent costs of agriculture, medical and veterinary services, etc., should not be increased, and in the North, where they have made up a larger proportion of local authorities' revenue than elsewhere, they should be reduced. We have made our projections accordingly. Expansion of these services should be paid for out of local revenues. Reserves of Eastern and Western local authorities are no larger than needed for working balances. In the North, on the other hand, reserves vere estimated to amount on March 31, 1954 to almost £ 6 million, a sum substantially in excess of working requirements. We do not suggest any net reduction of these reserves over the next five years, since we anticipate a great expansion of expenditure on schools and other facilities after 1960. But we do suggest a revision of the present system of five-year development plans, under which only funds available at the beginning of a five-year period may be ex- pended for development purposes during that period, while surpluses earned within the period are frozen until the beginning of the next period. The local authorities should be free immediately to accelerate their development plans if their current revenues permit, as long as reserves on hand are not thereby reduced. Our program for local authorities calls for a rise in total expendi- ture from £ 8.2 million in 1952-53 to £ 16.3 million in 1959-60. Revenues retained by local authorities and grants from regional gov- ernments totalled £ 8.5 million in 1952-53. Assuming a normal rate of growth, local authorities' own revenues might amount to £ 9.8 million in 1959-60. We project, in addition, grants from regional governments (in the case of the Lagos Town Council, from the federal government) amounting to £ 3.2 million in 1959-60. Efforts must therefore be made to increase local revenues, mainly from direct taxes, to fill the gap which would rise to £ 3.3 million in 1960. Table 6 gives a more detailed breakdown of the required increase in direct taxes in the North, the West, the East and the Southern Cameroons. In Lagos, where the property tax assessment is now being thoroughly revised, there should be no difficulty in reaching the target of £ 430,000 by 1959-60. Direct taxes of Southern Cameroons native treasuries will rise to 124 THE GENERAL REPORT TABLE 6 Proposed Rise in Direct Taxes Collected by Local Authorities (Million £) 1952-53 1953-54 1959-60 North Normal growth, for own use .............................. 3.06 3.78 4.51 for regional government ........ .......... .33 .35 .52 Proposed additional yield ........ .......... - - .70 Total .............................. 3.39 4.13 5.73 West Normal growth' for own use .............................. 1.02 1.17 1.40 for regional government ........ .......... .03 .53 .66 Proposed additional yield ........ .......... - - 1.80 Total ............................. 1.05 1.70 3.86 East Normal growth' for own use ............................. .84 1.03 1.23 for regional government ........ .......... .03 .04 .04 Proposed additional yield ........ .......... - - .60 Total ............................. .87 1.07 1.87 Southern Cameroons Normal growth' for own use ............................. .10 .11 .13 for regional government ........ .......... .01 .01 .01 Proposed additional yield ........ .......... - - .04 Total .............................. .11 .12 .18 Lagos Town Council Normal growthl ......... .23 .29 .35 Proposed additional yield ........ .......... - - .08 Total .............................. .23 .29 .43 1 3% per annum after 1954-55, based on an anticipated rise in incomes at that rate. See Appendix C, Notes on Government Revenue. £ 140,000 on the basis of a normal growth. We estimate that they will need an additional £ 40,000 to meet expanding local authority expenditures. FINANCING NIGERIAN DEVELOPMENT 125 In the North an additional £ 700,000 will be required by 1959-60. This amount and much more could be raised by assessing more accurately the incomes of wealthier individuals. The Eastern local authorities will have a more difficult task. By 1959-60 the amount of additional tax revenue required will be £ 600,000. To raise this amount will mean increasing the yield of direct taxation by 50% over what it would have been if normal growth were maintained. In the last two years the East has made striking progress in increasing tax yields and we are satisfied that the goal can be achieved by more widespread use of rating and perhaps by some increase in the yield of rates already in effect. Western local authorities will have the most difficult problem. The relatively wealthy Western Region has decided to introduce free uni- versal primary education beginning in 1955 and to expand social services. We believe that the West can carry out its ambitious pro- gram and we have made our projections accordingly.. In order to do so, we estimate that local authorities will have to increase the yield of direct taxation from a level of £ 1 million in 1952-53 to £ 2.8 million by 1959-60, even if they receive substantial regional education grants, which we recommend should rise to £ 1.5 million in 1959-60. This would mean an increase in the tax burden from an average of 30/- per taxpayer to some 80/-. We estimate that the average taxpayer has at his disposal about £ 90 to £ 120 of cash income per year. The higher tax is surely not an impossible burden, though the discontent occa- sioned by the Education and Health Levy of 10/- imposed in 1953 is an indication of the opposition which may be anticipated. The necessity of shouldering this burden will have to be explained clearly to the Western people. The raising of the additional tax revenue would be facilitated by taxing more persons on the "progressive" scale rather than on the flat rate basis, and by increasing the use of property taxes, especially in Ibadan and other large towns. We further recom- mend that regional grants for education be made contingent upon the achievement by the local authorities of the tax targets suggested. PART II THE TECHNICAL REPORTS TECHNICAL REPORT 1 CAPITAL FORMATION As in any other country, the growth of Nigeria's national income in the long run will depend to a large extent on the rate of capital TABLE 1 Savings and Investment, 1950-52 (Million £) 1960 1951 1952 Public Investment Domestic Fixed .................... 12.1 15.1 22.4 Abroad ........................... 24.2 42.9 25.4 Total .36.3 58.0 47.8 Private Investment Domestic Fixed .................... 24.5 26.91 33.3 Abroad2 ........................... 2.2 1.0 1.0 Total .26.7 27.9 34.3 Total Domestic Fixed Investment ... 36.6 42.0 55.7 Increase in Foreign Assets ........ 26.4 43.9 26.4 Total .63.0 85.9 82.1 Financed by: Net Donation Receipts from Abroad.. 2.6 0.7 4.0 Public Borrowing Abroad ....... .... 1.0 7.3 0.4 Private Capital Iniflow ........ ...... 3.0 7.6 12.4 Domestic Savings3-Public ...... .... 32.2 49.4 42.8 Private ......... 24.2 20.9 22.5 Total .63.0 85.9 82.1 1 Mission estimate. 2 Changes in foreign balances of Nigerian banks. 3 Excluding dividend and interest payments abroad. SOURCE: Departnent of Statistics, Lagos. For more detailed data on fixed investment, see Appendix E. 129 130 THE TECHNICAL REPORTS formation. Data on capital formation for the years 1950-52 (Table 1) show that the level of gross investment came to an average of 12% of the gross domestic product. Only a small part of total investment was financed by resources coming from outside Nigeria. Donations (mostly Colonial Develop- ment and Welfare grants), borrowings by government and inflows of private capital, consisting mostly of reinvested earnings of expatriate firms, accounted for one-sixth of total investment only; the remainder, or 10% of the gross national product, represented domestic savings. This must be considered a remarkable performance in view of the low consumption standards prevailing in the country, even if allow- ance is made for the fact that two-thirds of the savings accrued to the government and government agencies from receipts resulting mainly from increases in export prices.1 However, less than 60% of the funds available for investment was used to augment the stock of capital of the Nigerian economy; the remainder took the form of foreign investment, i.e., it was added to the country's sterling balances. Two-thirds of public savings-the difference between current receipts and current expenditures of gov- ernment and public agencies-accumulated abroad. The net outflow of public funds was partly offset by a net inflow of capital on private account. Thus, domestic investment 2 amounted between 1950 and 1952 to 7% of the gross national product only. The reasons for the failure to utilize fully the country's savings within Nigeria are ex- plained in Chapter 2. As to the future, there is the possibility that savings in the public sector will decline, primarily because the Marketing Boards probably will no longer accumulate "profits," if the prices of, export produce decline, as appears likely, and if the mission's recommendations re- garding the price policy of the boards are adopted. The increase in current government expenditure proposed by the mission would leave a smaller margin for capital investment out of current government revenues. Public domestic investment, on the other hand, should substantially increase and should exceed public 1A large part of increased export proceeds accrued to the public sector through export duty collections and in the form of "profits" of the Marketing Boards. 2 Excluding changes in inventories for which estimates are not available, except for 1952 when the value of inventories increased by £ 9.5 million. CAPITAL FORMATION 131 savings, the difference being financed, as recommended in Chapter 5, by the drawing-down of reserves, borrowings from abroad, and Colonial Development and Welfare grants. In the private sector, it is reasonable to expect an increase both in savings and investment, since the increase in public expenditures, capital and recurrent, aiming at an expansion of agricultural pro- duction, and improvements in the efficiency of Nigerian labor should open up new private investment opportunities for both African and non-African entrepreneurs. There are already some indications that the demand for certain kinds of consumer goods (textiles, household utensils) is growing more slowly than in the past and that a rising proportion of income is saved and invested in oil presses, lorries, bicycles, boats and permanent housing. Private investment should likewise be furthered by loans and partnership schemes of the reor- ganized development corporations. There is also the possibility of increased foreign investment in Nigeria through plowing back of earnings of foreign-owned enterprises and inflow of new capital by both established and new firms. It should be noted that there is no danger that in the next few years the increased level of investment will lead to pressures on the balance of payments. The difference between public savings and public capital expenditures is to be financed by drawing down balances held abroad and by loans and grants from abroad, while the expected increase in private investment would be financed primarily out of current income of individuals and business firms and to some extent through inward capital movements. To the extent to which increased total capital expenditures result in a rising demand for domestic goods and services, however, they may give rise to pressures on the price level, unless the supply of domestically produced goods, especially foodstuffs, is increased sufficiently to meet that demand. Therefore, the encouragement of local food production for which we make several recommendations in Technical Report No. 8 is an important measure of over-all eco- nomic policy and a prerequisite to the success of the proposed develop- ment program. TECHNICAL REPORT 2 INTERNATIONAL TRADE AND PAYMENTS Nigeria's international trade presents in general an unusually favorable picture. The exports are a reasonably diversified group of products, the long-run markets for which seem well assured. The balance of payments has for a number of years shown a very substantial surplus, both over-all and with the dollar area, and Nigeria has acquired very considerable sterling balances. The burden of foreign indebtedness is light-in fact, Nigeria is at the moment a net creditor. Accordingly, as far as external payments are concerned, Nigeria is very well placed to proceed rapidly with development plans. EXPORTS Nigerian exports have averaged over £ 100 million annually for the last five years. Although this is not a great volume of exports for a country with a population of over 30 million, it nevertheless establishes Nigeria as a world exporter of some importance. For example, its exports in the last five years were about equal in value to those of Turkey; they considerably exceed those of Uruguay and are 50%o higher than the exports of Portugal. Table 1 shows the value of Nigerian exports. Almost exactly half is represented by vegetable oil products-principally palm oil, palm kernels and groundnuts. Cocoa, the other major product, accounts for nearly one-quarter of total exports. Tin and columbite provide the largest share of the remainder. The bulk of the agricultural exports is produced by small land- holders and purchased by large expatriate companies as buying agents for the Marketing Boards. Palm products, groundnuts, cocoa and 132 INTERNATIONAL TRADE AND PAYMENTS 133 TABLE 1 Average Annual Value of Exports by Commodity, 1949-53 (Thousand £) Total Exports .......... 106,175 100.0 Other Exports: Oil & Oilseeds: Cocoa ............... 23,717 22.3 Palm Kernels ........ 19,690 18.5 Tin .7,050 6.6 Palm Oil . ......... 13,406 12.6 Hides & Skins .4,958 4.7 Groundnuts . ........ 18,019 17.0 Cotton .4,325 4.1 Groundnut Oil ....... 878 0.8 Rubber .3,675 3.5 Benniseed ......:. 854 0.8 Timber (incl. Plywood) 3,553 3.3 Other Oilseeds and Bananas ............. 2,205 2.1 Vegetable Oils ..... 929 0.9 Columbite .1,276 1.2 Sub-total ............ 53,776 50.6 All Other .1,640 1.6 Sub-total .52,399 49.4 SOURCE: Digest of Statistics and Nigeria Trade Summary, Lagos. cotton all follow this pattern. Mineral exports are principally pro- duced and sold by expatriate-owned mining companies. Bananas are produced and sold chiefly by the Cameroons Development Corporation and a subsidiary of the United Fruit Company. A considerable por- tion of the timber exports originates in the plywood factory of the United Africa Company, which together with some other companies is also a major exporter of bides, skins and 'rubber. Table 2 shows the volume of principal export commodities. Palm products have long been the chief source of earnings abroad. The oil palm is indigenous and even 40 years ago exports of the oil TABLE 2 Volume of Exports of Principal Commodities (1949-53 = 100) Total Palm Palm Ground- Clm Exportsl Kernels oil (. nuts Cocoa Tin Cotton Rubber Colu Exportsl Kernels O inel. oil) bt 1913 .... 22 46 49 7 3 36 20 - - 1924-28 .. 47 67 71 35 39 91 39 4 - 1929-33 .. 58 69 73 57 53 84- 31 4 - 1934-38 .. 78 86 78 76 82 92 57 14 28 1939-43 .. 79 83 78 61 83 140 66 29 48 1944-48 .. 77 80 70 74 82 126 29 58 124 1949-53 .. 100 100 100 100 100 100 100 100 100 1 See Appendix E for description of index. SOURCE: Digest of Statistics, Lagos; League of Nations: International Trade Statistics. 134 THE TECHNICAL REPORTS were nearly half the present volume. Cocoa and groundnuts, on the other hand, were introduced to Nigeria and developed substantially only after World War I. It was a little over 20 years ago that they reached half their present export level. Tin mining was developed relatively early in Nigeria, exports reaching almost their present level in the 'twenties. Among the minor products, rubber has been outstand- ing in its recent growth. Within the last five years the trends have varied somewhat from the longer run tendencies. While groundnuts have continued their expansion (Withl an increasing proportion being exported as ground- nut oil), the growth of cocoa exports has stopped for the time being. Timber, rubber, cotton and columbite have made quite rapid strides in recent years. This growth in minor products has made the recent pattern of exports rather more diversified, a desirable tendency be- cause it makes the country less vulnerable to shifts in particular markets. The over-all growth of exports, as shown in Table 2, has been quite remarkable. A doubling of the 1913 trade was achieved soon after World War I and the increase continued into the 'thirties. The war checked this growth; 1944-48 exports were below the level of 1934-38. The rise has since resumed: the last five-year average is over 25% above prewar levels and 1953 exports were considerably above those of any previous year. IMPORTS Table 3 shows the commodity groups represented among Nigeria's imports in the last five years. As would be expected for a country in an early stage of develop- ment, finished consumer goods bulk large in imports, as shown by Table 3. Textiles in particular form a very large item, one-third of total imports, a proportion which is exceeded by very few countries. On the other hand food imports are relatively small, consisting for the most part of luxury items and a few specialized items such as dried and canned fish and salt, in which the country is deficient. Transport equipment, including road vehicles, originates almost INTERNATIONAL TRADE AND PAYMENTS 135 TABLE 3 Imports by Commodity Groups, 1949-53 (% of value of total imports) 1. Consumnption Goods: II. Capital Goods and Raw Materials: Textiles ................... 33.6 Vehicles and Parts ......... 12.1 of which of which Cotton Piece Goods .... 21.5 Lorries ............... 3.0 Rayon Piece Goods .... 7.0 Cycles .1.9 Food, Drink & Tobacco 12.1 Automobiles .1.7 of which Building Materials ........ 7.6 Fish . 2.5 of which Salt ................. 1.4 Corrugated Iron ....... 2.7 Sugar ................ 1.0 Cement ............... 2.3 Beer ................. 1.8 Machinery and Equipment 7.5 Tobacco & Cigarettes ... 2.0 of which Miscellaneous Consunption Electrical Machinery Goods ................ 8.4 & Apparatus ........ 2.3 of which Industrial Machinery . d 1.4 Hollowware ........... 1.8 iMiscellaneous Supplies .... 10.1 Medicine & Drugs ..... 1.4 of which Kerosene ............. 0.7 Petroleum Oils ........ 4.2 - Bags and Sacks ....... 2.3 Stib-total - 54.1 Sub-total 37.3 III. Other Items .......... 8.6 of whiclh Unspecified Iron and Steel Manuifacttures. 4.0 Sub-total .......... 8.6 SOURCE: Digest of Statistics and Nigeria Trade Summary, Lagos. wholly from abroad and now takes a considerable share of the imports. The value of bicycle imports exceeds that of passenger automobiles. Building materials, particularly cement and corrugated iron sheets, are also imported in considerable quantities. Nigeria is dependent on imports for practically all machinery and equipment. The amounts imported are not as yet substantial; the group shown, which includes all forms of implements as well as some household electrical equip- ment, is less than one-fourth the imports of textiles. From the rough separation made of consumption goods it appears that they absorbed about 60% of all imports in recent years. This percentage is probably somewhat lower now than in earlier periods. The volume figures indicate that except for beer, imports of consump- tion goods have increased rather less than most of the capital goods. 136 THE TECHNICAL REPORTS Among the latter, the increase in imports of cement, road vehicles and petroleum is quite spectacular. One factor in the slow growth in consumption goods has been the growth of domestic production. In- creased sales of the cigarette factory and increased local production of tobacco have reduced the need to import cigarettes and tobacco. In earlier years there was a similar replacement of kola nut imports by local production. Table 4 shows the volume of selected imported commodities, repre- sentative of consumption goods, capital goods and raw materials. TABLE 4 Volume of Imports of Selected Commodities (1949-53 = 100) Consumption Goods Fish Salt Sugar Beer Tobacco Cigar-Cotton & Rayon ettes Piece Goods 1924-28... 132 65 28 22 87 104 48 1929-33... 132 63 32 15 61 106 47 1934-38... 109 65 61 10 48 117 61 1939-43... 18 67 18 11 38 81 37 1944-48... 14 86 20 21 58 104 51 1949-53... 100 100 100 100 100 100 100 Capital Goods and Raw Materials Cement Corrugated Cars and Petroleum Bags and Total Iron Sheets Lorries Oils Sacks Importsl 1924-28... 24 56 22 10 51 49 1929-33... 19 49 17 12 57 44 1934-38... 22 50 28 16 83 52 1939-43... 16 10 8 26 76 28 1944-48... 41 13 35 42 77 43 1949-53... 100 100 100 100 100 100 1 See Appendix E for description of index. souRcE: Digest of Statistic, Lagos; League of Nations: International Trade Statistics. The over-all volume of imports showed a surprising stability in the interwar years. The growth in export volume was not accompanied by an equivalent increase in imports, because imports were held down by the abnormally low export prices in the 'tbirties. In the war years the import volume fell very substantially, partly due to unavailability INTERNATIONAL TRADE AND PAYMENTS 137 of some types of supplies but also owing to a further worsening of the terms of trade, the extent of which is shown in the next section. The postwar volume of imports grew rapidly and the average for the last five years is roughly double the prewar level. The growth in the machinery and equipment imports has been particularly great; their share in total imports rose from 6.3% in 1949 to 8.6%o in 1953. In the same period the much larger item of textiles reduced its share from 39.4% to 30.5%o. However, part of these changes arose from differing price movements, as textile prices increased much less than those of other items. In PRICE MOVEMENTS AND TERMS OF TRADE Table 5 shows the prices of exports and imports and the terms of trade since 1924. TABLE 5 Prices of Exports and Imports and Terms of Trade (1949-53 = 100) Export Prices Import Prices Terms of Trade' 1924-28 ..................... 32 33 98 1929-33 ..................... 19 25 78 1934-38 ..................... 15 20 76 1939-43 .....,.15 ........... 36 42 1944-48 ..................... 39 66 60 1949-53 ..................... 100 100 100 1949 ......................76 85 90 1950 ....................... 84 88 97 1951 ....................... 115 108 107 1952 ....................... 120 115 105 1953 ....................... 105 104 101 1 Terms of trade = export prices divided by import prices. Apparent discrepancies are due to rounding. A rise in this ratio indicates improved terms of trade. souRcE: For five-year averages: mission estimate; for annual 'figure: Department of Statistics, Lagos. In the last 30 years the prices of Nigerian exports and imports have shown wide fluctuations, but the variations of export prices were much more pronounced than those of import prices. The terms of 138 THE TECHNICAL REPORTS trade resulting from these movements have gone through a full cycle. The prosperous period of the 'twenties, with relatively high prices for Nigerian exports, was followed by the depression of the 'thirties when export prices fell by much more than import prices. The terms of trade as roughly estimated from the available data fell by one-quarter. Ignoring year-to-year fluctuations, the terms of trade stayed low until the war, when they further worsened. Export prices during the war were kept stable, but import prices rose quite sub- stantially and the terms of trade fell to less than half those of the 'twenties. This means that at that time Nigeria had to export tvice as much in order to buy the same volume of imports. After the war the terms of trade rapidly recovered and soon passed the immediate prewar level. The rise in export prices in the period 1949-53 was sufficiently great to return Nigeria to the favorable terms of 1924-28. Taking the figures for the last five years individually, it is apparent that a peak was reached in 1951 under the stimulus of the speculative buying following the outbreak of Korean fighting. By 1953 the terms had receded somewhat and were only slightly more advantageous than the average for the last five years. These indications of the over-all terms of trade of the country are not of course directly indicative of the position of the individual African producer of export commodities. He purchases a collection of imported goods in which, for example, textiles would weigh more heavily than in the official index. Moreover, the producers are con- cerned with the price they receive rather than the export price, which includes Marketing Board "profits" (or "losses") and export duties. An index on this basis would indicate a somewhat less favorable po- sition for recent years than the over-all index. The general trend would, however, be similar and the index of the producer terms of trade would show the tremendous recent improvement.' The main difference would be that the producer index wvould probably be still improving and would mark an all-time high in 1953. 1 A detailed investigation of these producer terms of trade made by E. K. Hawkins of the West African Institute of Social and Economic Research, Ibadan, in an unpub- lished study, establishes the very considerable gains made. INTERNATIONAL TRADE AND PAYMENTS 139 iv DIRECTION OF TRADE In the last five years some three-quarters of Nigerian exports has gone to the United Kingdom. The United States is the next largest customer and accounts for more than all other countries combined, the most important of which are European. This marks a sharp change from prewar when the exports to the United Kingdom were much lower and the exports to the European continent much higher. The change is in part attributable to the bulk purchase arrangements with the U.K. Ministry of Food during the last five years. Table 6 shows the direction of flow of exports and imports during the prewar years and for the last five years. TABLE 6 Direction of Trade (% of Total) Exxports Imports 1934-38 1949-53 1934-38 1949-53 United Kingdom ..... 46.0 78.3 United Kingdomii ..... 56.8 52.8 United States ........ 9.4 12.4 Japan ............... 5.0 8.9 Netherlands ......... 8.9 2.1 Germany ............ 8.2 5.9 Gerimany ............ 17.2 1.7 India an(i Pakistaln ...5.9 5.8 France .............. 8.9 0.5 United States .6.5 4.2 Netherland(s West Indies ..............1. 3.8 Italy ................2.0 3.5 Netherlands ........... 3.0 SOURCE: Digest of Statistics, Lagos. The import pattern has been much more stable. The United King- dom has consistently been the source of more than half the total imports. The remainder has been widely distributed among industrial nations. In spite of quite severe restriction, Japan has achieved the greatest increase over prewar and in the last five years provided the second largest group of imports. Germany, whose share has been expanding greatly in the last two years, is next in importance. The United States, third largest prewar supplier, has been reduced to fifth place through dollar import restrictions. This pattern results in Nigeria's running a large surplus witlh the 140 THE TECHNICAL REPORTS United Kingdom and the United States, combined with a considerable deficit with the rest of the world. While trade with other dollar countries has been in deficit and there are net dollar payments involved in other transactions, such as petroleum purchases, Nigeria has clearly been a net dollar earner. On the other hand Nigeria runs a heavy deficit with Japan. v TRADE AND PAYMENTS RESTRICTIONS Nigeria is a member of the sterling area and maintains exchange and import controls similar to those of other members. Purchases from the dollar area have been restricted in over-all amount, wvith licenses granted only for a specified list of essential goods unobtain- able elsewhere. The list and the over-all allocation are determined in London on the basis of Nigerian submissions. Restrictions on imports from other countries have for the most part been relaxed, with the significant exception of Japanese goods. During 1952 restrictions on Japanese goods were sharply tightened by Nigeria as by most members of the sterling area, following an earlier sterling area deficit with Japan. These restrictions led to a reduction of £ 5.5 million, or 50%, in Japanese goods entering Nigeria in 1953, a cut in terms of total value much more severe than the dollar restric- tions. In 1954, after Japan had negotiated an agreement with the United Kingdom calling for a substantial relaxation of restrictions by the United Kingdom and her colonies, the Nigerian allocation of import licenses for Japanese goods was greatly increased. The requirement for specific licenses for Japanese goods has not been abolished, how- ever. From intimations the mission received at the time of its visit, it was evident that there would remain a substantial volume of repressed demand for such goods. In the allocation of licenses among importers the policy of the administration has been to favor the African importer. The proportion of import business for scarce goods granted to Nigerian importers has increased annually as compared with that allocated to expatriate importers. INTERNATIONAL TRADE AND PAYMENTS 141 Export controls are maintained, primarily to ensure that the pro- ceeds of the sale are repatriated to Nigeria in accordance with ex- change control arrangements. There is no attempt to use these controls to divert exports to the dollar area. For the foreseeable future Nigeria will remain within the sterling area and while the sterling area maintains restrictions, so will Nigeria. It would be wise, however, if the administrative procedure were revised to provide for the presence of Nigerian representatives at annual dis- cussions in London. In this way, Nigerians would be kept informed about sterling area problems and would be confident that Nigerian problems were presented and adequately taken into account. vi EXPATRIATE COMPANIES IN TRADE Although the agricultural export goods are chiefly produced by numerous small landholders, the purchase from them of the export crops is highly concentrated in the hands of a small number of expatriate companies, which, together with other Nigerian and ex- patriate firms, operate as licensed buying agents of the Marketing Boards. Since the inception of the boards, the number of Nigerian firms so operating has increased, however. One expatriate company in particular occupies an extremely large place, purchasing in 1949 43% of all Nigerian nonmineral exports.2 In imports, substantially the same picture is presented with the same firms dominating, although the share of the smaller firms is somewhat larger and has tended to grow recently. This concentration has arisen chiefly from the great advantages derived in West African trade from large-scale operations backed by substantial capital. Originally there were few facilities available for services such as warehousing. Consequently, firms which provided their own obtained a substantial advantage. Many of the goods handled are standardized and there were economies in bulk handling. The absence of a local capitalist class necessitated the development of 2 This figure is given by P. Bauer in his article "Concentration in Tropical Trade," Economica, Aug. 1953, p. 22. The article provides a detailed analysis of the share of the firms in the trade of Nigeria and an examination of the causes of the concentration. 142 THE TECHNICAL REPORTS internal distribution of imports. As communications were poor, un- usually large stocks of goods had to be carried. The requirements for capital were further increased by the uncertainties of tropical trade; firms with small capital frequently were destroyed when price declines caused losses on stocks and ran them short of liquid capital. Large firms, well known in London, were able to weatlher such crises by borrowing abroad. The large expatriate firms have played a very important role in developing Nigeria. Their distribution of imported goods into the interior has been among the most potent forces in bringing about an increase in production for sale by demonstrating to the farmer the benefits he can derive therefrom. In addition, several of the firms have reinvested their profits in industrial and other enterprises in Nigeria. These firms have provided and are providing efficient service and their large share in trade will continue for many years to come. But with the passing of the special conditions which gave them their initial advantage, the share in trade of smaller firms and in particular of Nigerian firms will grow. In recent years this tendency has been encouraged by the more liberal allocation of import licenses to the smaller traders. In the future, too, government support and encour- agement for the smaller traders will be justified. However, this should not take the form of restrictive action against the larger companies based purely on the size or ownership of the firm. vii BALANCE OF PAYMENTS ESTIMATES While trade gives rise to the major part of Nigeria's payments and receipts with the rest of the world there are other transactions of substantial importance. There are payments of profits by expatriate companies, receipts of interest on investments in London, receipts of private capital from abroad and the investment of government surplus funds in London, to mention only a few. Estimates of all these trans- actions for 1950, 1951 and 1952 are given in Table 72 :1 See Appenidix E for the basis of the estimates. INTERNATIONAL TRADE AND PAYMENTS 143 TABLE 7 Balance of Payments Estimates (Mlfillton £) 1950 1951 1952 R.1 P. R. P. R. P. Merchandise Exports ....................... 88.9 - 119.6 - 128.6 Imports (c.i.f.) ......... ....... - 63.1 - 86.1 - 115.2 Balance on goods ....... ..... 25.8 33.5 13.4 Services Travel ......................... 0.1 1.4 0.1 1.8 0.1 2.1 Transportation & Insurance ...... 2.4 2.0 3.1 2.5 3.4 2.7 Investment Income-Direct ..... - 5.8 - 6.7 - 7.0 Other ...... 3.0 0.6 3.9 0.6 4.8 0.8 Other Government ........1...... .7 2.7 2.3 2.0 2.5 2.2 MIiscellaneotis ......... . - 0.7 - 0.8 - 0.8 Balance on services 6.0 5.0 4.8 1. Balance on goods anid services ... 19.8 28.5 8.6 Donations Private ........................ 0.7 1.2 0.9 1.5 0.9 1.5 Government ............. ....... 3.1 - 1.3 - 4.6 2. Balance on donations ...... .... 2.6 - 0.7 - 4.0 - 3. Private Capital ................ 2.6 - 8.6 - 7.6 4. Errors and Omissions ...... .... 0.4 - - 1.0 4.8 - Balance 1 throtigl 4 ........... 25.4 36.8 25.0 Official & Banking Capital Changes in Nigerian Liabilities 1.0 2.7 7.3 - 0.4 0.1 Changes in Nigerian Assets (Net): Marketing Boards ....... ..... - 12.1 - 11.2 2.1 - Currency Board ........ ...... - 5.3 - 13.4 - 4.0 Banks .. - 2.2 - 1.2 - 1.0 Other Official ................ - 4.1 - 18.3 - 22.4 Balance of Official & Banking Capital 25.4 36.8 25.0 1 R. = receipts; P. = payments. SOURCE: Mission estimates based on data supplied by Department of Statistics, Lagos. See also Appendix E. The most striking feature of the balance-of-payments situation is the substantial addition made in each of the three years 1950-52 to Nigeria's net official and banking capital abroad. For the three years 144 THE TECHNICAL REPORTS the net addition amounted to £ 87 million, an amount equivalent to over 25%o of export proceeds. This is an extraordinarily high rate of exchange savings, which has rarely been exceeded in any country. Nigeria's payments position is consequently very strong. While this surplus was invested abroad a smaller inflow of private capital was being provided by the expatriate firms. The amount recorded in the estimates, £ 19 million for the three years, refers to the physical additions to capital by the expatriate companies after allowance for depreciation. It does not include any allowance for the growth of their liquid assets in Nigeria-debts or cash holdings-and it is probable that the actual transfer of capital was several million pounds greater. Among the service items the largest is the profits of the expatriate companies. This item, which amounts to about 6% of export receipts, is quite substantial although it does not approach the level reached in many other underdeveloped countries. Nigeria is, however, almost unique among underdeveloped countries in having a very substantial offset in the form of interest receipts on balances held in London. These receipts are sufficient to cover all the charges on Nigeria's own debt and half the profits of expatriate companies. In consequence, net payments of invested income are less than 3% of receipts for exports. The other major outward payments by Nigeria occur in travel expenditure and in private remittances abroad. These together take a net amount of a little over 2% of total export receipts. In govern- ment donations are recorded the substantial receipts on Colonial Development and Welfare grants together with some minor items. viii STERLING ASSETS The large additions to Nigeria's assets abroad, shown in the balance of payments, have through the years led to the accumulation of very considerable sums. The full total of the assets was not readily avail- able, as the balances are -held by a large number of organizations, but a tabulation made for the mission indicated the position as of March 31, 1953 shown in Table 8. INTERNATIONAL TRADE AND PAYMENTS 145 TABLE 8 Sterling Assets of Nigerian Official, Semi-Official and Banking Institutions, 1953 (Million £) Marketing Boards .............................. 51.6 Currency Board ............................. 55.5 Central Government .............................. 47.7 Regional Governments ............................ 5.4 Native Authorities ............................. 3.1 Regional Production Development Boards .......... 15.1 Other (Semi-Official) ............................ 11.9 190.3 Net Balances of Banks Abroad ............. ....... 16.4 Total Banking and Official ............ ........ 206.7 SOURCE: Financial Secretary's Office. See also Appendix E. The values in Table 8 represent either cash balances or the market value of securities held in London; 11 % of the securities was in- cluded at their nominal, and the rest at the market, value. At that time the market values of securities held by the Marketing Boards were at a discount of 12%. As the official United Kingdom sterling balance figures are in terms of nominal values, about £ 20 million should be added to the figures in the Table when comparing them with other countries' sterling balances.4 This level of external assets of banking and official and semi-official institutions is quite unusual. In March 1953 not one of the 20 Latin American republics had such reserves. In the independent sterling area only Australia and India had greater assets. South Africa's total gold and foreign exchange reserves were less than two-thirds as large. To look at the assets from another side, they were considerably greater than the investments of expatriate companies in Nigeria; actually they exceed the total of these investments and the Nigerian public debt, so that Nigeria is for the moment a net creditor. The main part of the balances is held by the Marketing Boards, the Currency Board and the central government, each accounting for about £ 50 million. The other large block was held by the Regional 4 The realizable value of the £ 207 million in March 1953 has probably increased further in the succeeding year. The market value of the securities has improved and there appear to have been some direct additions by most of the institutions. 146 THE TECHNICAL REPORTS Production Development Boards, which received them from the Marketing Boards. Thie remainder was made up by the surpluses and unspent capital allocations of all the many semi-governmental organ- izations and the regional and local governments. The bank balances shown are the deposits of the branches in Nigeria with the head office in London. These bJalances, although private in direct ownership, are half government-owned if the ownership is traced to the depositors, for about half of the private bank deposits are made by official bodies. Nigeria is exceedingly fortunate to have such assets at the outset of an intensified development program. The assets are considerably in excess of the amount required for external solvency and the excess will be available for development needs. The amount which should be held abroad to ensure external solvency can never be precisely indicated. It is probably true, however, that Nigeria should maintain for some time at least an above-average re- serve. The terms of trade, although not greatly out of line with previous periods of prosperity, are likely to worsen. The price stab- ilization operations of the Marketing Boards and the use of accumu- lated reserves by government during times of adversity will lead to relatively great demands on reserves in a depression. On the other hand, the debt service payments are small and imports are fairly easy to compress. Allowing liberally for all factors suggesting highler reserves, there seems no doubt that a substantial proportion of the sterling balances could be regarded as available to meet the capital requirements of development. It is equally clear that at the moment the use of existing balances for this purpose should be limited. In Chapter 5 we have indicated the amounts which can usefully be employed in financing the develop- ment program in the next five years. We do not believe that these amounts should be exceeded because the reserves may have to be relied on in the more distant future to supplement the country's current savings when the requirements for capital investment will be larger. This problem and the working determination of the safe level of reserves are matters for which the proposed state bank should have primary responsibility. TECHNICAL REPORT 3 MONEY AND BANKING I CURRENCY The currency in circulation in Nigeria is the West African pound, issued by the West African Currency Board as the common currency of the British West African colonies of Nigeria, the Gold Coast, Sierra Leone and the Gambia. The currency system is based on sterling, and the value of the West African pound is tied directly to that of the pound sterling. West African currency is issued by the Board against the payment of sterling and, conversely, the currency is redeemable for sterling at all times. The issue and redemption take place at the rate of one pound West African currency to one pound sterling. The Currency Board The West African Currency Board was constituted by the Secretary of State for the Colonies, who also issued the West African Currency Board Regulations of 1949 which presently govern the Board's opera- tions. They authorize the Board, subject to the legislation in force from time to time in the West African colonies, to provide, issue and re-issue coin and currency notes in the four colonies. The issue of currency notes in Nigeria is authorized by the Nigerian West African Currency Notes Ordinance, which provides that the currency notes shall be a charge on the assets of the Board and "failing them, on the general revenues of Nigeria." The Board consists of five members appointed by the Secretary of State for the Colonies. The practice has been for one of the two Crown Agents for Oversea Governments and Administrations to serve as chairman, while the other members are from the Colonial 147 148 THE TECHNICAL REPORTS Office and the Bank of England. The secretariat is in the office of the Crown Agents and all meetings are held in London. The sterling acquired by the Board against the issue of West African currency is credited to a Currency Reserve Fund. Part of this reserve is kept in liquid form to meet likely redemption demands. The Regulations authorize investment of the remainder in "sterling securities of the government of any part of Her Majesty's dominions or in such other manner as the Secretary of State may approve." In practice the Board has virtually limited its investments to U.K. securities which constituted 98% of its holdings in June 1953. At no time has the Board invested in any West African securities, although there is no legal restriction on its doing so. In consequence the cur- rency issue has always been backed by external assets and there has been no fiduciary issue backed by securities of the local colonial governments. The Board may, with the approval of the Secretary of State, dis- tribute its income in whole or in part to the four governments. In practice, part of the income has been added to the Currency Reserve Fund. It is the broad policy of the Board to aim at a Currency Re- serve Fund greater than the amount of currency outstanding, while at the same time making reasonably regular distributions to the four governments. The excess, normally of the order of 10%o, is retained against possible depreciation of the securities held. At the end of 1952-53 the Board had reserves valued at 108%o of the currency issue and distributed £ 4.00,000 for that year to the four West African colonies. Nigeria's share, determined by a formula based on trade, amounted to £ 213,000. The Board will deal with any member of the public in the issue and redemption of currency, provided the amount of each transaction is £ 10,000 or more. It charges a fee of 1/2 So for issue or redemption. As the banks charge the same fee for transfers of funds between London and West Africa, all private transfers take place through the banks. The Board maintains a main currency center in Lagos, and eight subcenters in Nigeria-all of which issue currency and accept cur- rency for redemption. Transfers between all centers and subcenters in West Africa have been free of charge. No regulations have been r SOKO _ -_ -LAK& CHAD } ,~~SOKOTO \ _/ \/\_/\, / N~~~~~~~~~~KTI, GR r < s KAURA 5; P *~~~~~~~~~~~~GASHUA s USAU ) > / KANOA /, --/ \, MAIDUGURI )9 d / ,~~~~~~~~~~ BAUCH g ° J / N N~~~~~~~~NA KAFANHN __. ........ j JEB(. RUA JEBBA~~~~B K ,4Z/ ,/ ~LOKOJ_ IBADAN G AUO- < / s ~~~~> J t (5(_ w _ > ~~~~~TAKUM/ ENI;?____ >__E_NU-G DUt r GNI GE RI A \ nKOKO \ t _ G~~~~~~~~ENERAL TRANSPORTATION \ ;ie APELE , , OITSHA \\\ , BAMENDA - a . \ it / ° l _ - J I~~~~A Fnternational boundary .- - -. WARRI \x;t \ I rt ?\ / )} Ra~~~~~~~~~~~R ilway''' BURUTU ; \i \({2Main roads Sb 34- \\_t f \t uJ ~~~~~~~~~~~inland waterways ..:4.-- ,' ~~~ BARO~~~~~~A \ ___- pCALA8AR * ~~~~~~~~~~~~~~Internal oir lines \ORT HARCOURTi-.......... 9 tE 't - ~~~~~~~~~~~~TIKO iMDECEMDER, 1953 AN INTEGRATED DEVELOPMENT PROGRAM 59 vi TRANSPORTATION AND COMMUNICATIONS"0 Except in the northeast and the Cameroons, Nigeria's transporta- tion system (shown on Map 1) is reasonably adequate in the sense that there are already extensive facilities and lines of communication. It is not adequate in the sense of being able to move, promptly and at reasonable cost, the present volume of traffic, let alone the increase anticipated during 1955-60. The volume of present traffic cannot be estimated with precision, for there are no statistics for road traffic and the figures for water transportation are incomplete. Our estimate of past and present dis- tribution of traffic among the various forms of transportation is shown in Table 2. TABLE 2 Estimated Distribution of Traffic (Million ton-miles) 1938-i9 1948-49 1962-51 Rail ................... 315 66 658 63 827 61 Road ................... 100 21 300 29 400 30 Rivers and creeks' ........ 60 13 85 8 120 9 Air ................... - - - - 0.2 - Total ............ 475 100 1,043 100 1,347 100 Tt is estimated that 80% of this traffic is carried on the Niger and Benue Rivers. Improved transport facilities will have an immediately beneficial effect on the Nigerian economy and are essential for its further de- velopment. The mission therefore assigns them a high priority. The objective should be a countrywide system, adequate the year round to handle the traffic at reasonable cost. We have given first attention to the provision of facilities which are now urgently needed to round out the Nigerian transportation system. We have regarded facilities which would parallel existing ones as less urgent, without intending to suggest that such paralleling might not be desirable at some future time. For the transport portion of the development program, we propose capital expenditure totalling £ 37.9 million and recurrent expenditure '° See Technical Reports Nos. 16-20. 60 THE GENERAL REPORT rising from £ 4.2 million in 1955-56 to £ 5.38 million in 1959-60, as compared to £ 2.8 million in 1952-53. A RAILWAY The railway is just beginning to recover from serious postwar difficulties. Material shortages, labor troubles and greatly lowered efficiency, particularly in the locomotive workshops, so affected carry- ing capacity as to create the threat of a serious obstacle to the coun- try's development. This was most dramatically illustrated by the backlog of 185,000 tons of groundnuts piled up in tarpaulin-covered pyramids at northern stations in November 1953. Delivery of new engines and improved operating efficiency should make it possible, however, to clear this backlog by the end of 1955. We estimate a rise in traffic from 1,150 million ton-miles in 1955-56 to 1,460 million ton-miles in 1959-60. This projected increase of 5% per annum is in line with our expectation that exports of groundnuts and cotton will rise substantially, that the transport of domestic food- stuffs, including livestock, will increase and that large quantities of motor fuel will move north to satisfy the growing requirements of road transportation.'2 The principal problems to be solved during 1955-60 are how to meet these anticipated heavy traffic increases and to reduce rapidly mounting operating costs. These problems are aggravated by the fact that while northbound and southbound traffic were well balanced in 1952-53, there will be, we estimate, an annual preponderance of southbound traffic of about 230 million ton-miles between 1955 and 1960. We think these problems can and should be solved by employing more economical motive power and making maximum use of heavy trains. This will require more powerful engines, heavier track and more rolling stock than Nigeria has now. We do not believe, however, that it will be necessary to double-track any part of the system. At present, the railway is entirely steam-powered. We recommend that for more efficient and economical operation, steam traction should gradually be replaced by diesel electric traction starting in the North. 11 See Technical Report No. 16. 12 See Technical Reports Nos. 7, 8 and 17. AN INTEGRATED DEVELOPMENT PROGRAM 61 Basing our calculations on the experience of other African countries, we estimate that aggregate savings of nearly 50% can be realized on expenditures for fuel, water and engine operation and maintenance. Ten 750 h.p. diesel engines have already been ordered for 1955 de- livery. The mission recommends the purchase of additional diesel equipment to meet 1955-60 motive power needs, at an estimated cost of £ 774,000 (13 750 h.p. engines for the main line, 10 300-400 h.p. engines for branches and shunting and five railcars). A program of gradual dieselization such as we have in mind will not affect the market for Enugu coal for another 10 years, because the stock of coal-burning locomotives will continue in service and will be fully utilized. For the heavily-travelled Enugu-Port Harcourt section, a survey should be made to determine the feasibility of electric traction over the long term, assuming that a genei'al electrification program is instituted for that area. About 800 30-ton freight cars of various types are needed, for which we have allocated £ 2 million. It has been typical of the past operations that there has been, in stock or on order, equipment ade- quate to meet minimum needs only. As we foresee a long-term rise in traffic demand, we find no justification for such a policy. Equipment shortages should be avoided even at the risk of temporary surpluses. As for track, the main lines are for the most part laid with only 60 lb./yd. rail. As renewals become necessary, these lines should be relaid with 80 lb./yd. track, with which only the Lagos-Jebba section is now equipped. Renewal of the Port Harcourt-Enugu section, already planned, should be undertaken promptly so that it will be ready to handle the increased traffic which may be expected after completion of the proposed wharf extension at Port Harcourt."s The railway has planned to re-lay the narrow-gauge Bauchi Light Railway between Zaria and Jos. Since this line carries very light traffic, which is un- likely to increase substantially, and since it operates at a deficit, we recommend that it be closed and replaced by a road transport service. The lack of transport facilities is impeding the development of the northeast, which has a considerable agricultural potential. There is also a need for improved facilities to serve the transit traffic with the French Chad territory. These needs could be met either by extending 13 See p. 65. 62 THE GENERAL REPORT the railway to Maiduguri or by tarring the Jos-Maiduguri road for two lanes. Three possible routes for a railway extension have been pro- posed. One of them, via Zaria-Rahama, if modified to pass through Bauchi, would seem to us to have merit. In addition we suggest con- sideration of a route via Jos-Bauchi. We recommend a survey of these routes, over both of which connections could be made with the eastern main line. When the relative advantages of these two routes are known and can be compared with the advantages of the road, either the road or the rail project should be undertaken promptly. We think the only railway extension immediately justified is one of 40 miles from Nguru to Gashua, to give better service to that part of the Northern Region where no all-weather road exists. The extension could be laid with track taken up elsewhere; no additional motive power or rolling stock would be required. We have allocated £ 400,000 for this extension. Total capital expenditures recommended by the mission (including, in addition to the items specifically discussed, expenditures on build- ings, stations, workshops, machinery, etc.) amount to £ 9 million. We estimate that £ 5.4 million of this amount can be met from the railway's profits; we have projected government loans for the balance. On the basis of our traffic estimates, and on the assumption that the efficiency of operation and maintenance will continue to improve. we foresee a substantial margin of profit over the period 1955-60. We suggest, therefore, that the railway consider the possibility of lowering rates, to aid the country's production and trade. A review of the rate structure should also take account of increasing road competition. B ROADS 14 The Nigerian road system was estimated in 1953 at 29,000 miles, approximately one mile of road per 14 square miles, a high road density for Africa. But some of this mileage consists of mere tracks and much of it is not passable during the rainy seasons. Only 1,900 miles of road were bituminous, over half of them in the West. The number of vehicles in operation at the end of 1953 was 23,000, about half commercial. We estimate that the number of vehicles will increase 14 See Technical Report No. 17. AN INTEGRATED DEVELOPMENT 'ROGRAM 63 by 15% per year. so that by 1960 approximately 60,000 vehicles will be on the roads. There is a need for heavy trailer-trucks for long- distance traffic but at present they are permitted to operate only be- tween Jos, Maiduguri and Fort Lamy in the dry season. Administratively, Nigerian roads are classified as Trunk Roads A, financed by the central government; Trunk Roads B, financed by the regions; and local roads, which are the responsibility of various local governments and authorities. An adequate network of about 6,000 miles of Trunk Roads A was planned in 1946. We have allocated £ 2 million for its completion during 1955-60, but we suggest that the projected construction of about 200 miles of the Bamenda-Yola road be deferred in view of the anticipated completion of the connection via Takum. The emphasis of the 1955-60 program should be on adapting the Trunk Roads A system to denser and heavier traffic. This means widening, straightening and tarring roads, and reinforcing and re- placing prewar bridges, designed for an eight-ton load only. We pro- pose a number of arteries for heavy-weight traffic aggregating 1,700 miles, limited to the hinterland of the ports, an east-west connection and the area beyond the railway line in the North. They should be two-lane bituminous roads and should have bridges capable of carrying 12 units B.S.,"5 permitting heavy trailer-truck traffic. The many short single-lane bridges constitute a serious traffic hazard; they should be widened to two lanes. Since we think that for the time being the railway should remain the principal heavy-traffic connection between Lagos and the North. we do not recommend that the Lagos-Kano road be brought up to the above specifications. Pending a decision on the alternatives of rail versus road transport for Bornu Province, the Jos-Maiduguri road should be tarred for one lane only. We have allocated £ 10.5 million for the heavy-weight traffic arteries program and £ 1.5 million for improvement of the Lagos road network, consisting of a four-lane road connecting Carter Bridge with the port and the industrial area of Apapa, and a connection running to the west of the city between Apapa and Ikeja airport. We recommend an extension of the Trunk Roads B mileage and 15 British Standard. 64 THE GENERAL REPORT tarring of all Southern Trunk Roads B. In the North, roads should be tarred at a lower traffic density than is now the rule. The 1960 goal for the North should be 5,000 miles of Trunk Roads B, of which 1,000 would be tarred. We estimate that capital expenditures by the regional governments would total £ 7.5 million for the five-year period. The present poor quality of road surfaces is due in part to primi- tive work methods. We recommend that tarring be mechanized. Maintenance of earth roads, especially in the North, presents special problems. There is no doubt that mechanized maintenance could greatly improve the quality of the roads. However, before it is adopted for roads throughout the country, we recommend the experimental introduction of mechanized maintenance on one heavily travelled sector, to enable the authorities to become more familiar with the problems of organization and maintenance. At the same time manual maintenance should be improved, chiefly by. better supervision. The greatly increased road activities recommended for 1955-60 require, in our opinion, some organizational changes. At present, Trunk Roads A and B are the responsibility of the Public Works De- partment, which also performs a number of other tasks. We recom- mend separate road departments for the federal government and for the Northern Region. In the other regions, the regional public works departments will be able to give sufficient attention to road problems. We further recommend that the federal road department be placed under the jurisdiction of the Minister of Transport, to assure co- ordination of transport policy. Capital expenditures for roads recommended by the mission total £ 25 million. Recurrent expenditure is projected to rise from £ 2.5 million in 1955-56 to £ 3.4 million in 1959-60 as against an estimated £ 2.2 million in 1953-54. A program of this magnitude will require not only intensified training of Nigerian staff and recruitment of expatriate staff, but also a much greater reliance on private contrac- tors than has been customary heretofore. We recommend that the contracts to be let call for sufficient work and run for a sufficient period to be attractive to private contractors; international competitive bids should be invited. 66 THE GENERAL REPORT new Lagos-Benin road and the Apapa Wharf extension have been in operation for a while. We have allocated £ 5.8 million for ports and other marine improve- ments. Inland Wateriways Nigeria has an extensive inland waterways system. More than 1,000 miles of the Niger and its tributary the Benue are navigable for at least part of the year and a network of navigable creeks stretches from the western border of Nigeria to Opobo in the Eastern Region. Including other waterways, a total of 4,000 miles is in regular use. Silting of the entrances of the huge Niger delta and the short period of navigability of much of the Niger and the Benue pose serious prob- lems which until recently have not received the necessary attention. In 1953, however, an independent engineering survey of the delta was undertaken with the object of finding an entrance with a satisfac- tory and maintainable draught, to be followed in 1955 by a complete survey of the two rivers (see p. 49). Year-round navigation of the Niger is possible as far as Onitsha only; the railway terminus of Baro, a transshipment port for groundnuts, can be reached for eight months. The Benue is navigable up to Yola for only four months, while Garua in the French Cameroons can be reached for no more than 10 weeks. For this reason, the river transport companies find it uneconomical to expand their fleets to a size which could take care of all traffic, but new "push-tow" tugs, recently introduced, have increased the fleet's carrying capacity. If the projected river basin study discloses the technical feasibility of major improvements, their economic justification should be judged in the light of the traffic outlook and of the possibility of co-ordinating the river improvements with irrigation schemes and the development of agricultural production in the Middle Belt. For surveys of and improvements to inland waterways, £ 800,000 has been allocated in the mission's recommended program. Organization The Nigeria Marine, a government department, is the Nigerian harbor authority. It is also responsible for inland waterways and has AN INTEGRATED DEVELOPMENT PROGRAM 65 C PORTS AND INLAND WATERWAYS 10 Ports The nine Nigerian ports open to ocean-going vessels handled a total of 3.7 million tons of cargo in 1953, three-quarters of that total at Lagos and Port Harcourt. Over the past five years, cargo in foreign trade has increased by 50% in Lagos and by 80% in Port Harcourt, seriously straining these ports' resources and leading to costly delays. A major program of extension and improvement of Apapa Wharf at Lagos is well under way. The planned annual capacity of 1.4 million tons should be adequate for the near future. Customs Wharf on Lagos Island is badly in need of repair, but as the volume of its traffic is likely to decrease in favor of Apapa, it may be advisable to close Customs Wharf and concentrate traffic at Apapa, which should then be further extended. We suggest that an estimate of the cost of rehabilitation be made but recommend that no extensive work be undertaken until a decision is reached as to the wharf's future. Facilities at Port Harcourt, which are already inadequate to handle present traffic, face increased demands. The port and the eastern rail- way line are growing in importance as northeastern traffic grows. Major improvements to the port, including additional pier and lighter- age berths and better road access, estimated to cost roughly £ 2 mil- lion, are being considered. These improvements are badly needed and we urge that the necessary preliminary surveys be made promptly so that the work can be begun in 1955. The other ports, which serve a limited hinterland or are transship- ment ports for river traffic, present no problem, with the exception of Sapele where traffic must use a ferry. To avoid this, it has been pro- posed to construct a port at Koko, some 30 miles away, to which would be diverted all traffic except timber now using Sapele. We are not convinced that the proposal is economically justified and we urge that a careful comparative survey be made of the cost of building a port at Koko, together with housing, roads and power, and of con- structing a wharf and warehouse on the river opposite Sapele. No final decision on either alternative should be taken until it can be seen what changes in volume and direction of traffic occur after the 16 See Technical Report No. 18. AN INTEGRATED DEVELOPMENT PROGRAM 67 a number of other functions. A Ports Authority is to be set up to take over the Marine's harbor functions and to operate the publicly- owned wharves, now operated by the railway, by the Customs Depart- ment and by other agencies. Lagos and Port Harcourt will un- doubtedly benefit from the unified and integrated port operations made possible by the new form of organization. The Marine's non-port functions will be exercised by a "Marine Department" within the Authority. In order to insure that this reorganization will not result in too little attention being paid to the inland waterways problems, we recommend the organization of a separate inland waterways section of the Marine Department as soon as possible. D CIVIL AVIATION 17 Nigerian air transport is operated by the West African Airways Corporation (WAAC), an interterritorial statutory corporation serving Nigeria, the Gold Coast, Sierra Leone and the Gambia. There are 28 airports and landing grounds in Nigeria, including the international airports of Lagos and Kano, the latter being an important transit port. We see no need for additional airports. We do recommend improve- ments necessary to adapt all runways to use by the B-170 planes of the WAAC fleet, and the extension of runway lighting, now installed only at Kano and Lagos, to other airports. A new terminal is planned for Kano. At other terminals only minor improvements are needed. Radio equipment will be required to extend and improve the com- munications system. We estimate the cost of the foregoing improvements at £ 1.4 million. In April 1954, WAAC substantially reorganized its Nigerian op- erations in an effort to reduce its deficit, which has grown annually despite steady increases in passenger and freight traffic. Cost of op- eration has been high, due in part to low aircraft utilization (because of short flight stages and lack of runway lighting), but in greater measure to the uneconomical use of small planes for most of the first- class services. The success of its second-class services, operated with larger planes, led WAAC in April 1954 to institute a single-class service on its main lines, operated at reduced frequencies by 45-seater B-170's. The fare of 6d. per passenger mile is slightly above the 17 See Technical Report No. 19. 68 THE GENERAL REPORT former. second-class rate. We think that this plan should reduce op- erating and maintenance costs and should soon result in self-support- ing main lines which will offer more frequent service as traffic expands. But we also think that consideration might be given to the feasibility of increasing revenue by offering some more comfortable first-class seats on these planes at higher rates. The northern secondary lines will not be self-supporting for some time to come. WAAC deficits are made up by contributions of the four territorial governments, Nigeria customarily contributing from 70% to 75%o. We have allocated £ 750,000 for Nigeria's contribution to WAAC's deficit over 1955-60. To permit a more realistic allocation of the deficit, we recommend that separate operating accounts be kept for intercolonial, Nigerian main, and Nigerian secondary lines. For fleet expansion we have allocated a token £ 200,000. E COMMUNICATIONS 18 Nigeria's communications services are at the moment inefficient and slow. The postal service is handicapped by a shortage of staff and plans for extending the service by building new post offices have been held up because the Public Works Department is occupied with more urgent work. Urban telephone service has been improving but long-distance telephone service is erratic and does not connect all large centers. The Posts and Telegraphs Department has undertaken a pro- gram of expansion of the VHF (very high frequency) radio-telephone system, which should result in marked improvements. Telegraph service is very poor; we think this is largely because of a system of overtime wage payments that acts as a deterrent to efficiency. The postal service is now being surveyed by experts from the British Post Office and it is to be htoped that the survey will lead to a substantial improvement in service. The staff position can be bet- tered only by energetic training and recruitment campaigns. The building program could be speeded up by turning large portions of it bver to private contractors. Recruitment of additional skilled mainte- nance linesmen and a revision of the wage system would result in im- proved telegraph service. These steps should be taken as soon as pos- Is See Technical Report No. 20. AN INTEGRATED DEVELOPMENT PROGRAM 69 sible, for Nigeria's economic expansion will demand much more efficient telecommunications than now exist. The Nigerian Broadcasting Service has an ambitious expansion program for the next three years. Although the mission did not ex- amine the program in detail, it feels that the plan should be stretched out over the five years to 1960 at least, to avoid competing with other claims for skilled manpower. Expansion of telecommunications and the postal service will re- quire capital expenditure of £ 3.7 million in the five years 1955-60. The capital cost of the broadcasting program is £ 1.1 million. Re- current expenditure for the operation of all these services will rise from £ 1.5 million in 1952-53 to £ 3.4 million in 1959-60. The mis- sion did not draw up a separate detailed communications program; our cost estimates are based on proposals of the government depart- ments concerned. vii EDUCATION'9 Education in Nigeria has been undergoing remarkable expansion. Within the last two years both the Eastern and Western Regions have formulated plans for the early introduction of universal primary edu- cation and a rapid advance at the primary level is also being pro- posed in the North. Secondary and higher education are likewise expanding. The country's first technical schools are in the process of development. The intense and widespread desire in Nigeria for education is encouraging. Broadly-based education is an essential in providing the manpower for economic development. In the past, economic growth has been largely left to the efforts of expatriate entrepreneurs, ad- ministrators and technicians; the time has come to increase as speedily as possible the number of adequately trained Nigerians able effec- tively to contribute to that growth. However,-the pace of educational advance and the formulation of a financial program for the period ahead are affected by a variety of factors, including popular interest in education, financial resources, the extent of organizational and managerial ability and, most impor- 19 See Technical Report No. 21. 70 THE GENERAL REPORT tant, the number of trained teachers available. In view of the limiting effect of some of these factors, the mission doubts whether all of the currently planned educational programs can be accomplished as quickly as is desired. On the other hand, there are areas in wvhich the mission feels that greater progress could be made. Primary Education It is estimated that at the beginning of 1953 only 20-25% of Nigeria's five million children between the ages of 7 and 14 were in school: about two out of five in the East, one out of three in the West, one out of four in the Southern Cameroons and one out of 20 in the North. The two most important limitations on progress toward universal primary education will be the rate at which trained teachers can be supplied and the magnitude of recurrent costs in relation to the pres- ent revenue levels. Our financial projections are based on our esti- mate that enrollment can increase at a rate of 15% per year in the West, 10% in the North, 8% in the Southern Cameroons and 6%o in the East. These rates mean a faster growth than heretofore. The West has set 1959 as the date by which all children of school age will be in primary school. Taking into account our estimate of a 15% annual growth, it seems improbable to the mission that the target can be reached before 1962. These rates of expansion are as high as the availability of trained teachers will allow. There are now in Nigeria some 42,000 teachers of whom less than 14,000 have had specialized teacher training; the remainder have not received an education beyond the first eight or even six years. In 1953, training centers produced only about 1,800 new teachers, to fill new posts and to serve as replacements. Programs now under way in all regions will almost double the output of trained teachers by 1958; we would favor additional expan- sion in the North and the East. In the East and in the Southern Cameroons there should also be an effort to increase the present very low ratio of trained teachers to students. Every effort should be made to make teaching as a career more attractive and to reduce the "wast- age" of trained teachers who leave the profession. To secure qualified staff for the teacher-training centers, the training departments at the AN INTEGRATED DEVELOPMENT PROGRA-,M 71 Nigerian College of Arts and at the institute of education of the University College, proposed below, should be developed promptly. Secondary Education Only 20,300 are enrolled in general secondary schools compared to over one million now in primary schools, although secondary educa- tion is the basic preparation for most responsible jobs and is manda- tory for any type of professional training. A doubling of the secondary school enrollment by 1960 would be a desirable target but we doubt its feasibility because of the difficulty of obtaining qualified teachers. We have therefore based our projec- tions on a 10%o annual increase, except in the North where the dearth of secondary schools necessitates an extra effort and where we have projected an annual increase of 15%. Secondary school instruction is not now geared to the needs of the Nigerian student body and should be reoriented accordingly. Much has already been accomplished in this direction in the North but there is in the East and West a great deal of emphasis on the pattern of the English grammar school and on preparation for the Cambridge School Certificate examination. More emphasis should be placed on chem- istry, biology and physics (preparatory to training in medicine, health and nutrition), agriculture and handicrafts, and on such com- mercial and clerical subjects as bookkeeping, commercial law, short- hand and typing. Facilities for the training of secondary school teachers are ex- tremely limited. If the present dependence on expatriate staff is to be lessened, programs will have to be instituted or enlarged at the Nigerian College of Arts, Science and Technology and at the Uni- versity College. Technical Education Nigeria's 10-year plan for development and welfare has given a central place to training in technical skills. As a result, a program of technical education is now being developed in technical institutes, trade centers and handicraft centers in every region. 72 THE GENERAL REPORT The most advanced technical institute is at Yaba, near Lagos, which offers "senior" courses in electrical, mechanical and civil engineering, "junior" courses in subprofessional engineering, drafting, commerce, printing and woodworking, and teacher training in handicrafts, as well as shortened and part-time courses. These programs are highly effective. It is to be hoped that the similar institutes now being de- veloped at Enugu and Kaduna will be in full operation soon. Busi- ness and industry have been co-operating with the schools in providing supplementary training; there should be more of these arrangements. The mission recommends that the seven trade centers now being established should be reorganized and expanded. Instead of produc- ing a small number of skilled workmen, the centers should aim at providing the kind of training which will enable the students even- tually to hold supervisory positions. We suggest that the five-year course begin with two years of general education and that the follow- ing three years. of specialized training include a year of on-the-job experience in industry. The handicraft centers and the home craft centers have been most beneficial and we suggest that additional cen- ters be set up all over the country. But technical training programs in schools, by their nature, cannot be expected to provide the type of skilled and semi-skilled workers in the mechanical and industrial trades who will be needed in increasing number as Nigeria's development proceeds. The mission believes that the most effective way of producing the required manipulative skills will be through training on the job-training within industry-as distinguished from instruction at organized trade schools. Every op- portunity should be taken to encourage the efforts of government agencies, private industry and organized labor to this end. Higher Education The establishment of the University College, Ibadan, was an im- portant step forward but Nigeria needs many times more college grad- uates than even the most optimistic plans could provide. Therefore we recommend that every effort be made to increase enrollment at the University, presently around 400, as quickly as possible. Added en- rollment would also reduce the present high operating cost per student. AN INTEGRATED DEVELOPMIENT PROGRAM 73 At the same time the University College should offer a greater va- riety of courses. We recommend that an institute of education be established at the University to offer postgraduate study in education, that the faculty of agriculture be strengthened and a course in agri- cultural engineering be given, that faculties of forestry and veterinary medicine be established and that courses in applied economics be added to the curriculum. The Nigerian College of Arts, Science and Technology is a federal government institution with three branches, one in each region. It is designed to meet the need for a kind of higher education not normally offered by a university. The mission believes that it would be advan- tageous to divide the College into three parts and to vest operating responsibility in the regional governments, with the federal govern- ment contributing to the running expenses and assuring the mainte- nance of minimum standards. We also have three specific suggestions: the agricultural schools now being operated by the agriculture depart- ments of the Northern and Western Regions should be consolidated with the branches of the Nigerian College at Zaria and Ibadan; phar- macy courses should be added at all three branches; and the courses in bookkeeping and accounting should be expanded both in the regu- lar program and by offering evening extension classes. As the educational program grows, there will be a growing demand for scholarships; the cost of advanced education is high for Nigeria. The mission's projections allow for moderate expansion, 5% per year, in the funds to be made available for this purpose by the federal and regional governments. However, present policies for granting scholar- ships should be reviewed and in the future preference should be given as far as possible to students who will study in Nigeria rather than abroad. Cost and Financing of Educational Expansion. The educational expansion wvhich we have projected would involve a very large increase in annual recurrent expenditure by all levels of government: from £ 6.3 million in 1953-54 to over £ 14 million in 1959-60. In the last year 56% of the recurrent expenditure would be on primary schools. Total capital expenditure would be likely to approach £ 14 million over the five. years 1955-60. Of this amount, 74 THE GENERAL REPORT 34%o would be for primary schools, 23% for secondary schools, 15% for teacher training, 17% for technical education and 10% for higher education. Broadly speaking, higher education should be financed by federal funds, secondary education by regional funds and primary education by local funds. The regions should, however, cQntribute substantially to primary schools, and to the regionalized branches of the Nigerian College. The mission urges particularly that the cost of primary edu- cation be financed to the greatest possible extent at the local level. In general, the greater the local responsibility for the cost of educa- tion the more genuine will be the community's interest in its schools. The mission wholeheartedly supports the policy statement of the gov- ernment of the Eastern Region that the rate of progress in this field should depend on the willingness of local authorities to finance the cost of expansion. We also think that the system of "rates" adopted by those Eastern local authorities wvhich have chosen to move rapidly ahead is the most practical device for raising the necessary revenue. However, the precise financing arrangements and in particular the im- portance of regional grants must of necessity vary according to the cir- cumstances of each region. General Recommendations Finally, there are certain observations which apply broadly to Ni- gerian education and which have provided a basis for the mission's more specific recommendations set forth in Technical Report No. 21. 1. As the educational program develops, continuing thought and effort must be devoted to making instruction as beneficial to Ni- gerian-students as possible. The closeness with which standards and practices developed in the United Kingdom have been followed in Nigeria can be a source both of pride and of concern-pride be- cause standards have been high and concern lest courses and methods of instruction might be adapted too slowly to Nigerian needs. 2. The recent constitutional revision has placed squarely on regional and local governments the responsibility for organizing, financing and supervising primary and secondary education. The AN INTEGRATED DEVELOPMENT PROGRAM 75 mission agrees with this in principle, as long as it does not impair the maintenance of uniform standards which will assure basically sound education in all regions; these are best administered cen- trally. The mission would like to see the federal government carry out functions of inspection, including interregional co-ordination, research and the administration of a modest program of special financial assistance to the regions. The exercise of some of these functions may require the delegation of authority by the regions to the federal government. 3. The Christian Missions which pioneered in education in Ni- geria are gradually being displaced as primary education becomes more and more a matter of public responsibility. We suggest that the Missions can still serve a useful purpose by providing instruc- tion of a quality and with emphases and values which public institu- tions cannot always offer. 4. The education of women in Nigeria suffers by comparison with the opportunities for men. Educational opportunities should be expanded and diversified to provide proper training for teaching posts and for employment in industry and government. viii MEDICAL AND HEALTE1 SERVICES The mission has formulated no detailed recommendations for medical and health services in Nigeria. It nevertheless attaches im- portance to their development, particularly of those services which can help to prevent disease. In this category are the plans now under consideration for a public sewerage system and for slum clearance projects in Lagos. We recommend slum clearance programs for Port Harcourt and Ibadan as well. In the case of federal expenditures on medical and health facilities, officia,l proposals for expenditure have been incorporated in our projections. In the case of regional and local governments, we have made rough projections providing for a substantial rise in recurrent expenditure and for a moderate rise in capital expenditure. Our projections call for a rise in total recurrent expenditure on medical and health services from £ 3.6 million in 1952-53 to £ 7 million in 1959-60. Capital expenditure is projected to amount to £ 21 million during 1955-60. Of this, £ 5 million is for 76 THE GENERAL REPORT Lagos sewerage, £ 4 million for Lagos slum clearance, £ 3 million for slum clearance in the Western Region, £ 1 million for slum clearance in the Eastern Region and the balance for hospitals (including ex- panded general hospital facilities for Lagos), dispensaries and small public health projects. The mission attaches considerable importance to the attainment of higher nutritional standards through the production of higher-quality home-grown foods. Earlier reference is made to the need for research on soil, plant and animal production problems; such research will have an important bearing on the future elimination of disease, the availability of milk for children and an increased production of ani- mal protein generally. Public health improvement also calls for an expansion in the water supplies available in Nigerian towns and villages, and it is unfortunate that the provision of water supplies, both urban and rural, has re- cently had to be somewhat curtailed for lack of sufficient appropria- tions. We recommend that government expenditure on water re- sources 20 include £ 4.7 million capital expenditure between 1955 and 1960 on new urban water undertakings, much of which should be provided to local authorities as loans. In addition, the renewal and expansion of existing undertakings operated by the Public Works Department may require capital expenditure of £ 900,000. The recur- rent cost of urban water undertakings would rise from about £ 140,000 in 1953-54 to about £ 350,000 in 1959-60. There is also a need to continue providing new rural water sup- plies, especially in the North, where they are required not only for public health but also to make possible increased cattle production. The Northern Regional Public Works Department has been engaged in an extensive program of digging wells and, where the water is very far from the surface, drilling bore boles. We have projected continuing capital expenditure on this program, amounting to £ 3 million in five years. In the Eastern and Western Regions, we have allocated £ 880,000 for proposed capital expenditure on rural water supplies. Recurrent expenditure by the three regional governments would rise to £ 550,000 in 1959-60, from £ 260,000 in 1953-54. Local authorities can also make a substantial contribution to im- 20 See Technical Report No. 12. AN INTEGRATED DEVELOPMENT PROGRAM 77 provement of water supplies. We propose that their capital expendi- ture, exclusive of expenditure from loans from the regional govern- ments, amount to not less than £ 650,000 between 1955 and 1960. In 1953-54 they spent about £ 90,000 for this purpose. ix THE PATTERN OF EXPENDITURE The development program which we have outlined is summarized in Table 3. It proposes a rise in the expenditures of the various levels of government from- £ 51 million in 1952-53 to just under £ 100 million in 1959-60.21 Thus in six years public outlays would be almost doubled, while Nigeria's national income is not likely to rise by more than 20% in that period. From a relatively low 7.5% of the national income in 1952-53, government expenditure would mount to some 12% in 1959-60 on the basis of our projections. This figure is more in line with the level in other underdeveloped countries,22 though much lower than that in developed ones. The mission believes this expansion to be fully warranted, for, as we have pointed out, the public services have been inadequate to serve the economic and social needs of the country. As explained in Appendix C, the projections of Table 3 represent the mission's recommended expenditure program in the case of the sectors for which the mission has formulated detailed recommenda- tions; for other sectors we have projected expenditures at a fixed rate of increase, in most cases 3% per annum. Annual projections of re- current expenditures reflect the pace at which, in our opinion, po- sitions can be filled and services expanded. Capital expenditures are shown in the years in which they are most likely to be incurred, al- though for this type of expenditure the five-year total is more sig- nificant than the annual figures. Table 4 gives the percentage composition of actual and recom- mended public expenditure by main sectors for 1952-53, 1955-56 and 21 Exclusive of the capital expenditures from nongovernment funds made by statu- tory corporations, which totalled £ 5 million in 1952-53; our projections provide for their spending some i 6 million in 1959-60. 22 In British Guiana the proportion has in recent years been 17%, in Burma 12%, in Ceylon 15%, in Chile 15% and in Colombia 11%. /, TABLE 3 The Pattern of Public Expenditure (Million £) A Projections of Mission Actual' ______________________________ Total 1952-53 1955-56 1956-57 1957-58 1958-59 1959-60 1955-60 Recur- Cap- Recur- Cap- Recur- Cap- Recur- Cap- Recur- Cap- Recur- Cap- Recur- Cap- X rent ital rent ital rent ital rent ital rent ital rent ital rent ital Agriculture2 Government ............................... 2.5 .4 4.0 2.0 4.4 1.4 4.9 2.6 5.3 3.3 5.7 3.1 24.2 12.4 Statutory corporations3 . ................ - 1.2 - 1.5 - 2.0 - 1.0 - .8 - 1.5 - 6.8 t'i Industry, mining and power Government ................. .5 2.1 .6 2.6 .6 .9 .7 3.0 .7 4.4 .7 4.9 3.2 15.8 Statutory corporations3 ............... - 2.0 - 1.0 - 1.5 - .5 - .3 - 1.0 - 4.3 tv Transportation4 :O Government ................................ 2.8 4.9 4.2 5.5 4.5 6.1 4.8 8.5 5.1 8.7 5.4 9.2 23.9 37.9 tt Statutory corporations3 ............... - 1.4 - 3.4 - 3.4 - 3.5 - 3.4 - 3.4 - 17.1 0 Telecommunications ............ .............. 1.5 .6 2.2 1.0 2.5 1.0 2.7 .9 3.0 1.0 3.4 1.0 13.8 4.8 3 Water supplies ............................... .4 1.2 .7 1.4 .8 1.8 .9 2.1 .9 2.6 1.0 2.7 4.3 10.6 Miscellaneous public works ....... ............ 3.6 2.9 3.4 3.1 3.6 3.3 3.8 3.5 4.0 3.5 4.2 3.6 19.0 16.9 Education ................................... 5.3 3.1 9.4 3.0 10.5 3.1 11.7 2.6 12.9 2.4 14.2 2.4 58.8 13.6 Medical and public health services ..... ....... 3.6 .6 5.2 1.7 5.5 2.5 5.9 3.9 6.3 6.2 6.8 7.1 29.7 21.3 Administration, security, survey and miscellaneous Government ................. .............. 14.2 .8 18.6 1.2 19.2 1.2 19.7 1.1 20.3 1.1 20.8 1.1 98.5 5.8 Statutory corporations3 ................ - .5 - - - - - - - - … - … _ Total5 ....... 34.3 21.6 48.4 27.4 51.7 28.0 55.1 33.2 58.4 37.6 62.1 41.0 275.4 167.2 of which: Government1 ....... 34.3 16.5 48.4 21.5 51.7 21.1 55.1 28.2 58.4 33.1 62.1 35.1 275.4 139.0 Statutory corporations" ................. - 5.1 - 5.9 - 6.9 - 5.0 - 4.5 - 5.9 - 28.2 1 Figures for local authorities are revised Estimates. 2 Including forestry, veterinary, marketing and exports, co-operatives, and fisherics. 3 Expenditure of funds other than those received from government. 4 Roads, harbors and waterways, railways, aviation. 5 Totals may not equal sum of columns because of rounding. souRCE: Tables 1-11 in Appendix C. TABLE 4 Percentage Composition of Proposed Public Expenditure 1952-53 1955-56 1959-60 Recurrent Capital Total Recurrent Capital Total Recurrent Capital Total - H Agriculture .................................. 7.3 7.4 7.3 8.3 12.8 9.9 9.2 11.2 10.0 tI Industry, mining and power ....... ............ 1.5 18.9 8.2 1.2 13.1 5.6 1.1 14.4 6.4 x Transportation . ............................... 8.1 29.0 16.2 8.7 32.4 17.3 8.7 30.7 17.4 ^ Telecommunications ........... ............... 4.4 2.8 3.7 4.6 3.6 4.2 5.5 2.4 4.3 x Water supplies . ............................... 1.2 5.5 2.9 1.4 5.1 2.8 1.6 6.6 3.6 Miscellaneous public works ....... ............ 10.5 13.3 11.6 7.0 11.3 8.6 6.8 8.8 7.6 m Education ................................... 15.4 14.3 15.0 19.5 10.9 16.4 22.8 5.9 16.1 < Mledical and public health services ..... ........ 10.5 2.8 7.5 10.8 6.2 9.1 10.9 17.3 13.5 t Administration, etc . .......................... 41.3 6.0 27.6 38.5 4.4 26.2 33.4 2.7 21.2 ° Total' .......... ..................... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 x 1Totals may not equal sum of columns because of rounding. SOURCE: Table 3. 0 80 THE GENERAL REPORT 1959-1960. By 1959-60, projected expenditure on agricultural serv- ices and projects amounts to 10% of total expenditure, as against 7.3% in 1952-53. Agriculture's share in recurrent expenditure is projected to rise during 1955-60, whereas capital expenditure would become relatively less important after the initial heavy investment in research facilities and staff quarters. The industrial sector would account for 6.4%o of total expenditure in 1959-60. The comparison with 1952-53, when it accounted for 8.2%o, is misleading: in that year large loans were made to the Elec- tricity and Coal Corporations, while recurrent expenditures included running expenses of certain power plants, since transferred to ECN. In fact, if electric power is excluded, the proportionate share of indus- try would double from 1952-53 to 1959-60. Transportation, which already accounted for one-sixth of total ex- penditure in 1952-53, would increase further in relative importance during the years 1955-60. The greatest proportional increase is recommended for the medical and health sector. It is to be noted, however, that this increase is due largely to proposed capital expenditure on slum clearance projects in Lagos, Port Harcourt and Ibadan and on a sewerage system in Lagos. Recurrent expenditure would remain a constant percentage of the total. The share of education in total expenditure, on the other hand, would show only a slight rise, from 15% to 16%. However, recurrent expenditure for education would rise steeply and in 1959-60 would take almost 23% of total recurrent expenditure compared to 15% in 1952-53, while capital expenditure would decline because most of the facilities for University College, Ibadan, and the Nigerian College of Arts, Science and Technology will have been completed by 1959-60. Cost of general administration, security and miscellaneous activi- ties would decline in relation to expenditures for other sectors. A greater decline would have been projected were it not for expenditures on the additional administrative apparatus necessitated by the consti- tutional changes. CHAPTER 4 ORGANIZING THE DEVELOPMENT EFFORT The preceding chapter is concerned with our recommendations for expanded development activities by the federal, regional and local governments and by the several statutory bodies. This chapter ad- dresses itself to the organization of the development effort and to the role of a number of public agencies in that effort. It also sets forth the mission's proposal for a state bank. In making our recommendations, which involve the creation of new institutions and changes in existing ones, we have been mindful of the desirability of keeping to a minimum any further burdening of the administrative apparatus. In each case, we have carefully weighed the advantages of a proposed change against the added administrative burden which it would initially entail. We have paid particular attention to the implications of the pro- gression towards self-government, and of the federal system intro- duced by the revised constitution which has already made necessary a great number of organizational and administrative changes. We think that most of our recommendations can be carried out as part of this general reorganization. FORMULATION AND CO-ORDINATION OF ECONOMIC POLICY The limited availability of skilled manpower and the fact that funds, though now ample, are by no means inexhaustible, make it imperative that duplication of effort be avoided, that each part of the develop- ment program be related to the needs of the economy as a whole, and that priorities be assigned among public investment projects. Ultimate decision on these matters is a responsibility of government which cannot be delegated. But cabinet action should be based on staff work, and this should be done by an economic secretariat inde- pendent of the departmental government machinery. 81 82 THE GENERAL REPORT This report is to a certain extent illustrative of the kind of analysis such a staff would make. But we have made no more than a begin- ning. Our recommendations are necessarily based on the situation as it exists and as we expect it to develop; they must be studied, kept under constant review and modified in the light of changing circum- stances. In many instances we have not been able to recommend action, in the absence of necessary information; in those cases we have recommended surveys, studies and research. When their results become available, they will form the basis for further decision and action. In our view, Nigeria's present economic problems call for the creation of a special body to advise on economic policy and to propose, analyze and co-ordinate public investment programs. The machinery which we suggest for this purpose consists of an economic secretariat within the federal government, to provide staff services for an eco- nomic committee of the federal Council of Ministers. We also propose that there be regional counterparts of the economic committee and that there be created a national economic council in which the federal and regional governments would be represented. Economic Secretariat The economic secretariat, which would be responsible to the eco- nomic committee of the Council of Ministers, which we propose below, would have three principal functions: 1. To gather, analyze and evaluate information regarding the development potential of the country as a whole; to estimate the financial requirements of development projects and programs; and, generally, to prepare such studies and documentation as may be required by the economic committee of the Council of Ministers, including an appraisal of the economic situation for use in the preparation of the annual Estimates. 2. To review departmental estimates of federal development expenditure in the light of the priority needs of the country laid down in the development program, as agreed upon from time to time, and to report thereon to the economic committee of the Council of Ministers before action by the committee. ORGANIZING THE DEVELOPMENT EFFORT 83 3. To furnish secretariat services to the national economic council. The secretariat should report to the economic committee of the Council of Ministers through the secretary of the committee, a position which we recommend be held by the secretary of the Council of Ministers. The professional staff of the secretariat, which need not be large, should be headed by a director who should be a competent economist with government experience. To ensure smooth relationships with the staffs of the ministries and departments, the statutory corporations and other agencies, to avoid duplication and to facilitate the work of the secretariat, we recom- mend that (a) the various ministries and agencies be required to make available to the secretariat staff such information as it may require in the exercise of its functions, particularly those of review; (b) the secretariat should not be asked to undertake, or be permitted to assume, administrative or operational duties beyond those set forth above, nor should it concern itself with technical aspects of develop- ment proposals, which are properly the responsibility of the heads of departments or statutory corporations, as the case may be; (c) in its research activities the secretariat should co-operate with the West African Institute of Social and Economic Research (WAISER) at Ibadan. Economic Committees In our opinion, co-ordination of development activity at the po- litical level would be furthered by placing primary responsibility for it in a body somewhat smaller than the federal Council of Ministers or the regional Executive Councils, and composed of those cabinet members most directly concerned with, and responsible for, economic development. The mission therefore recommends that an economic committee of the Council of Ministers be set up, to be charged particularly with the financial and economic aspects of federal development activity and the formulation of policy in that field. The conclusions ancl recommendations of the committee would require approval by the full Council. We suggest that the governor of the proposed state 84 THE GENERAL REPORT bank be invited to attend meetings of the economic committee as an observer. In the Northern Region there is already an Economic Committee of the Executive Council; we recommend that similar committees be set up in the other regions. They would have the same relation to the full executive council as the federal committee would have to the Council of Ministers. We do not anticipate that the magnitude of the problems at the regional level will be such as immediately to call for separate regional economic secretariats. We suggest that all studies of the federal secretariat which do not deal with matters wholly of federal interest be circulated to the economic committees of the regions; these committees will also be able to call upon their regular departmental staffs for advice. National Economic Council The federal and regional economic committees, the former served by the economic secretariat, can, we think, greatly strengthen policy- making in their respective governmental spheres. We think that there is need for a national body as well. It would be extremely useful for Nigeria to have a forum in w'hich the federation and the regions might meet to discuss the many economic problems common to each, notwithstanding their separate constitutior,al functions, and such of their development policies as may have consequences reaching beyond their respective constitutional spheres. We think it most important that these consultations be given a permanent organizational basis. We recommend, therefore, the establishment of a national economic council, under the chairmanship of the Governor-General, in which the federation and each region will have an equal number of representatives. The governor of the pro- posed state bank would also be a member. We would suggest that members of the economic committees serve respectively as federal and regional representatives on the council. We are fully aware that the constitution delimits the respective fields of federal and regional action, as well as an area of concurrent powers. In suggesting the setting up of the council, we do not intend that there should be any encroachment by either the federation or the regions upon the authority entrusted to the other. The council ORGANIZING THE DEVELOPMENT EFFORT 85 would be primarily consultative and should be given no administrative authority or responsibility. It is designed to give maximum encourage- ment to the development of a national policy and to close co-operation toward that end between the federal government and the regions. The council need not meet frequently; one or two regular meetings a year should suffice. Subcommittees appointed to deal with particular problems might be convened more frequently. The council and any subcommittees should draw their secretaries from the staff of the economic secretariat. We strongly recommend that the national economic council sit as the Loans Advisory Board which, under the new constitution, is to advise the federal government on external borrowing; this should be done with a reduced number of members. MARKETING BOARDS The purchase in Nigeria and the sale abroad of the principal export crops, oil palm produce, cocoa, groundnuts and cotton,1 are in the hands of four statutory marketing boards, autonomous bodies estab- lished between 1947 and 1949 to take the place of control schemes instituted during the war. At the beginning of each crop year the boards announce minimum prices at which the firms licensed as the boards' buying agents will purchase crops from producers during the year. The principal tasks of the Marketing Boards are the stabilization of producer prices, the promotion of the economic development of the producing industries and areas of production, and the encourage- ment and financing of research. During their comparatively short existence the Marketing Boards have become one of the most important factors in the economic life and the financial structure of Nigeria. Because world prices have risen more rapidly than prices paid to producers, their operations have shown very large surpluses which, after the allocation of £ 25 million for economic development and research, stood at about £ 75 million at the end of 1953. 1 And the minor crops of benniseed, soyabeans and sunflower seeds, which are under the jurisdiction of the Groundnut Marketing Board. 86 THE GENERAL REPORT At the 1954 Lagos Conference it was decided to replace the existing boards, each of which has countrywide jurisdiction over a particular product or group of products, by four regional boards,2 each with jurisdiction over all controlled commodities produced within its territory. There will also be a Central Marketing Board which will set standards of quality and arrange for transportation and marketing overseas. Price and stabilization policy will be determined by the regional boards with the advice of the central board. On the whole, the operations of the Marketing Boards have bene- fited the producers of the controlled crops and the Nigerian economy in general. We found that both the producers and the commercial community were satisfied with the working of the system. Producer prices are set and maintained for an entire crop season. Thus the producer as well as the middleman and produce buyer is protected against day-to-day fluctuations, the possibility of specula- tion is eliminated and crops are promptly collected and moved. The boards have successfully used their price-setting powers to bring about great improvements in the quality of export produce. The introduction of wide price margins between "special grade" (edible) and "grade I" (technical) oil by the Oil Palm Produce Marketing Board has resulted in a radically changed composition of the palm oil supply: in 1950, less than 1%o of the board's purchases was classified as edible, with a free fatty acid content below 4.5%; by 1953 more than one-half of the oil purchased was edible. The demand outlook for edible oil being considerably better than that for the lower-grade technical oil, the long-run prospects for Nigerian palm oil have been greatly improved. Similarly, the price differential between grade I and grade II cocoa resulted in 95%o of 1952-53 exports being grade I, compared with only 47 % in 1947-48. The Marketing Boards must also be credited with bringing more Nigerians into the trade in export produce. Before the war, virtually all of this trade was carried on by European firms. By the end of the 1952-53 buying season, the Cocoa Marketing Board had 17 Nigerian licensed buying agents compared with only 6 in 1949-50, while the number of expatriate buying agents decreased from 19 to 18. Similarly, as of November 1953, of 26 licensed buying agents 2 One for each region and one for the Southern Cameroons. ORGANIZING THE DEVELOPMENT EFFORT 87 for palm oil, 10 were Nigerians, and for palm kernels 18 out of 40. There are, on the other hand, no Nigerian cotton buyers and only two Nigerian groundnut buyers. The share of Nigerian buyers in the volume of produce purchases is still small, however. To be able to set prices for an entire crop season and to lessen the impact of year-to-year world price changes on the Nigerian producer, the boards had to accumulate large reserves. These were built up over a short period, thanks to the sterling devaluation, the raw ma- terials boom caused by the Korean war and the continuing higher- than-normal world price level thereafter. Partly as a matter of con- scious policy and partly in expectation of a price fall which did not materialize, the boards fixed producer prices at levels which regularly netted substantial additions to reserves. This course of action has been criticized as resulting in a with- holding from the producers of their equitable share of higher world prices. Although we agree that in some instances the boards' price policies have been unduly cautious, we do not think that the gen- erality of the criticism is justified. In the first place, under any stabilization scheme a period of rising prices is the time for the forma- tion of reserves. Secondly, the setting of relatively low producer prices greatly mitigated the severity of inflationary pressures, to the advantage of the country in general, the producers included, at a time when no other machinery for anti-inflationary action existed. Finally, the accumulated stabilization reserves are large enough not only to assure producers the direct benefit of reasonable and relatively stable prices for many years to come but also to enable the boards to lend large sums on a long-term basis to government for development purposes. In our opinion the marketing board system is well suited to Nigerian conditions. The combination of guaranteed prices for an entire crop year to the smallholder producers, adequate compensation for the buying agents, and price policies designed to encourage quality im- provements provides the inducements necessary for increased and improved production and for a regular and efficient flow of produce, and the joint selling arrangements s strengthen Nigeria's position in the world market. 3 Through the Nigeria Produce Marketing Company, Ltd. in London, owned by the several Marketing Boards. 88 THE GENERAL REPORT We recommend, however, that henceforth the boards' functions be limited to setting quality standards, fixing producer prices and purchasing and marketing crops. The financing of economic develop- ment and agricultural research is a responsibility of government and the boards should not attempt to undertake it. Nor should the level of expenditure for these purposes be left to the discretion of the boards or be dependent on the results of their operations. While the present reserves of the boards can be an important source of develop- ment capital, we recommend that the boards' contribution be made through long-term loans to government out of that portion of their funds which need not be kept liquid, as discussed below. We also recommend that in fixing producer prices, the boards should have no object other than mitigating price fluctuations and giving an incentive to improvement of quality. The deliberate use of the price-fixing function for other purposes, such as the promotion of development or to counteract inflationary or deflationary trends, cuts across the responsibility of government. Present stabilization reserves are ample and the boards should not aim to increase them. They can afford to adopt a long-term stabilization and reserve policy which we believe will result in producer prices higher in relation to world market prices than has thus far been the case. While in fixing producer prices the boards should continue to take account of the expected trend of world market prices, the prices they set should as a rule vary no more than 10% from those set for the previous year. This principle should be applied after an initial readjustment of those purchase prices which are lower than is war- ranted by world market conditions. We have in mind particularly the price of cocoa. Details of our recommendations and the calcula- tions on which they are based are set forth in Technical Report No. 4. Our calculations indicate that to carry out this stabilization policy the boards would not need to keep more than an estimated £ 25 million as liquid reserves and that, after allowing for working capital, some £ 40 million, constituting the second-line reserves, could be loaned on a long-term basis to government for development pur- poses (see Chapter 5 for specific recommendations regarding Mar- keting Board lending). The existing boards have already agreed to ORGANIZING THE DEVELOPMENT EFFORT 89 lend £ 14 million to the Government of Nigeria,4 of which £ 2.7 million has been drawn to date. We believe that the foregoing recommendations would achieve a more appropriate demarcation of the functions of the Marketing Boards and of government. We also believe that the recommended price and reserve policies would enable the boards to pay the pro- ducers fair prices while giving them adequate protection against fore- seeable risks, and would at the same time permit funds already accumulated to be used to finance development. II DEVELOPMENT INSTITUTIONS The agencies most directly concerned with the promotion of Ni- geria's economic development, in addition to the central Department of Commerce and Industries, are the Regional Production Develop- ment Boards (RPDBs), the Regional Development Boards and the Colony Development Board, called loans boards. The former make direct investments; the latter provide capital primarily by way of loans, sometimes by grants. Together, they represent Nigeria's prin- cipal machinery for the financing and execution of agricultural and industrial development projects. We believe that they could perform that function more effectively than they do at present. In this section we make recommendations designed to improve the operations of both types of institution, including a proposal that in each region they be merged into a single "development corporation." The RPDBs were created in 1949 to administer funds made avail- able for development purposes by the several Marketing Boards. These funds may be used only for the development of the specific branches of agriculture from which they were derived, or for the economic benefit of the producers or the areas of production. By March 31, 1954 the RPDBs had received grants totaling nearly £ 22 million and had spent (net after investment income) some £ 6 million. Investment and operating expenditure for all boards has now reached a level of £ 3 million per annum. 4 Of which £ 2 million is to be reloaned to the Western and Eastern Regions. 5 For additional comments and recommendations with respect to these institutions, see Technical Report No. 5. 90 THE GENERAL REPORT The RPDBs have engaged in a variety of operations, including a number of directly productive agricultural projects (e.g., rubber, coconut, citrus, oil palm and other kinds of plantations), some in partnership with local authorities or co-operatives and one with expatriate investors, and various processing projects (e.g., oil mills, factories and a cannery). They have financed projects dealing with settlement, mixed farming, tsetse control and fertilizer and fodder distribution, and experiments with corn storage and meat canning. They have also financed certain activities of the regional departments of agriculture, road building, and (in the North) have employed agricultural production officers. The loans boards, also created in 1949, derive their funds princi- pally from a government grant. Loans or grants have been made for agricultural projects, promotion of rural crafts and industries, trans- port equipment, industrial development of Nigerian products, public works, town planning and similar projects. Loans granted to March 31, 1953 totaled £ 1.2 million, in amounts ranging from £ 30 to £ 100,000. Forty percent of the total was lent to public bodies and nearly 20% for the purchase of transport equipment. The remainder was lent to private entrepreneurs for both agricultural and industrial projects. The RPDBs and, to a much lesser extent, the loans boards, can point to a number of successful projects, but both have had failures, the causes of which are, in part, the same. Both have been under great pressure to show results and neither has had adequate staff to do the job, having had to rely on such staff assistance as they could get from government departments. In the case of the RPDBs this has uncloubtedly contributed to the overlapping of their operations with those of the government, evidenced by their financing of various governmental projects. In the case of the loans boards, it has meant that loan applications have had to be investigated and evaluated by persons neither directly associated wvith the boards nor qualified to judge the commercial viability of projects. Regional Produtction Development Boards A number of projects, particularly in the field of agricultural pro- duction, has been successful or holds promise of becoming successful ORGANIZING THE DEVELOPMENT EFFORT 91 in the next few years. Others have failed because of a lack of plan- ning and insufficient preliminary investigation and research, due in part at least to the shortage of qualified technical personnel which has also resulted in delays (see Technical Report No. 13). The projects in which the RPDBs have engaged on behalf of the govern- ment may well be of high priority in the economic development of the regions, but we think they might more appropriately be under- taken or financed by the government proper. To some extent, the use of RPDB funds for these purposes can be attributed to the fact that there has never been a clear line of demarcation between properly governmental functions and the functions of the boards. Such dis- tinction as exists has been further blurred by administrative arrange- ments under which the respective regional Development Secretaries have presided over the boards and regional Directors of Agriculture have served as members. As a consequence, the boards have been operated as a side-line of government and sometimes as a source of extra-budgetary funds. We feel that a redefinition of the functions of the boards is desirable and we make the following recommendations. We think the primary function of the RPDBs should be the pro- motion of directly productive enterprise, with maximum participation of private African and foreign capital, and the support of African entrepreneurial initiative. As a corollary, we think they should not extend either direct or indirect financial assistance to the government nor should they engage in activities customarily undertaken by gov- ernment, such as agricultural extension work. They should provide capital for commercially promising investment opportunities for which private capital and entrepreneurial skills are not available, or which are unattractive to private investors because of the risks involved. They should encourage participation in their projects by giving preference to those projects in which local interests-communities, co-operatives, or private entrepreneurs-are willing to join, and through the sale of projects to private interests. In the latter connec- tion, the facilities of the reconstituted loans boards should be called upon (see below). The RPDBs can usefully continue to conduct pilot projects in the form of demonstration units, although research and experimentation 92 THE GENERAL REPORT work should as a rule be undertaken not by the boards but by the agricultural services and the proposed technical research institute (see Technical Report No. 13). The technical staffs which the RPDBs will require for their investment and loan operations should also be available for assistance to African enirepreneurs (see Technical Re- port No. 13, page 363). Loans Boards The loans boards have been criticized on several grounds: that their procedures are slow and complicated, that they have engaged in political favoritism and that their judgment is poor. The boards' difficulties can be ascribed at least in part to their overly broad field of action, which, as already stated, extends to loans and grants to public bodies as well as to loans to private enterprise. These two types of activity call for the application of differing cri- teria and techniques. They should preferably be undertaken by sepa- rate institutions. We recommend, therefore, that the loans boards concentrate their efforts on the provision of credit for private business. Public bodies should finance their public works projects from tax revenues and from local development funds.6 The hoards' procedures leave much to be desired: they meet infrequently, and because of staff shortages they have limited personal contact with the applicant. We think that frequent discussions and explanations are essential to give Nigerians an understanding of the requirements of a sound lending proposition. On occasion, types of enterprises have been declared ineligible, as a matter of policy, by one board or another. Since entrepreneurial initiative is so limited, lending policies should be kept flexible and designed to give the maximum encouragement to prospective indus- trialists. When a project appears sound and potentially productive and the borrower is responsible, an application ought generally to be given favorable consideration. On loans to industrial and agricultural enterprise, the default ratio has been high and is rising. The boards are intended to accept risks higher than normal and defaults are bound to occur. But some losses might have been avoided by better selection of projects and better 6 See Chapter 5, p. 122. ORGANIZING THE DEVELOPMENT EFFORT 93 loan supervision. Use of the loan proceeds is often unsupervised; sometimes the proceeds are used for purposes entirely unrelated to the project for which the loan was granted. The mission was informed that the Western Board has begun to supervise loan funds and pays over loan proceeds only upon proof of payment for the goods financed by the loan. This kind of supervision is essential, but it is not enough. Even after completion of the project, the boards should keep them- selves informed of the manner in which the borrower conducts his business and should advise him where necessary. We think much of the criticism of the boards' operations is justi- fied, but we believe that, if properly run, the boards can play an important role in the promotion of African enterprise. They have made a number of sound loans and many of their mistakes stem from a laudable desire to get a flow of loans to Africans under way. To improve the operations of the loans boards, a number of changes should be made. To begin with, the loans boards should be incorpo- rated into the RPDBs where they should function as separate loans departments. This will permit use of the RPDBs technical staffs and will effect administrative savings. The loans departments should have no grant authority, and should lend only to private enterprise, en- couraging especially co-operatives and other forms of business associa- tion. They should finance, on a medium- and long-term basis, both small and large projects. In the case of the latter, the closest attention should be paid to technical and commercial management, in which the large industrial projects already financed show their greatest weakness. They should not, however, make loans which commercial banks or other lenders are willing to handle on reasonable terms; their function should be to supplement, not to compete with, other sources of credit. Future Activities The reorganization of the functions of the RPDBs and of the loans boards, and the merger of the two types of institutions, will require legislation. In order more appropriately to indicate the functions of the new institutions, they might be named the Northern, Western and Eastern Development Corporations, respectively. In view of the anticipated separation of the Southern Cameroons from the Eastern 94 THE GENERAL REPORT Region, the Southern Cameroons should have its own development agency. As stated in the preceding section, the Marketing Boards should no longer be responsible for the financing of the development corpora- tions. The regional governments should henceforth assume direct financial responsibility for all development corporation activities. The mission has estimated in its financial projections that the develop- ment corporations will require government assistance amounting to £ 12 million over 1955-60 (including £ 1 million to the Cameroons development agency). This, together with the resources now on hand, would provide them with well over £ 20 million to finance their activities over the next five years. All funds of the corporations should be available for any of the following purposes: 1. Direct investment in productive agricultural and industrial projects; 2. Loans to agricultural, industrial and commercial enterprises; 3. Encouragement of agricultural and industrial development by pilot operations and, in the industrial field, by technical and man- agerial advice to entrepreneurs. At present, the funds of the RPDBs are restricted in their use to expenditures which can be deemed to benefit the producers or the areas of production of the commodities from which they were derived. We recommend that this restriction be eliminated in the proposed legislation merging the RPDBs and the loans boards. We consider it highly unrealistic; the economic well-being of producers of export produce is so closely tied to the prosperity of the regions and the country as a whole that a distinction between expenditures for the benefit of the producers and for the benefit of the country cannot justifiably be made. To be distinguished in name from the existing Cameroons Development Corpora- tion (see Technical Report No. 5). The activities of the latter differ from those of the development corporations a,s we define them, and should not be extended to include them. ORGANIZING THE DEVELOPMENT EFFORT 95 iv STATUTORY CORPORATIONS At various times the Nigerian government has engaged in activities which lie outside the normal administrative functions of government: the railway, most of the important port installations, the coal mines and a large number of power plants were set up and operated by the government. In recent years, plans have been made and in part already carried out to transfer these operations out of the general governmental machinery to autonomous bodies, known as statutory corporations. In 1951 the coal mines were transferred to the Nigerian Coal Corpora- tion and the electricity undertakings to the Electricity Corporation of Nigeria. Legislation is now being drafted for the establishment of a railway corporation and a ports authority. When, after World War II, the government assumed responsibility for the development of former enemy-owned plantations in the Cameroons, it delegated that respon- sibility to the Cameroons Development Corporation, created for the purpose. The statutory corporation is a legal entity, has separate finances, employs its own staff and is subject to income tax. The chairman is generally also the chief executive officer; the other members include government officials as well as members of the public. The member- ship of the railway corporation and the ports authority will, in addi- tion, include representatives of the users of their facilities. We think it has been a wise policy to entrust quasi-commercial operations to these statutory corporations. We also endorse the gen- eral policy under which they conduct their operations along com- mercial lines and seek to earn enough, after allowance for interest and depreciation, to permit building up not only adequate reserves but also a surplus out of which to finance expansion. To make fully effective, both in the interest of the corporation and of the government, the financial autonomy inherent in the system of statutory corporations, they should be so capitalized as to be enabled in due time to finance their capital needs by borrowing in the market on their own credit, rather than being a burden on the government budget. This is not now the case. The statutory corpora- tions are financed exclusively by loan capital. None has been given a permanent capital fund and, as far as we know, it is planned that the 96 THE GENERAL REPORT two corporations about to be created will issue debenture stock or other obligations to the government for the full, amount of the assets to be transferred to them. We strongly recommend that this policy be changed and that a substantial portion of the capital of the corporations be converted into a permanent capital fund.8 This would increase their credit- worthiness by reducing fixed charges and by offering prospective lenders the security of the permanent capital fund. v STATE BANK9 In 1952, the Government of Nigeria requested Mr. J. L. Fisher, Adviser to the Bank of England, to examine the desirability and practicability of establishing a central bank in Nigeria as an instru- ment for promoting the economic development of the country. His report and recommendations were completed in December 1952."' After describing the principles of central banking as developed in England and reviewing Nigeria's monetary system, Mr. Fisher concluded that it would be inadvisable to establish a central bank "at the moment." He suggested instead a program in three stages, first, the transfer of the West African Currency Board to Africa; second, the establishment of a Nigerian currency board; and third, the estab- lishment of a bank of issue which would gradually develop into a full-fledged central bank. In reviewing the monetary system of Nigeria in relation to the proposed development program, the mission has paid close attention to Mr. Fisher's analysis. On many points we are in basic agreement with his report. In particular there can be no dispute that creation of a full-fledged central bank would be premature at this time. On the other hand, the mission feels that, in the light of the increasingly 8 For additional comments relating to the Cameroons Development Corporation, see Technical Report No. 5. 9 See Technical Report No. 3 for an account of the monetary and banking system in Nigeria. 10 Report on the desirability and practicability of establishment of a Central Bank in Nigeria for promoting the economic development of the country (Government Printer, Nigeria: 1953). ORGANIZING THE DEVELOPMENT EFFORT 97 rapid strides toward self-government,"' the timing of the advance should not be as cautious as that report suggests. Therefore, the mission proposes the early creation of a "State Bank of Nigeria" with limited functions. Initially these functions should include the right to issue currency, to be the principal depositary for the funds of government and semi-governmental organizations, to accept deposits from banks and to regulate their operations, and to buy and sell government securities. At a later stage, these functions may be grad- ually broadened to enable the new institution to assume other func- tions of a central bank. The continued political and economic advancement of Nigeria is bound to lead to the establishment of a central bank. To postpone the day when functions of currency issue and the management of foreign assets are performed in Nigeria will also postpone the day when trained Nigerians will be able to perform these functions responsibly by themselves. The proposed state bank would have as its primary function the issue of Nigerian currency to replace that of the West African Cur- rency Board. The new issue, like the old, should be backed by sterling. Foreign reserves should not fall below 100% of the currency issue in the foreseeable future. Sterling would be acquired by the retirement of the West African currency in Nigeria and the paying- over by the Currency Board to the state bank of the corresponding share of the undistributed profits of the Currency Reserve Fund. Like the Currency Board, the state bank should stand ready at all times to issue or redeem local currency for sterling. In this manner the ad- vantages of a stable sterling link would be retained, ensuring par- ticularly the continuance, on present conditions, of trade with sterling area countries. The second function of the state bank would be to serve as the principal depositary of the funds of government and semi-govern- mental organizations. These assets should be centralized, as is the case in nearly every country in the world. By far the greater part of Nigerian government and semi-government reserves is now held abroad. This makes it particularly important that they be centralized in the state bank. The consolidation of these sterling assets would 11 Mr. Fisher's report was completed before the decision was taken to convene the London constitutional conference. 98 THE GENERAL REPORT have the advantage of permitting Nigeria to safeguard the external value of its currency with a smaller level of foreign reserves than is necessary when foreign assets are held individually by separate agencies. It would therefore permit maximum use of the country's accumulated capital for development.'2 In acting as the depositary for official and semi-official funds, the bank should be empowered to accept demand deposits and fixed deposits. The reason for fixed deposit accounts, which would bear interest, is that a large portion of government and semi-government funds is not immediately needed by the depositors. It would be mani- festly unjust if the depositors, by transferring their funds to the state bank, would have to lose the income wvhich they are now earning from these funds. The bank should also be empowered to offer trust account arrangements to governmental and semi-governmental deposi- tors. Under these arrangements the bank would administer and invest funds entrusted to it for the account of the depositors. The state bank should also be empowered to accept demand de- posits from commercial banks, as a service to those banks which may wish to use the facilities of the state bank as a clearing house. The transfer to the bank of official and semi-official sterling hold- ings could be made soon after its establishment. Local funds would have to be transferred gradually, with due regard to the position of the commercial banks which now bold them. Some transfers should, howvever, be made promptly in order to enable the bank to begin operations as banker of governmental and semi-governmental organ- izations. Working balances for services not provided by the state bank should continue to be held with European and African com- mercial banks. The bank should be empowvered to buy and sell for its own account securities of the Government of Nigeria, but in the next 5 or 10 years its holdings of such securities should not, as a working rule, exceed the level of its accumulated surplus, including Nigeria's share of the profits of the West African Currency Board. Aside from loans already 12 As we point out in Technical Report No. 3, there has developed a widespread de- sire to "repatriate" Nigerian public funds and to deposit them with African commer- cial banks. We believe that the African banking and business comumunity would be ill-served if government deposits were used as a basis for expanding credit, because the drawing-down of these reserves in the course of the next few years would then necessitate a dangerous contraction of bank credit. ORGANIZING THE DEVELOPMENT EFFORT 99 contracted for with the Marketing Boards, the federal government is most unlikely during the next five years to borrow substantial amounts in Nigeria. Some small issues of securities of various ma- turities would, however, be quite important in helping to develop the institutional framework necessary to ensure the success of security sales in later years. The issue of short-term securities, such as Treas- ury bills, would be particularly useful in providing bankers with a short-term domestic investment. In order to give publicly issued local securities the necessary marketability and to make them suitable for the trust accounts man- aged by the bank, the bank must be prepared to purchase them at all times. There should be no guaranteed purchase price, but the bank might consider initially undertaking to relate prices to those prevailing in London. This facility should also be open to the public, in order to encourage it to hold government securities. The supervision of the commercial banks which at present is the responsibility of the Financial Secretary, under the provisions of the Banking Ordinance, should be transferred to the state bank. For the time being, a modification of the provisions of the Banking Ordinance does not appear necessary, since the domestic banking system is not yet developed sufficiently to justify access by it to the resources of the state bank as a lender of last resort. The ultimate aim must be the assumption by the state bank of the normal responsibility of a central bank to assure the liquidity of the banking system, but this extension of its functions will have to await the further development of that system. Two other tasks at present undertaken by government departments might be taken over by the state bank. First, the administration of exchange controls would be a proper function of the institution re- sponsible for external solvency. Second, the bank might maintain a small statistical department responsible in particular for preparing monetary statistics and balance of payments estimates. The state bank should not undertake any private business, either by accepting deposits from the public or by making loans or ad- vances. The recently established government bank in the Gold Coast engages in commercial banking. But unlike the Gold Coast, Nigeria has, in addition to European banks, African commercial banks, and 100 THE GENERAL REPORT there is no need for a government institution in the field of commercial banking. The form of the governing body of the bank is a matter which will have to be determined at the time of its formation. Tentatively, a relatively large board might be suggested so that the state bank may benefit from the wide experience of its members and on the other side ensure a wide dissemination of knowledge of central banking problems. The board would not need to meet frequently. A suitable board might consist of the governor and deputy governor of the state bank, representatives of the federal government and nonofficial mem- bers chosen with due regard to-the interests of the various regions and of the interests of the Marketing Boards. Another matter to consider at that time is the desirability of establishing separate issue and bank- ing departments. The success of the bank would depend above all on the quality of the staff selected. Initially the staff would have to be largely European, for Africans with qualifications in the field of banking are few and much in demand. But plans should be laid from the outset for the training of Africans so that they can soon assume responsibility. Particular attention should be devoted to the selection of the first governor. Such a state bank should make substantial profits. It should earn a large income from the investments backing the currency issue, while expenditures should initially be relatively small. The staff required would not be large and in part might be drawn from existing gov- ernment departments. At first the bank should operate only in Lagos and in the three regional capitals, continuing elsewhere the agency arrangements of the currency board system. The investments in Lon- don would be made through an agent, either the Bank of England or the Crown Agents for Oversea Governments and Administrations. The relatively small additional administrative expenditure as com- pared with the present system would, in the opinion of the mission, be money very well spent, since it would assist in the development of sound monetary and banking practices and in the training of Nigerians in the techniques of central banking. In the mission's view the state bank is a necessary element in the organization of the economy of a developing Nigeria, although, as ORGANIZING THE DEVELOPMENT EFFORT 101 Mr. Fisher has pointed out, its establishment would not in itself create resources for development. Its operations cannot take the place of development financing by private and government savings; they can only assist in the channeling and the most economic utiliza- tion of the country's financial resources. Our recommendations are not intended to present a complete blue- print for a state bank. In the creation of such an institution problems will arise which we have not discussed or to which we have referred only in general terms. In carrying out our recommendations, the government should seek the expert assistance of the United Kingdom monetary authorities or of the International Monetary Fund. vi STAFFING The need to draw upon the services of overseas personnel was recog- nized by the leaders of all Nigerian political parties in a statement issued at the Lagos constitutional conference, designed to reassure expatriate personnel. But the retention of present staff will not meet the problem of filling existing vacancies or the new positions which in our opinion are necessary. Energetic measures must be taken to step up recruitment of personnel. At present, overseas personnel for government service is recruited through the Colonial Office and the Crown Agents. Some of the statu- tory corporations hire overseas personnel directly. To fill current vacancies and to staff new positions may, we estimate, require as many as 2,000 additional overseas recruits, yet present recruitment arrangements have proved inadequate to meet even the requirements of the present establishment. The mission therefore recommends the setting-up of a Nigerian recruitment office in London, through which all personnel for the federal and regional governments and the statu- tory bodies would be recruited and to which all requests for overseas staff would be made directly by the government or agency concerned. The recruitment office should seek to recruit personnel both directly and through the Colonial Office and the Crown Agents; the existing arrangements would not be replaced but would be supplemented. We are aware of the possibility of duplication and of interference 102 THE GENERAL REPORT with the Colonial Office's established procedure of personnel selection. These possible disadvantages, which with skillful administration can be avoided, would be far outweighed by the increased vigor of a purely Nigerian recruiting organization and by a widening of the geographical area of recruitment. In order to match the attractiveness of other employment oppor- tunities for qualified candidates, particularly in technical fields such as agricultural research and experimentation, road construction and public health, it may be necessary in some instances to depart from prevailing standards of salary, tenure and other emoluments. The possibility that some positions cannot be filled at established rates of pay must be faced. In some instances, considerations other than salary may be important in attracting personnel: for example, oppor- tunities to engage in research or special investigations of particular interest to the employee. The mission feels that it is not in a position to make more specific recommendations regarding salary scales and other terms of employ- ment for overseas personnel. We are impressed, however, by the arguments presented in a report of a select committee of the Legisla- tive Assembly of the Gold Coast regarding the necessity of maintaining a differential between the salaries of overseas and locally recruited personnel. We believe that the analysis of the problem presented in the report applies with equal force to Nigeria.13 We also believe that the reorganization of the Colonial Service into the Oversea Service should help to overcome the concern of overseas personnel regarding their tenure, and thus facilitate recruit- ment in the future.14 One method of securing overseas staff, which in the opinion of the mission should be pursued more vigorously than in the past, is to arrange for secondment of personnel from the United Kingdom and other Commonwealth countries. Under existing arrangements, some personnel for the Nigerian Railway, the Posts and Telegraphs De- partment and other services have been obtained through secondment from corresponding U.K. agencies, but for administrative reasons the services of staff thus obtained have been limited to relatively short 13 Report of the Select Committee on the Lidbury Report (Accra, Gold Coast: Government Printing Department, 1952). See particularly page 6, paragraph 33. 14 White Paper, June, 1954 (Colonial No. 306). ORGANIZING THE DEVELOPMENT EFFORT 103 periods. The mission believes that a more flexible treatment of secondment should be feasible and that the possibility of secondment should be explored in additional fields, such as agricultural research, public works and education. While most overseas personnel would come from the United King- dom and the Commonwealth, recruitment should not be confined to these countries. A wider search for suitable applicants would not only enhance the possibility of filling the personnel requirements more quickly, but would also offer a wider selection if experience in the skill sought is particularly common in a country outside the Common- wealth. For instance, it should be possible to obtain from Western European countries research and managerial personnel with experience in tropical agriculture, or road construction engineers. The assistance of international organizations such as the Food and Agriculture Or- ganization and the World Health Organization should also be sought. CHAPTER 5 FINANCING NIGERIAN DEVELOPMENT In Chapter 3 we outlined our principal recommendations for the de- velopment effort in various sectors of the economy, by the federal and regional governments, the local authorities and the statutory corpora- tions, and showed the aggregate cost of the recommended 1955-60 program. In this chapter we consider how the country and the separate government units could meet the cost of that program. We have projected government revenue and expenditure over the five-year period in order to determine how much additional financing would be likely to be required. Separate revenue and expenditure projections have been made on a year-to-year basis for the govern- ments of the Federation, the regions and the Southern Cameroons and for the local authorities under their jurisdiction.1 In making these projections, we have been cognizant of the impos- sibility of forecasting with any real degree of accuracy government expenditure and revenue over a fairly long period of years. Never- theless such forecasts must be made by governments whenever they embark on any long-term program. In setting forth annual figures, rather than forecasting aggregates for the five-year period, we have undertaken a particularly hazard- ous, but in our opinion necessary, task. On the expenditure side, a five-year aggregate figure would be misleading, because it would fail to reveal that expenditure can increase only gradually. Moreover, it would not enable us to show the rate at which we think it can expand. Annual expenditure under the recommended program, far from being uniformly one-fifth of the total for the period, would not 1 These projections are set forth in Appendix C, Tables 1-18. Summary tables ap- pear in this chapter. 104 FINANCING NIGERIAN DEVELOPMENT 105 be much higher in 1955 than at present, but would be considerably higher by 1960. Of necessity our figures are indicative of orders of magnitude only and undoubtedly they will differ by a more or less wide margin from expenditures which will actually be made. Shortages of personnel may postpone recommended expansion of government services, causing annual expenditure to be lower than projected; con- versely, expansion may come sooner than we have anticipated, in which case actual expenditure will be higher. If costs should prove higher than those allowed for, or if the many surveys we recommend should disclose the feasibility of undertaking additional projects earlier than now seems possible, the projections may be found to be too low. On the revenue side, year-by-year projections are necessary to show the likely development of specific items of revenue and to provide a basis for gauging the rate at which additional financing will be re- quired. Here again, the figures should be viewed with caution. The methods employed in making the projections and the assump- tions on which they are based are explained in detail in Appendix C. Three general comments should, however, be made here. We have consolidated in our figures all government revenue and expenditure, whether shown in the main accounts of the government units or in various special funds or extra-budgetary accounts. Second, the revenue estimates have been based in part on the conservative assumption of a considerable decline in export prices below the high levels of recent years. Third, in the case of federal and regional government accounts, we have made an allowance for contingencies equal to 10% of projected revenue. This is in part intended to cover service charges on new debt and loss of interest receipts through the drawing-down of reserves, which have not been included in our detailed projections because of the impossibility of forecasting the timing and conditions of new loans. In view of the conservative nature of our revenue estimates and of the generous provisions for expenditure, the allow- ance should be adequate as well to meet possible additional expendi- ture and temporary decline in revenue. 106 THE GENERAL REPORT COST OF THE PROGRAM The proposed development program for Nigeria contemplates a gradual build-up of annual government expenditure at all levels to about £ 100 million by 1959-60. The upward movement may be sum- marized as follows: (Million £) Expenditure 1952-53 1955-56 1959-60 Recurrent .................................. 34 48 62 Capital ..................................... 17 22 35 Total . .............................. 51 70 97 Statutory corporations-capital expenditures, ... 5 6 6 1 Funds other than those received from the government. The proposed year-by-year rise in expenditure is shown in Table 1. TABLE 1 The Proposed Rise in Public Expenditure (Mllillion £) Federal Regional Native Govern- Govern- Treasuries, Total6 ment ments Local Govt., 1951.52 (Actual) ........ ....... 23.8 12.2 7.2 43.2 1952-53 (Actual) ........ ....... 25.4 17.2 8.21 50.8 1953-54 (Approved Estimates) 2 30.0 21.2 9.6 60.8 1954-55 (Preliminary Estimates) .. 34.53 23.3 10.1' 67.9 1955-56' (Mission's projections) . . 31.7 25.9 12.2 69.9 1956-57 31.8 27.9 13.2 72.8 1957-58 35.5 33.6 14.2 83.3 1958-59 39.0 37.1 15.2 91.3 1959-60 41.2 39.8 16.3 97.2 Total 1955-606 179.2 164.2 71.1 414.4 ' Revised Estimates. 2 "Estimiates" is used throughout, in accordance with British usage, to refer to bud- getary projections. 3 Approved Estimates. 4 Projection of mission. 5 First year of reallocation of functions under new constitution. G Totals may not equal sum of columns because of rounding. FINANCING NIGERIAN DEVELOPMENT 107 We have limited our recommendations for expenditures to those which we believe can in fact be made within the period 1955-60. The Estimates called for a 20% increase in public expenditures between 1952-53 and 1953-54 and for an additional 12% between 1953-54 and 1954-55. For these years we have entered the latest detailed Estimates available, as approved or proposed. But we now know that 1953-54 expenditure fell short of what was budgeted, particularly in public works, and it is likely that some shortfall will also occur in 1954-55. Our projections for 1955-56, while apparently not much higher than expenditure in 1954-55, would therefore in fact represent a substantial increase. Table 2 2 shows the expenditures which are projected at the various levels of government. TABLE 2 The Cost of the Proposed Program (Mllillion £) Recurrent Expenditure Expen- dituire 1955-56 1956-57 1957-58 1958-59 19G9-60 1955-60 Federal Government ............ 19.8 20.9 21.9 22.9 24.0 69.6 Lagos Town Council ..5 .5 .5 .6 .6 .7 Northern Regional Government 6.6 7.1 7.7 8.3 8.9 20.1 Northern Native Treasuries and Townships .4.7 5.0 5.3 5.6 5.9 6.4 Western Regional Government . 5.9 6.5 7.1 7.7 8.4 22.4 Western Native Treasuries and Local Governments .3.2 3.5 3.9 4.2 4.6 3.6 Eastern Regional Government 5.1 5.4 5.7 6.0 6.3 11.8 Eastern Native Treasuries, Local Governments and Townships 1.4 1.5 1.7 1.8 2.0 2.1 Southern Cameroons Government. .8 .9 1.0 1.1 1.2 2.0 Southern Cameroons Native Treasuries ..2 .2 .2 .2 .2 .3 Total .48.2 51.5 55.0 58.4 62.1 139.0 In 1951-52, central government expenditure accounted for 55% of all Nigerian public expenditure, whereas under the mnission's pro- gram it would be only 45% in 1955-56. Thereafter the percentage 2 Differences in totals in Tables 1 and 2 are due to rounding. TABLE 3 Government Expenditures and Financial Resources Available, 1955-60 (Million £) Northern Westerni Eastern So. Cameroons Estimates Federal Lagos Regional Local Regional Local Regional Local G Local Total , Govern- Town Govern- Author- Govern- Author- Govern- Author- mvent- Author- o ment Counlcil ment ities ment ities ment ities ities co -i Recurrent Expenditures ...... 109.7 2.7 38.6 26.6 35.7 19.5 28.6 8.3 5.1 0.9 275.7 Capital Expenditures ........ 69.6 0.7 20.1 6.4 22.4 3.6 11.8 2.1 2.0 0.3 139.0 M Total' .............. 179.2 3.4 58.7 33.0 58.1 23.1 40.4 10.4 741 1.2 414.6 Ox Revenues at present revenue structure ................. 149.8 2.1 44.9 25.6 59.1 10.6 29.8 7.4 2.2 0.8 332.3 . Borrowings planned by Federal government-Internal ...... 11.3 - - - - - - - - - 11.3 External ..... 11.3 - - - - - - - - - 11.3 t 0 Projections of mission: ° Increase in Tax Revenues . - - 0.5 4.5 2.0 6.0 6.2 4.3 1.7 1.22 0.2 26.6 '- Use of Reserves ........... 20.0 - 5.0 - 3.0 - 2.0 - - - 30.0 Additional loans from Marketing Boards ....... - - 10.0 - 10.0 - - - - - 20.0 Inter-governmental grants: Receipts . - 0.8 - 5.4 - 6.3 3,0 1.3 4.13 0.2 21.1 Payments .. -7.9 - -5.4 - 4-.3 - -1.3 - -0.2 - -21.1 Contingency allowance4 .. -15.0 - -4.5 - -5.8 - -3.0 - -0.2 - -28.5 To be covered by C.D. and W. grants and additional loans 9.7 - 4.2 - (-7.9)D - 5.6 - G - 19.57 Total .............. 179.2 3.4 58.7 33.0 58.1 7 23.1 40.4 10.4 7.1 1.2 414.67 l Totals may not equal sum of columns because of rounding. - £ 1 million represents disbursements of profits by the Cameroons Development Corporation to the Southern Cameroons Government; £ 200,000 represents the Cameroons' share of increased diuty collections. 3 £ 1.8 million of this amount represents grants to which the Southern Cameroons is entitled because of its special status. 410% of federal and regional revenue. See p. 105. 5 Surplus. G Deficit offset by grant from federal government. I Excluding surplus of Western Region. FINANCING NIGERIAN DEVELOPMENT 109 would continue to decline, as a result of greater expansion of services in the regional fields such as agriculture, education and secondary roads. The share of expenditure of native treasuries, local govern- ments, townships and town councils 3 would remain constant at about one-sixth of total public expenditure. FINANCING THE PROGRAM In order to finance the proposed development program, government authorities at all levels would need £ 415 million in the next five years. There are four sources of finance for Nigerian public expenditure: government revenue, reserves of public funds, borrowing at home and abroad, and grants from the Government of the United Kingdom. We recommend drawing upon all of them: taxes should be substan- tially raised, the federal and regional governments should use a large part of their existing reserves and they should borrow substantial amounts from the Marketing Boards. The federal government should also borrow in the London market. We assume that Nigeria will con- tinue to receive grants under the Colonial Development and Welfare Scheme. A comparison of financial requirements with available or poten- tially available resources is shown in Table 3. The Table indicates that; assuming no change in the present revenue structure, antici- pated revenues for 1955-60 would fall short, by £ 82 million, of the public expenditures we propose. To this must be added the con- tingency allowance referred to earlier, in the amount of £ 28.5 million, making a total shortfall of £ 111 million.4 We propose that this difference should be met roughly as follows: £ 27 million from additional revenue, over and above the normal rate of growth, £ 30 million from reserves, £ 22 million from loans which the central government has already decided to raise, £ 20 million to be borrowed by the regions from the Marketing Boards, and the 3 Referred to collectively as "local authorities." 4 No contingency allowance has been made in the case of local authorities since ex- pansion of expenditures on the local level should be determined by the ability and willingness of local authorities to raise additional revenue. See pp. 120 et seq. 110 THE GENERAL REPORT balance from Colonial Development and Welfare grants and additional loans. We also recommend substantial grants by the federal government to the Eastern Region and the Southern Cameroons. These are shown in the Table as intergovernmental grants in addition to the normal grants from the regional governments to local authorities. The mission believes that the development program for the next five years could be financed with relative ease. But we must repeat here what has been said earlier: the over-all level of revenue is insuf- ficient for a continuing expansion of public development expenditure. If the development effort is to continue after 1960, the build-up of revenue which we recommend will have to continue at an accelerated rate. A THE REVENUE STRUCTURE Table 4 reveals the two main features of the Nigerian revenue struc- ture: its heavy reliance on indirect taxes (principally import and export duties) and the fact that an overwhelming proportion of reve- nue is collected by the central government. The first makes Nigerian revenue particularly sensitive to the vagaries of international trade; the second has made for politically difficult and technically complicated problems of revenue allocation. The central government, under the Income Tax Ordinance, taxes the income of all companies and non-African individuals, and African income earned in Lagos. African income earned outside Lagos is iaxed under the Direct Taxation Ordinance. This tax is assessed and collected by local authorities. They also levy "rates," mostly for special purposes such as education or water supply. In 1952-53 these direct taxes together accounted for about one-fourth of total govern- ment revenue. Most of the balance consists of the proceeds of indirect taxes. Ex- cept for sales taxes on controlled produce, first imposed by the region- al governments in 1953 and 1954, all these are levied and collected by the central government. The reallocation of functions under the new constitution led to a review of the system of revenue allocation. A fiscal commissioner was appointed to advise on the distribution of revenue, "having TABLE 4 Structure of Tax Revenue, All Government Authorities Combined Projected Tax Collections Actual Tax 1959-60 Collections 1952-53 1955-56 excluding recommended inicludinig recommended 2 additional revenue additional revenue Million % Million % Million % Million 9 7 Customs and Excise Taxes, .. 33.9 67.5 39.2 70.1 41.3 68.8 46.3 67.8 _ Direct Taxes2 .12.5 24.9 13.2 23.6 14.9 24.8 18.2 26.6 Licenses, Fees and Fines3 2.1 4.2 2.3 4.1 2.6 4.3 2.6 3.8 Z Mining Royalties .1.7 3.4 1.3 2.3 1.3 2.2 1.3 1.9 Total4 ... . .. 50.2 100.0 55.9 100.0 60.0 100.0 68.3 100.0 Of which collected by central < government .43.2 86.1 44.9 80.3 47.5 79.2 52.5 76.9 Incltuding regional produce sales taxes. 2 Including federal income taxes, taxes under the Direct Taxation Ordinance and "rates" of local authorities. 3 Including "licenses and internal revenues" and "fees of court or office." 4 Totals may not equal sum of components because of rounding. 112 THE GENERAL REPORT regard on the one hand to the need to provide to the Regions and the Centre an adequate measure of fiscal autonomy within their own sphere of government and, on the other hand, to the importance of ensuring that the total revenues available to Nigeria are allocated in such a way that the principal of derivation is followed to the fullest degree compatible with meeting the reasonable needs of the Centre and each of the Regions." 5 The system recommended by the Commissioner and approved by the Lagos constitutional conference provides for the allocation to the regions, on a derivation basis, of one-half of all import and export duties and excise taxes (but the whole of the import duty on motor spirit); for distribution of mining royalties to the region of origin; for allocation of federal personal income tax proceeds to the region of the taxpayer's residence; and for the retention by the Federation of proceeds of income tax on companies and on residents of Lagos. It was also recommended and agreed that grants totalling £ 7 million would be made to the regions as their share of federal reserves. This distribution of revenue between the Federation and the regions as a group gives each a desirable measure of fiscal autonomy. As among the regions, however, ,the application of the principle of derivation, under which revenue is distributed on the basis of its origin, tends to perpetuate regional differences in financial strength. The Fiscal Commissioner recognized this in his report by recommend- ing that the federal government should have power to make discretion- ary grants to regions. We fully agree with the recommendation of the Fiscal Commis- sioner 6 that the next review of the revenue allocation system, in con- nection with the review of the constitution in 1956, be conducted under broader terms of reference. We believe that the interests of Nigeria as a whole would best be served by a more flexible applica- tion of the derivation principle, in order to give greater recognition to the needs of the different regions. S Report of the Fiscal Commissioner on the Financial Effects of the Proposed New Constitutional Arrangements (Government Printer, Nigeria: 1953), p. 1. 6 Ibid., p. 17. FINANCING NIGERIAN DEVELOPMENT 113 B FEDERAL FINANCES Federal finances are sound. The Federation would need only limited resort to its borrowing capacity and accumulated reserves in order to finance the increased expenditure we have recommended and to contribute to the revenues of the Eastern Region and of the South- ern Cameroons. By the end of the five-year program, we expect annual federal revenue to have risen to £ 31 million, compared with recurrent expenditure of £ 24 million exclusive of grants. Capital expenditure of £ 17 million has been projected for 1959-60, a substantial part of which can be financed from current revenues. At that time the Fed- eration's reserves should still be considerable and its borrowing capacity ample. Customs Duties and Excise Taxes In recent years, approximately 60% of all customs and excise collections have come from import duties and excise taxes (the latter mainly on cigarettes and beer), and the remainder from export duties. Import duties are in general low, ranging between 15%o and 207O for most articles. Alcoholic beverages, tobacco and certain luxury imports pay higher rates, while machinery, tools, fertilizers and other agricultural or industrial producers' goods are duty-free. Except for duties on such essentials as salt and kerosene, the incidence of the tariff is on the whole progressive. There is considerable evidence that the lowest income groups purchase only small quantities of imports, while persons in the middle and higher income brackets, particularly in urban areas, buy a relatively large volume of imports, especially textiles. We recommend that import duties be increased-not for the pur- pose of increasing the federal revenues but as a means of alleviating the financial problems of the regions. We propose further that the full amount realized from the recommended increase be distributed among the regions. Specifically, we recommend that duties on all imports except food, tobacco, motor spirit and kerosene be increased so that revenue from this source will rise by 50%o. We recommend further that certain of the inequitable or undesirable features of the existing tariff be elimi- 114 THE GENERAL REPORT nated at the same time: all imports of food except confectionery and alcoholic beverages should be exempt from duty and so should all building materials except (temporarily) cement. Exemption of con- struction materials is desirable in the interest of promoting building activity but it may be necessary to retain the present duty on cement to give initial protection to the proposed cement factory.7 We realize that this increase would make the fiscal structure even more dependent on the flow of the country's international trade. We therefore believe that it should remain in effect only until the yield of taxation on income and property rises sufficiently to take its place. Since it will take some time to put these tariff changes into effect, we have not counted on any increase in revenue from this source until 1957. On the basis of information supplied to us in Nigeria, wve esti- mate that the recommended revision would yield a net of £ 15 million over the period 1957-60. Export duties on the most important agricultural products are 10% ad valorem with progressive surcharges if export prices exceed a "normal" level.S Minor exports are taxed at relatively low specific rates. At the export prices anticipated during the next five years, cocoa would be the only major export subject to duty in excess of 10%. We do not recommend an increase in these duties. On the other hand, we do not believe that the export duty on cocoa should be reduced as suggested in sections of the Nigerian press, even though at presently prevailing prices it far exceeds that on other dutiable exports.9 There is ample evidenec that producers of cocoa are, as a group, substantially better off than other agricultural producers. Their tax burden may therefore equitably be higher, especially if the price which they receive from the Marketing Boards is increased in accordance with our recommendation as to the price policies of the boards (see Chapter 4 and Technical Report No. 4). Income Taxes The Income Tax Ordinance taxes profits of limited liability com- panies and certain statutory corporations at the rate of 9/- in the 7 See Technical Report No. 13. The price per ton at which surcharges apply is: cocoa, £ 150; groundnuts, £ 65; palm kernels, £ 50; technical palm oil, £ 65; edible palm oil, £ 75; cotton, £ 325. 9 At the June 1954 price of cocoa, the duty was 45%. FINANCING NIGERIAN DEVELOPMENT 115 £ (45%o). Non-Africans and Africans earning income in Lagos pay taxes varying from 6/- to £ 2.16.3 on income below £ 150 per year; incomes above that amount are taxed at rates rising from 41/2d. in the £ (1/8%o ) for the first £ 200 of "chargeable" income to 15/- in the £ (75%) on that portion of "chargeable" income which exceeds £ 10,000.'° The mission does not believe that an increase in the companies tax is advisable, for it is already at a high level and any increase would discourage investment by both Nigerian and foreign capital. Nor do we recommend an increase in the personal income tax. We do sug- gest the advisability of a change in the present provisions of the law under which the effective rate of tax may, by reason of allowances and reliefs, remain at 41/2d. in the £ for incomes which may be con- siderably in excess of £ 200.1 Reserves As indicated in Chapter 1, the Nigerian government has accumu- lated substantial reserves partly because revenues have consistently been underestimated, partly because expenditures fell behind esti- mates, and partly deliberately to mitigate inflationary pressures caused by large export surpluses and to provide a cushion against a possible decline in revenues. The reserves are held in various funds, the largest being the Revenue Equalisation Fund established with the further object of compensating for the impact of future higher recur- rent expenditures presently met out of Colonial Development and Welfare grants. On the basis of official figures, which we consider conservative, we estimate that the reserves of the federal government will be about £ 40 million in March 1955.12 We are satisfied that in the next five years the reserves, part of which has been earmarked explicitly for the purpose of financing development expenditure, can be drawn down considerably without 10 Typical tax liabilities are: £ 67.10.0 on a "chargeable" income of £ 1,000 (6.75%); £ 277.10.0 on £ 2,000 (14.375%); and £ 1,402.10.0 on £ 5,000 (28.05%). 11 E.g., for married men, the effective rate remains at 41/2d. in the £ up to an income of £ 600; and even for higher incomes if child, insurance or other "reliefs" can be claimed. 12 See Table 19 of Appendix C. 116 THE: GENERAL REPORT endangering the country's long-run financial stability or impairing the liquidity of its treasury position. We think that in the next five years the government can safely draw up to £ 20 million from its reserves. In the absence of unforeseen developments, Nigeria should be able to use its reserves also after 1960 to supplement other sources of finance for development. The mission also suggests that the practice of setting up and allo- cating current revenues into a large number of special funds be dis- continued and that the principle of unity of government accounts be established. This would enable the government to work with a much lower level of reserves than the present one. There are, it is true, good reasons why the Nigerian government needs working balances and contingency reserves larger than those required by governments of other countries with a comparable level of revenue. As already stated, the level of Nigerian government revenue depends, and is likely to depend for some time, on the value of the country's inter- national trade which, by the nature of Nigeria's exports, is subject to abrupt fluctuations; moreover, the difficulties of moving funds within the country make large working balances necessary. But the government cannot afford a cushion against all conceivable contin- gencies except at the cost of a continuing insufficiency of public services, incompatible with the requirements of a growing economy. Loans At present, Nigeria's government debt is small. At the beginning of the 1954-55 fiscal year the total Nigerian foreign debt amounted to £E 21.2 million, against which £ 4.2 million was held (as of October 31, 1953) in ihe statutory sinking fund. Interest and sinking fund required £ 949,000 in 1953-54. In addition, the central government has borrowed £ 2.7 million from the Cocoa Marketing Board, on which the service cost was £ 126,000 in 1953-54. It plans to borrow an additional £ 22.6 million. Half would be raised internally and half is to be raised in the London market."3 Allowing for the retirement of a loan of £ 4.2 million due in 1955 these operations will increase 13 This does not include a loan of £ 2 million from the Marketing Boards which is to be reloaned in 1954S55, half to the Western and half to the Eastern regional govern- ments. FINANCING NIGERIAN DEVELOPMENT 117 the total Nigerian debt to about £ 40 million, with an annual debt service of less than £ 2 million. The cost of debt service will be initially offset to some extent by interest on the invested proceeds of contemplated loans. After having contracted these additional debts, the country will still be in a position prudently to borrow substantial amounts. But this borrowing potential should be kept intact for the period after 1960, when capital requirements may be expected to increase. C REGIONAL FINANCES The magnitude of the financial problem which each of the regional governments will face in 1960 if the mission's program is followed is illustrated in Table 5. TABLE 5 Financial Position of Regional Governments, 1959-60 (Million £) North West East Revenues at normal rate of growth ....... ..... 9.6 11.8 6.4 Recurrent expenditure ............. ........... 8.9 8.4 6.3 Capital expenditure ................ .......... 5.0 6.5 3.2 Balance to be covered ............. ........... 4.3 3.1 3.1 The principal sources of regional finance consist of revenues shared with the federal government, produce sales taxes and the so-called "capitation levy," the regions' share of local direct taxes levied under the Direct Taxation Ordinance. The produce sales taxes are levied by the regions on exports controlled by the Marketing Boards and have been in effect in the North and West since 1953; 14 and our projections of revenue assume that like taxes will be imposed in the East also. The regions themselves raise little of their income. The only major sources of revenue the level of which they can control are the produce sales taxes. They are essentially export duties and as such they dupli- cate federal export duties. We realize that for the time being these 14 The rates are: cocoa £ 4 per ton; groundnuts and palm oil, £ 1 per ton; ben- niseed, 10/- per ton; and cotton, 0.ld. per lb. of seed cotton. 118 THE GENERAL REPORT taxes will have to be retained, but we do not think that they should be increased. While over the long term we expect that an increase in the tax collected by local authorities under the Direct Taxation Ordinance will result in greater revenue to the regions through their share of the additional proceeds, no substantial increase from that source is likely to come about before 1960. In order to reduce the gap between regional expenditure and reve- nue, we have proposed above that the regions receive the entire pro- ceeds of the recommended rise in import duties, estimated at £ 15 million over 1957-60. Accordingly, that sum has been included in Table 3 and, on the assumption that arrangements can be made under which the federal government will forego its 50% share of this reve- nue, we have allocated it to the regions. Following the revenue allocation scheme, we have allocated £ 6 million to the West, although, as Table 3 shows, the West actually does not need additional funds. In addition, we recommend that all three regional governments be prepared to use during 1955-60 the reserves, aggregating £ 7 million, granted to them by the Lagos conference. The North should also use another £ 2 million of its reserves, bolstered in 1952 by a special "underdevelopment grant" from the central government, while the West can draw upon an additional £ 1 million of its reserves. In Chapter 4, we recommend that the "second-line reserves" of the Marketing Boards be made available for long-term, lending to gov- ernment for development purposes. On the basis of our appraisal of the reserve position of the boards as reorganized (see Technical Re- port No. 4), we recommend that the West and the North each borrowv up to £ 10 million from their Marketing Boards. The figure of £ 10 million (shown in Table 3) merely indicates the order of magnitude of loans which can safely be made in these two regions wvithout im- pairing the financial position of either the boards as creditors or the regions as debtors. Also, loans in such amounts would leave sufficient funds with the respective boards for lending at a later date. We think the second-line reserves of the Marketing Board in the Eastern Region are insufficient to permit their use for long-term loans during 1955-60. Among the regions, only the West can mobilize sufficient funds to meet the cost of the program which we propose. The Eastern Region, FINANCING NIGERIAN DEVELOPMENT 119 even taking into consideration probable financial assistance under the new Colonial Development and Welfare Scheme, would not be able to meet the cost of the program without financial assistance from the federal government. The North should just be able to meet the demands of the recommended program with Colonial Development and Welfare assistance. Under the new revenue allocation system, regional revenues will be more sensitive than federal revenues to price and volume fluctuations of individual export crops. This is so because each of the principal export crops is for the most part concentrated in a single region and because export duties are a significant part of regional receipts. During 1955-60, we expect the price of cocoa to remain at a high level in relation to the last few years and prices of groundnuts and palm produce to decline to lower levels. As a result, the revenues of the West are likely to be higher than was anticipated when the allocation system was devised, while those of the North and East are likely to be somewhat lower. In the Northern Region, the expected price decline of groundnuts is likely to be partially offset by an increase in export volume, partly because of large shipments of accumulated stocks and partly because of good prospects for a sizeable expansion of pro- duction. There are no important compensating factors in sight for the Eastern Region. The Trust Territory of the Southern Cameroons has a special financial relationship with the Federation, explained in the Notes on Government Revenue in Appendix C. To increase Cameroons revenue, we recommend that the federal government consider the practicability of increasing the export duty on bananas and of introducing export duties on other products such as coffee. We further recommend a substantial addition to revenue through larger profit distributions to the government of the Southern Came- roons by the Cameroons Development Corporation. We have projected these at £ 1 million for 1955-60.'5 The Southern Cameroons has no reserves to draw on and the reserve position of its Marketing Board will not, in our view, permit any lending to the government. The insufficiency of Eastern Region revenues and of those of the 15 See Technical Report No. 5 for our views on the future financial policy of the CDC. 120 THE GENERAL REPORT Southern Cameroons was anticipated by the recommendation of the Fiscal Commissioner that the East and the Southern Cameroons be given some grant assistance by the federal government. Table 3 indi- cates that the East may need £ 3 million in grants during 1955-60 and that grants to the Southern Cameroons may exceed £ 4 million."0 These grants would be a heavy burden on federal revenue, but we think they must be made if these two regions are not to fall behind the others in economic development. The mission has not taken into consideration funds of the Cus- todian of Enemy Property totaling £ 1.6 million, derived from the disposal of enemy assets in Nigeria and the Cameroons. At the time of the mission's visit, no decision had been taken regarding the disposition of the balance of these funds remaining after the payment of claims. It is to be assumed, however, that this balance will be made available to Nigeria and the Southern Cameroons. As more than half of the Custodian's holdings was derived from the sale of enemy assets in the Cameroons a substantial sum would thus become available for the Soutlhern Cameroons. D LOCAL FINANCES Although only one-sixth of public expenditure is accounted for by local authorities, we believe that local authority finances deserve the closest attention. Under the present system of taxation, taxes on the Nigerian population outside Lagos are assessed by local authorities. We are inclined to believe that for many years to come it will be impossible to assess income or property taxes on Africans on any but the local authority level. Since we believe that in Nigeria, as in other countries, taxes on income and property are the most equitable form of taxation, we recommend that taxation at the local level be increased in order to pay for the increased government services which we propose. The proceeds of such taxation should be sufficient not only to pay for local government but eventually to permit the appli- '( The special financial arrangements of the Southern Cameroons may entitle it to grants of £ 1.8 million, so that "discretionary" grants by the federal government, in- cluding the Southern Cameroons' share of C.D. and W. funds, would amount to £ 2.3 million only. See Appendix C. The figure for grants to the Cameroons does not in- clude £ 1 million for the Southern Cameroons development agency which we have recommended in Chapter 4. This amount is included in federal expenditure. FINANCING NIGERIAN DEVELOPMENT 121 cation of income tax proceeds to the cost of regional government. As and to the extent that this becomes possible, local expenditure should be met increasingly through property taxes. While this should be the long-term objective of tax policy, we be- lieve that during 1955-60 the objective will have to be limited to making the local authorities assume an increasing share of the cost of their operations, most particularly in health and education. At present, local authorities collect taxes under the Direct Taxation Ordinance. A share of the proceeds of these taxes, the "capitation levy," is turned over to the regional governments. But these payments to the regions are more than offset by grants by the regional govern- ments to the local authorities. In 1952-53 about 62%o of local authorities' revenue came from direct taxes and local "rates." Although administration of the Direct Taxation Ordinance varies considerably from one part of Nigeria to another, in principle there are two classes of direct tax. The first amounts to a flat-rate poll tax to be levied on low-income taxpayers only. In many parts of the North this head tax is apportioned by village chiefs according to a rough estimate of ability to pay. Rates generally vary between 10/- to 30/- per adult male. The second class applies to "wealthy" persons, and to salaried persons whose income is easily ascertainable; in theory, it is a progressive tax on income. In practice, the direct tax is often administered in a manner which makes it regressive. Most authorities assess all but a few taxpayers at the flat rate although incomes vary considerably. Methods of assessing income taxes at the progressive rate are crude. It is under- stood that generally local assessment committees grossly underassess incomes of farmers, traders, craftsmen, etc., with the result that the latter may pay a lower share of their actual incomes than persons subject to the flat rate. Local authorities are aware of this shortcoming and recently some areas have made great progress toward more accu- rate assessment of larger incomes. Many taxpayers have been shifted from the flat to the progressive rate. This improved administration should continue and should be extended. Moreover, sooner or later local governments must squarely face the politically difficult problem of taxing the incomes of women. We recognize, however, that it will be a long time before income assessment on wvestern standards will be achieved. 122 THE GENERAL REPORT Local authorities are also empowered to levy "rates" on a property or other basis, for special purposes or to increase their general funds. These have been extensively introduced in the East, commonly to finance education. Proceeds of rates in that region rose from an estimated £ 134,000 in 1952-53 to £ 309,000 in 1953-54. New rates for specified purposes seem to be far more acceptable to taxpayers than other kinds of tax increases and we recommend their adoption by all local authorities. We believe, however, that they should to an increasing extent be levied in accordance with income and wealth. In urban areas they should be based on property values, as is already done in Lagos. Property assessments made or in progress in many towns for the purpose of levying water rates can be used as a basis for property or other rates. Grants are received from the regional (and in the case of the Lagos Town Council, the federal) government for a variety of pur- poses. In 1952-53, they accounted for 15%o of local revenues. All regions reimburse local authorities for a large share of their expendi- tures on education.17 Police, roads, medical services and, in the Northern Region, agriculture, forestry and veterinary services are also partly grant-financed. The East has a system of matching grants for local capital works projects. Both the West and the East make "Com- munity Development Grants" out of funds supplied under the Colonial Development and Welfare Scheme. Aside from education grants, the mission makes two proposals with respect to regional grants to local authorities. Each region should establish a local development fund, to provide grants and loans for meritorious capital works projects. In the East and in the West these funds should continue the type of assistance supplied by Community Development Funds."8 In the North, where we have projected a relatively smaller sum for the purpose, the local development fund should be used to assist native treasuries unable to finance desirable development projects from their current revenue surpluses. These funds should be administered by the departments responsible for local finance, i.e., the Ministries of Local Government in the East and the West and by the Financial Secretary's office in the North. 17 For our recommendations on the future of these grants see Technical Report No. 21. 1i And in the East by "special grants" and up to 1954.55 by "code grants." FINANCING NIGERIAN DEVELOPMENT 123 Grants for recurrent costs of agriculture, medical and veterinary services, etc., should not be increased, and in the North, where they have made up a larger proportion of local authorities' revenue than elsewhere, they should be reduced. We have made our projections accordingly. Expansion of these services should be paid for out of local revenues. Reserves of Eastern and Western local authorities are no larger than needed for working balances. In the North, on the other hand, reserves were estimated to amount on March 31, 1954 to almost £ 6 million, a sum substantially in excess of working requirements. We do not suggest any net reduction of these reserves over the next five years, since we anticipate a great expansion of expenditure on schools and other facilities after 1960. But we do suggest a revision of the present system of five-year development plans, under which only funds available at the beginning of a five-year period may be ex- pended for development purposes during that period, while surpluses earned within the period are frozen until the beginning of the next period. The local authorities should be free immediately to accelerate their development plans if their current revenues permit, as long as reserves on hand are not thereby reduced. Our program for local authorities calls for a rise in total expendi- ture from £ 8.2 million in 1952-53 to £ 16.3 million in 1959-60. Revenues retained by local authorities and grants from regional gov- ernments totalled £ 8.5 million in 1952-53. Assuming a normal rate of growth, local authorities' own revenues might amount to £ 9.8 million in 1959-60. We project, in addition, grants from regional governments (in the case of the Lagos Town Council, from the federal government) amounting to £ 3.2 million in 1959-60. Efforts must therefore be made to increase local revenues, mainly from direct taxes, to fill the gap which would rise to £ 3.3 million in 1960. Table 6 gives a more detailed breakdown of the required increase in direct taxes in the North, the West, the East and the Southern Cameroons. In Lagos, where the property tax assessment is now being thoroughly revised, there should be no difficulty in reaching the target of £ 430,000 by 1959-60. Direct taxes of Southern Cameroons native treasuries will rise to 124 THE GENERAL REPORT TABLE 6 Proposed Rise in Direct Taxes Collected by Local Authorities (Million £) 1952-53 1953-54 1959-60 North Normal growth' for own use ............................. 3.06 3.78 4.51 for regional government ........ .......... .33 .35 .52 Proposed additional yield ........ .......... - - .70 Total ............................. 3.39 4.13 5.73 West Normal growth' for own use ............................. 1.02 1.17 1.40 for regional government ....... ........... .03 .53 .66 Proposed additional yield ........ .......... - - 1.80 Total .............................. 1.05 1.70 3.86 East Normal growth' for own use ............................. .84 1.03 1.23 for regional government ....... ........... .03 .04 .04 Proposed additional yield ........ .......... - - .60 Total .............................. .87 1.07 1.87 Southern Cameroons Normal growth' for own use .............................. .10 .11 .13 for regional government ........ .......... .01 .01 .01 Proposed additional yield ........ .......... - - .04 Total .............................. .11 .12 .18 Lagos Town Council Normal growth1 ................ ........... .23 .29 .35 Proposed additional yield ........ .......... - - .08 Total .............................. .23 .29 .43 13 % per annum after 1954.55, based on an anticipated rise in incomes at that rate. See Appendix C, Notes on Government Revenue. £ 140,000 on the basis of a normal growth. We estimate that they will need an additional £ 40,000 to meet expanding local authority expenditures. FINANCING NIGERIAN DEVELOPMENT 125 In the North an additional £ 700,000 will be required by 1959-60. This amount and much more could be raised by assessing more accurately the incomes of wealthier individuals. The Eastern local authorities will have a more difficult task. By 1959-60 the amount of additional tax revenue required will be £ 600,000. To raise this amount will mean increasing the yield of direct taxation by 50% over what it would have been if normal growth were maintained. In the last two years the East has made striking progress in increasing tax yields and we are satisfied that the goal can be achieved by more widespread use of rating and perhaps by some increase in the yield of rates already in effect. Western local authorities will have the most difficult problem. The relatively wealthy Western Region has decided to introduce free uni- versal primary education beginning in 1955 and to expand social services. We believe that the West can carry out its ambitious pro- gram and we have made our projections accordingly. In order to do so, we estimate that local authorities will have to increase the yield of direct taxation from a level of £ 1 million in 1952-53 to £ 2.8 million by 1959-60, even if they receive substantial regional education grants, which we recommend should rise to £ 1.5 million in 1959-60. This would mean an increase in the tax burden from an average of 30/- per taxpayer to some 80/-. We estimate that the average taxpayer has at his disposal about £ 90 to £ 120 of cash income per year. The higher tax is surely not an impossible burden, though the discontent occa- sioned by the Education and Health Levy of 10/- imposed in 1953 is an indication of the opposition which may be anticipated. The necessity of shouldering this burden will have to be explained clearly to the Western people. The raising of the additional tax revenue would be facilitated by taxing more persons on the "progressive" scale rather than on the flat rate basis, and by increasing the use of property taxes, especially in Ibadan and other large towns. We further recom- mend that regional grants for education be made contingent upon the achievement by the local authorities of the tax targets suggested. PART II THE TECHNICAL REPORTS TECHNICAL REPORT 1 CAPITAL FORMATION As in any other country, the growth of Nigeria's national income in the long run will depend to a large extent on the rate of capital TABLE 1 Savings and Investment, 1950-52 (Million £) 1950 1951 1952 Public Investment Domestic Fixed ............. ....... 12.1 15.1 22.4 Abroad ........................... 24.2 42.9 25.4 Total . .36.3 58.0 47.8 Private Investment Domestic Fixed .................... 24.5 26.91 33.3 Abroad2 ........................... 2.2 1.0 1.0 Total . .26.7 27.9 34.3 Total Domestic Fixed Investment ... 36.6 42.0 55.7 Increase in Foreign Assets ........ 26.4 43.9 26.4 Total . .63.0 85.9 82.1 Financed by: Net Donation Receipts from Abroad.. 2.6 0.7 4.0 Public Borrowing Abroad ....... .... 1.0 7.3 0.4 Private Capital Inflow ........ ...... 3.0 7.6 12.4 Domestic Savings3-Public ....... ... 32.2 49.4 42.8 Private ......... 24.2 20.9 22.5 Total .63.0 85.9 82.1 1 Mission estimate. 2 Changes in foreign balances of Nigerian banks. 3 Excluding dividend and interest payments abroad. SOURCE: Department of Statistics, Lagos. For more detailed data on fixed investment, see Appendix E. 129 130 THE TECHNICAL REPORTS formation. Data on capital formation for the years 1950-52 (Table 1) show that the level of gross investment came to an average of 12% of the gross domestic product. Only a small part of total investment was financed by resources coming from outside Nigeria. Donations (mostly Colonial Develop- ment and Welfare grants), borrowings by government and inflows of private capital, consisting mostly of reinvested earnings of expatriate firms, accounted for one-sixth of total investment only; the remainder, or 10% of the gross national product, represented domestic savings. This must be considered a remarkable performance in view of the low consumption standards prevailing in the country, even if allow- ance is made for the fact that two-thirds of the savings accrued to the government and government agencies from receipts resulting mainly from increases in export prices.' However, less than 60% of the funds available for investment was used to augment the stock of capital of the Nigerian economy; the remainder took the form of foreign investment, i.e., it was added to the country's sterling balances. Two-thirds of public savings-the difference between current receipts and current expenditures of gov- ernment and public agencies-accumulated abroad. The net outflow of public funds was partly offset by a net inflow of capital on private account. Thus, domestic investment 2 amounted between 1950 and 1952 to 7% of the gross national product only. The reasons for the failure to utilize fully the country's savings within Nigeria are ex- plained in Chapter 2. As to the future, there is the possibility that savings in the public sector will decline, primarily because the Marketing Boards probably will no longer accumulate "profits," if the prices of export produce decline, as appears likely, and if the mission's recommendations re- garding the price policy of the boards are adopted. The increase in current government expenditure proposed by the mission would leave a smaller margin for capital investment out of current government revenues. Public domestic investment, on the other hand, should substantially increase and should exceed public 1 A large part of increased export proceeds accrued to the public sector through export duty collections and in the form of "profits" of the Marketing Boards. 2 Excluding changes in inventories for which estimates are not available, except for 1952 when the value of inventories increased by £ 9.5 million. CAPITAL FORMATION 131 savings, the difference being financed, as recommended in Chapter 5, by the drawing-down of reserves, borrowings from abroad, and Colonial Development and Welfare grants. In the private sector, it is reasonable to expect an increase both in savings and investment, since the increase in public expenditures, capital and recurrent, aiming at an expansion of agricultural pro- duction, and improvements in the efficiency of Nigerian labor should open up new private investment opportunities for both African and non-African entrepreneurs. There are already some indications that the demand for certain kinds of consumer goods (textiles, household utensils) is growing more slowly than in the past and that a rising proportion of income is saved and invested in oil presses, lorries, bicycles, boats and permanent housing. Private investment should likewise be furthered by loans and partnership schemes of the reor- ganized development corporations. There is also the possibility of increased foreign investment in Nigeria through plowing back of earnings of foreign-owned enterprises and inflow of new capital by both established and new firms. It should be noted that there is no danger that in the next few years the increased level of investment will lead to pressures on the balance of payments. The difference between public savings and public capital expenditures is to be financed by drawing down balances held abroad and by loans and grants from abroad, while the expected increase in private investment would be financed primarily out of current income of individuals and business firms and to some extent through inward capital movements. To the extent to which increased total capital expenditures result in a rising demand for domestic goods and services, however, they may give rise to pressures on the price level, unless the supply of domestically produced goods, especially foodstuffs, is increased sufficiently to meet that demand. Therefore, the encouragement of local food production for which we make several recommendations in Technical Report No. 8 is an important measure of over-all eco- nomic policy and a prerequisite to the success of the proposed develop- ment program. TECHNICAL REPORT 2 INTERNATIONAL TRADE AND PAYMENTS Nigeria's international trade presents in general an unusually favorable picture. The exports are a reasonably diversified group of products, the long-run markets for which seem well assured. The balance of payments has for a number of years shown a very substantial surplus, both over-all and with the dollar area, and Nigeria has acquired very considerable sterling balances. The burden of foreign indebtedness is light-in fact, Nigeria is at the moment a net creditor. Accordingly, as far as external payments are concerned, Nigeria is very well placed to proceed rapidly with development plans. I EXPORTS Nigerian exports have averaged over £ 100 million annually for the last five years. Although this is not a great volume of exports for a country with a population of over 30 million, it nevertheless establishes Nigeria as a world exporter of some importance. For example, its exports in the last five years were about equal in value to those of Turkey; they considerably exceed those of Uruguay and are 50% higher than the exports of Portugal. Table 1 shows the value of Nigerian exports. Almost exactly half is represented by vegetable oil products-principally palm oil, palm kernels and groundnuts. Cocoa, the other major product, accounts for nearly one-quarter of total exports. Tin and columbite provide the largest share of the remainder. The bulk of the agricultural exports is produced by small land- holders and purchased by large expatriate companies as buying agents for the Marketing Boards. Palm products, groundnuts, cocoa and 132 INTERNATIONAL TRADE AND PAYMENTS 133 TABLE 1 Average Annual Value of Exports by Commodity, 1949-53 (Thousand £) Total Exports .......... 106,175 100.0 Other Exports: Oil & Oilseeds: Cocoa ............... 23,717 22.3 Palm Kernels ........ 19,690 18.5 Tin .7,050 6.6 Palm Oil . ......... 13,406 12.6 Hides & Skins .4,958 4.7 Groundnuts . ........ 18,019 17.0 Cotton .4,325 4.1 Groundnut Oil ....... 878 0.8 Rubber .3,675 3.5 Benniseed ...... :. 854 0.8 Timber (incl. Plywood) 3,553 3.3 Other Oilseeds and Bananas ............. 2,205 2.1 Vegetable Oils ..... 929 0.9 Columbite .1,276 1.2 Sub-total ............ 53,776 50.6 All Other .1,640 1.6 Sub-total .52,399 49.4 SOURCE: Digest of Statistics and Nigeria Trade Summary, Lagos. cotton all follow this pattern. Mineral exports are principally pro- duced and sold by expatriate-owned mining companies. Bananas are produced and sold chiefly by the Cameroons Development Corporation and a subsidiary of the United Fruit Company. A considerable por- tion of the timber exports originates in the plywood factory of the United Africa Company, which together with some other companies is also a major exporter of hides, skins and rubber. Table 2 shows the volume of principal export commodities. Palm products have long been the chief source of earnings abroad. The oil palm is indigenous and even 40 years ago exports of the oil TABLE 2 Volume of Exports of Principal Commodities (1949-53 = 100) Total Palm, Palm Ground- Cca Tn Cto ubrClm Exportsl Kernels Oil (.nuts cocoa Tin cotton Rubber Cblute inel. oil) bt 1913 ..... 22 46 49 7 3 36 20 - - 1924-28 .. 47 67 71 35 39 91 39 4 - 1929-33 . . 58 69 73 57 53 84. 31 4 - 1934-38 .. 78 86 78 76 82 92 57 14 28 1939-43 .. 79 83 78 61 83 140 66 29 48 1944-48 .. 77 80 70 74 82 126 29 58 124 1949-53 .. 100 100 100 100 100 100 100 100 100 1 See Appendix E for description of index. SOURCE: Digest of Statistics, Lagos; League of Nations: International Trade Statistics. 134 THE TECHNICAL REPORTS were nearly half the present volume. Cocoa and groundnuts, on the other hand, were introduced to Nigeria and developed substantially only after World War 1. It was a little over 20 years ago that they reached half their present export level. Tin mining was developed relatively early in Nigeria, exports reaching almost their present level in the 'twenties. Among the minor products, rubber has been outstand- ing in its recent growth. Within the last five years the trends have varied somewhat from the long,er run tendencies. While groundnuts have continued their expansion (with an increasing proportion being exported as ground- nut oil), the growth of cocoa exports has stopped for the time being. Timber, rubber, cotton and columbite have made quite rapid strides in recent years. This growth in minor products has made the recent pattern of exports rather more diversified, a desirable tendency be- cause it makes the country less vulnerable to shifts in particular markets. The over-all growth of exports, as shown in Table 2, has been quite remarkable. A doubling of the 1913 trade was achieved soon after World War I and the increase continued into the 'thirties. The war checked this growth; 1944-48 exports were below the level of 1934-38. The rise has since resumed: the last five-year average is over 25% above prewar levels and 1953 exports were considerably above those of any previous year. H IMPORTS Table 3 shows the commodity groups represented among Nigeria's imports in the last five years. As would be expected for a country in an early stage of develop- ment, finished consumer goods bulk large in imports, as shown by Table 3. Textiles in particular form a very large item, one-third of total imports, a proportion which is exceeded by very few countries. On the other hand food imports are relatively small, consisting for the most part of luxury items an(I a few specialized items such as dried and canned fish and salt, in which the country is deficient. Transport equipment, including road vehicles, originates almost INTERNATIONAL TRADE AND PAYMENTS 135 TABLE 3 Imports by Commodity Groups, 1949-53 (%7, of value of total imports) T. Consumption Goods: 11. Capital Goods and Raw Materials: Textiles ................... 33.6 Vehicles and Parts ......... 12.1 of which of which Cotton Piece Goods .... 21.5 Lorries ............... 3.0 Rayon Piece Goods .... 7.0 Cycles .1.9 Food, Drink & Tobacco 12.1 Automobiles .1.7 of which Building Materials 7.6 Fish ................. 2.5 of which Salt ................. 1.4 Corrugated Iron ......7. 27 Sugar ................ 1.0 Cement ............... 2.3 Beer ................. 1.8 Machinery and Equipment 7.5 Tobacco & Cigarettes ... 2.0 of which Mliscellaneous Consumption Electrical Machinery Goods ................ 8.4 & Apparatus ........ 2.3 of which Industrial Machiinery . 1.4 Hollowware ........... 1.8 A Miscellaneous Supplies .... 10.1 Medicine & Drugs ..... 1.4 of whicll Kerosene ............. 0.7 Petroleuim Oils ........ 4.2 Bags and Sacks ....... 2.3 Sub-total 54.1 Sub-total 37.3 III. Other Items .......... 8.6 of wlhichi Unspecified Jron ant Steel Manufactures. 4.0 Sub-total .......... 8.6 SOURCE: Digest of Statistics and Nigeria Trade Summary, Lagos. wholly from abroad and now takes a considerable share of the imports. The value of bicycle imports exceeds that of passenger automobiles. Building materials, particularly cement and corrugated iron sheets, are also imported in considerable quantities. Nigeria is dependent on imports for practically all machinery and equipment. The amounts imported are not as yet substantial; the group shown, which includes all forms of implements as well as some household electrical equip- ment, is less than one-fourth the imports of textiles. From the rough separation made of consumption goods it appears that they absorbed about 60% of all imports in recent years. This percentage is probably somewvhat lower now than in earlier periods. The volume figures indicate that except for beer, imports of consump- tion goods have increased rather less than most of the capital goods. 136 THE TECHNICAL REPORTS Among the latter, the increase in imports of cement, road vehicles and petroleum is quite spectacular. One factor in the slow growth in consumption goods has been the growth of domestic production. In- creased sales of the cigarette factory and increased local production of tobacco have reduced the need to import cigarettes and tobacco. In earlier years there was a similar replacement of kola nut imports by local production. Table 4 shows the volume of selected imported commodities, repre- sentative of consumption goods, capital goods and raw materials. TABLE 4 Volume of Imports of Selected Commodities (1949-53 = 100) Consumption Goods Fish Salt Sugar Beer Tobacco Cigar-Cotton & Rayon ettes Piece Goods 1924-28... 132 65 28 22 87 104 48 1929-33... 132 63 32 15 61 106 47 1934-38... 109 65 61 10 48 117 61 1939-43... 18 67 18 11 38 81 37 1944-48... 14 86 20 21 58 104 51 1949-53... 100 100 100 100 100 100 100 Capital Goods and Raw Materials Cement Corrugated Cars and Petroleum Bags and Total Iron Sheets Lorries Oils Sacks Importsl 1924-28... 24 56 22 10 51 49 1929-33 ... 19 49 17 12 57 44 1934-38... 22 50 28 16 83 52 1939-43... 16 10 8 26 76 28 1944-48... 41 13 35 42 77 43 1949-53... 100 100 100 100 100 100 1 See Appendix E for description of index. SOURCE: Digest of Statistic, Lagos; League of Nations: International Trade Statistics. The over-all volume of imports showed a surprising stability in the interwar years. The growth in export volume was not accompanied by an equivalent increase in imports, because imports were held down by the abnormally low export prices in the 'thirties. In the war years the import volume fell very substantially, partly due to unavailability INTERNATIONAL TRADE AND PAYMENTS 137 of some types of supplies but also owing to a further worsening of the terms of trade, the extent of which is shown in the next section. The postwar volume of imports grew rapidly and the average for the last five years is roughly double the prewar level. The growth in the machinery and equipment imports has been particularly great; their share in total imports rose from 6.3% in 1949 to 8.6% in 1953. In the same period the much larger item of textiles reduced its share from 39.4%o to 30.5%. However, part of these changes arose from differing price movements, as textile prices increased much less than those of other items. II PRICE MOVEMENTS AND TERMS OF TRADE Table 5 shows the prices of exports and imports and the terms of trade since 1924. TABLE 5 Prices of Exports and Imports and Terms of Trade (1949-53 = 100) Export Prices Import Prices Terms of Trade' 1924-28 ..................... 32 33 98 1929-33 ..................... 19 25 78 1934-38 ..................... 15 20 76 1939-43 ..................... 15 36 42 1944-48 ..................... 39 66 60 1949-53 .100 100 100 1949 ....................... 76 85 90 1950 ....................... 84 88 97 1951 ....................... 115 108 107 1952 ....................... 120 115 105 1953 ....................... 105 104 101 1 Terms of trade = export prices divided by import prices. Apparent discrepancies are due to rounding. A rise in this ratio indicates improved terms of trade. SOURCE: For five-year averages: mission estimate; for annual figure: Department of Statistics, Lagos. In the last 30 years the prices of Nigerian exports and imports have shown wide fluctuations, but the variations of export prices were much more pronounced than those of import prices. The terms of 138 THE TECHNICAL REPORTS trade resulting from these movements have gone through a full cycle. The prosperous period of the 'twenties, with relatively high prices for Nigerian exports, was followed by the depression of the 'thirties when export prices fell by much more than import prices. The terms of trade as roughly estimated from the available data fell by one-quarter. Ignoring year-to-year fluctuations, the terms of trade stayed low until the war, when they further worsened. Export prices during the war were kept stable, but import prices rose quite sub- stantially and the terms of trade fell to less than half those of the 'tventies. This means that at that time Nigeria had to export twice as much in order to buy the same volume of imports. After the war the terms of trade rapidly recovered and soon passed the immediate prewar level. The rise in export prices in the period 1949-53 was sufficiently great to return Nigeria to the favorable terms of 1924-28. Taking the figures for the last five years individually, it is apparent that a peak was reached in 1951 under the stimulus of thle speculative buying following the outbreak of Korean fighting. By 1953 the terms had receded somewhat and were only slightly more advantageous than the average for the last five years. These indications of the over-all terms of trade of the country are not of course directly indicative of the position of the individual African producer of export commodities. He purchases a collection of imported goods in which, for example, textiles would weigh more heavily than in the official index. Moreover, the producers are con- cerned with the price they receive rather than the export price, which includes Marketing Board "profits" (or "losses") and export duties. An index on this basis would indicate a somewhat less favorable po- sition for recent years than the over-all index. The general trend would, however, be similar and the index of the producer terms of trade wvould show the tremendous recent improvement.' The main difference would be that the producer index would probably be still improving and would mark an all-time high in 1953. ' A detailed investigation of these producer terms of trade made by E. K. Hawkins of the West African Institute of Social and Economic Research, Ibadan, in an unpub- lished study, establishes the very considerable gains made. INTERNATIONAL TRADE AND PAYMENTs 139 iv DIRECTION OF TRADE In the last five years some three-quarters of Nigerian exports lhas gone to the United Kingdom. The United States is the next largest customer and accounts for more than all other countries combined, tlle most important of which are European. This marks a sharp change from prewar when the exports to the United Kingdom were much lower and the exports to the European continent much higher. The change is in part attributable to the bulk purchase arrangements with the U.K. Ministry of Food during the last five years. Table 6 shows the direction of flow of exports and imports durinig the prewar years and for the last five years. TABLE 6 Direction of Trade (% of Total) Exports Imports 1934-38 1949-53 1934-38 1949-53 United Kingdom 46.0 78.3 United Kingdom ..... 56.8 52.8 United States .9.4 12.4 Japan .5.0 8.9 Netherlands .8.9 2.1 Germany .8.2 5.9 Germany .17.2 1.7 India and Pakistan . .9 5.8 France .............. 8.9 0.5 United States ........ 6.5 4.2 Netherland(ls West Indies ............. 1.1 3.8 Italy ................ 2.0 3.5 Netherlands ......... 1.8 3.0 SOURCE: Digest of Statistics, Lagos. The import pattern has been much more stable. The United King- dom has consistently been the source of more than half the total imports. The remainder has been widely distributed among industrial nations. In spite of quite severe restriction, Japan has achieved the greatest increase over prewar and in the last five years provided the second largest group of imports. Germany, whose share has been expanding greatly in the last two years, is next in importance. The United States, third largest prewar supplier, has been reduced to fifth place through dollar import restrictions. This pattern results in Nigeria's running a large surplus with the 140 THE TECHNICAL REPORTS United Kingdom and the United States, combined with a considerable deficit with the rest of the world. While trade with other dollar countries has been in deficit and there are net dollar payments involved in other transactions, such as petroleum purchases, Nigeria has clearly been a net dollar earner. On the other hand Nigeria runs a heavy deficit with Japan. v TRADE AND PAYMENTS RESTRICTIONS Nigeria is a member of the sterling area and maintains exchange and import controls similar to those of other members. Purchases from the dollar area have been restricted in over-all amount, with licenses granted only for a specified list of essential goods unobtain- able elsewhere. The list and the over-all allocation are determined in London on the basis of Nigerian submissions. Restrictions on imports from other countries have for the most part been relaxed, with the significant exception of Japanese goods. During 1952 restrictions on Japanese goods were sharply tightened by Nigeria as by most members of the sterling area, following an earlier sterling area deficit with Japan. These restrictions led to a reduction of £ 5.5 million, or 50%o, in Japanese goods entering Nigeria in 1953, a cut in terms of total value much more severe than the dollar restric- tions. In 1954, after Japan had negotiated an agreement with the United Kingdom calling for a substantial relaxation of restrictions by the United Kingdom and her colonies, the Nigerian allocation of import licenses for Japanese goods was greatly increased. The requirement for specific licenses for Japanese goods has not been abolished, how- ever. From intimations the mission received at the time of its visit, it was evident that there would remain a substantial volume of repressed demand for such goods. In the allocation of licenses among importers the policy of the administration has been to favor the African importer. The proportion of import business for scarce goods granted to Nigerian importers has increased annually as compared with that allocated to expatriate importers. INTERNATIONAL TRADE AND PAYMENTS 141 Export controls are maintained, primarily to ensure that the pro- ceeds of the sale are repatriated to Nigeria in accordance with ex- change control arrangements. There is no attempt to use these controls to divert exports to the dollar area. For the foreseeable future Nigeria will remain within the sterling area and while the sterling area maintains restrictions, so will Nigeria. It would be wise, however, if the administrative procedure were revised to provide for the presence of Nigerian representatives at annual dis- cussions in London. In this way, Nigerians would be kept informed about sterling area problems and would be confident that Nigerian problems were presented and adequately taken into account. vi EXPATRIATE COMPANIES IN TRADE Although the agricultural export goods are chiefly produced by numerous small landholders, the purchase from them of the export crops is highly concentrated in the hands of a small number of expatriate companies, which, together with other Nigerian and ex- patriate firms, operate as licensed buying agents of the Marketing Boards. Since the inception of the boards, the number of Nigerian firms so operating has increased, however. One expatriate company in particular occupies an extremely large place, purchasing in 1949 43% of all Nigerian nonmineral exports.2 In imports, substantially the same picture is presented with the same firms dominating, although the- share of the smaller firms is somewhat larger and has tended to grow recently. This concentration has arisen chiefly from the great advantages derived in West African trade from large-scale operations backed by substantial capital. Originally there were few facilities available for services such as warehousing. Consequently, firms which provided their own obtained a substantial advantage. Many of the goods handled are standa~rdized and there were economies in bulk handling. The absence of a local capitalist class necessitated the development of 2 This figure is given by P. Bauer in his article "Concentration in Tropical Trade," Economica, Aug. 1953, p. 22. The article provides a detailed analysis of the share of the firms in the trade of Nigeria and an examination of the causes of the concentration. 142 THE TECHNICAL REPORTS internal distribution of imports. As communications were poor, un- usually large stocks of goods had to be carried. The requirements for capital were further increased by the uncertainties of tropical trade; firms with small capital frequently were destroyed when price declines caused losses on stocks and ran them short of liquid capital. Large firms, well known in London, were able to weather such crises by borrowing abroad. The large expatriate firms have played a very important role in developing Nigeria. Their distribution of imported goods into the interior has been among the most potent forces in bringing about an increase in production for sale by demonstrating to the farmer the benefits he can derive therefrom. In addition, several of the firms have reinvested their profits in industrial and other enterprises in Nigeria. These firms have provided and are providing efficient service and their large share in trade will continue for many years to come. But with the passing of the special conditions which gave them their initial advantage, the share in trade of smaller firms and in particular of Nigerian firms will grow. In recent years this tendency has been encouraged by the more liberal allocation of import licenses to the smaller traders. In the future, too, government support and encour- agement for the smaller traders will be justified. However, this should not take the form of restrictive action against the larger companies based purely on the size or ownership of the firm. vii BALANCE OF PAYMENTS ESTIMATES While trade gives rise to the major part of Nigeria's payments and receipts with the rest of the world there are other transactions of substantial importance. There are payments of profits by expatriate companies, receipts of interest on investments in London, receipts of private capital from abroad and the investment of government surplus funds in London, to mention only a few. Estimates of all these trans- actions for 1950, 1951 and 1952 are given in Table 7.3 See Apperidix E for the basis of the estiniates. INTERNATIONAL TRADE AND PAYMENTS 143 TABLE 7 Balance of Payments Estimates (Millioln I) 1950 1961 1952 R.1 P. R. P. R. P. Merchandise Exports ....................... 88.9 - 119.6 - 128.6 Imports (c.i.f.) . . - 63.1 - 86.1 - 115.2 Balance on goods .25.8 33.5 13.4 Scrvices Travel .0.1 1.4 0.1 1.8 0.1 2.1 Transportation & Insurance 2.4 2.0 3.1 2.5 3.4 2.7 Investment Income-Direct - 5.8 - 6.7 - 7.0 Other 3.0 0.6 3.9 0.6 4.8 0.8 Otlher Government .1.7 2.7 2.3 2.0 2.5 2.2 I\iscellaneous . . - 0.7 - 0.8 - 0.8 Balance on services 6.0 5.0 4.8 1. Balance on goods and services... 19.8 28.5 8.6 Donations Private .0.7 1.2 0.9 1.5 0.9 1.5 Government .3.1 - 1.3 - 4.6 - 2. Balance on donations .......... 2.6 - 0.7 - 4.0 - 3. Private Capital ................ 2.6 - 8.6 - 7.6 - 4. Errors and Omissions .......... 0.4 - - 1.0 4.8 - Balance 1 through 4 .......... 25.4 36.8 25.0 Official & Banking Capital Changes in Nigerian Liabilities 1.0 2.7 7.3 - 0.4 0.1 Changes in Nigerian Assets (Net) Marketing Boards ...... ...... - 12.1 - 11.2 2.1 Currency Board ....... ....... - 5.3 - 13.4 - 4.0 Banks ....................... - 2.2 - 1.2 - 1.0 Other Official ........ ........ - 4.1 - 18.3 - 22.4 Balance of Official & Banking Capital 25.4 36.8 25.0 1 R. = receipts; P. = payments. SOURtCE: Mission estimates based on data supplied by Department of Statistics, Lagos. See also Appendix E. The most striking feature of the balance--of-payments situation is the substantial addition made in each of the three years 1950-52 to Nigeria's net official and banking capital abroad. For the three years 144 THE TECHNICAL REPORTS the net addition amounted to £ 87 million, an amount equivalent to over 25%o of export proceeds. This is an extraordinarily high rate of exchange savings, which has rarely been exceeded in any country. Nigeria's payments position is consequently very strong. While this surplus was invested abroad a smaller inflow of private capital was being provided by the expatriate firms. The amount recorded in the estimates, £ 19 million for the three years, refers to the physical additions to capital by the expatriate companies after allowance for depreciation. It does not include any allowance for the growth of their liquid assets in Nigeria-debts or cash holdings-and it is probable that the actual transfer of capital was several million pounds greater. Among the service items the largest is the profits of the expatriate companies. This item, which amounts to about 6% of export receipts, is quite substantial although it does not approach the level reached in many other underdeveloped countries. Nigeria is, however, almost unique among underdeveloped countries in having a very substantial offset in the form of interest receipts on balances held in London. These receipts are sufficient to cover all the charges on Nigeria's own debt and half the profits of expatriate companies. In consequence, net payments of invested income are less than 3% of receipts for exports. The other major outward payments by Nigeria occur in travel expenditure and in private remittances abroad. These together take a net amount of a little over 2% of total export receipts. In govern- ment donations are recorded the substantial receipts on Colonial Development and Welfare grants together with some minor items. viii STERLING ASSETS The large additions to Nigeria's assets abroad, shown in the balance of payments, have through the years led to the accumulation of very considerable sums. The full total of the assets was not readily avail- able, as the balances are held by a large number of organizations, but a tabulation made for the mission indicated the position as of March 31, 1953 shown in Table 8. INTERNATIONAL TRADE AND PAYMENTS 145 TABLE 8 Sterling Assets of Nigerian Official, Semi-Official and Banking Institutions, 1953 (Million £) Marketing Boards ............................. 51.6 Currency Board ............................. 55.5 Central Government .............................. 47.7 Regional Governments ............................ 5.4 Native Authorities ............................. 3.1 Regional Production Development Boards .......... 15.1 Other (Semi-Official) ............................ 11.9 190.3 Net Balances of Banks Abroad ............. ....... 16.4 Total Banking and Official ............. ....... 206.7 SOURCE: Financial Secretary's Office. See also Appendix E. The values in Table 8 represent either cash balances or the market value of securities held in London; 11% of the securities was in- cluded at their nominal, and the rest at the market, value. At that time the market values of securities held by the Marketing Boards were at a discount of 12%. As the official United Kingdom sterling balance figures are in terms of nominal values, about £ 20 million should be added to the figures in the Table when comparing them with other countries' sterling balances.4 This level of external assets of banking and official and semi-official institutions is quite unusual. In March 1953 not one of the 20 Latin American republics had such reserves. In the independent sterling area only Australia and India had greater assets. South Africa's total gold and foreign exchange reserves were less than two-thirds as large. To look at the assets from another side, they were considerably greater than the investments of expatriate companies in Nigeria; actually they exceed the total of these investments and the Nigerian public debt, so that Nigeria is for the moment a net creditor. The main part of the balances is held by the Marketing Boards, the Currency Board and the central government, each accounting for about £ 50 million. The other large block was held by the Regional 4 The realizable value of the £ 207 million in March 1953 has probably increased further in the succeeding year. The market value of the securities has improved and there appear to have been some direct additions by most of the institutions. 146 THIE TECMNICAL REPORTS Production Development Boards, which received them from the Marketing Boards. The remainder was made up by the surpluses and unspent capital allocations of all the many semi-governmental organ- izations and the regional and local governments. The bank balances shown are the deposits of the branches in Nigeria with the head office in London. These balances, although private in direct ownership, are half government-owned if the ownership is traced to the depositors, for about half of the private bank deposits are made by official bodies. Nigeria is exceedingly fortunate to have such assets at the outset of an intensifiecd development program. The assets are considerably in excess of the amount required for external solvency and the excess will be available for development needs. The amount which should be held abroad to ensure external solvency can never be precisely indicated. It is probably true, however, that Nigeria should maintain for some time at least an above-average re- serve. The terms of trade, although not greatly out of line with previous periods of prosperity, are likely to worsen. The price stab- ilization operations of the Marketing Boards and the use of accumu- lated reserves by government during times of adversity will lead to relatively great demands on reserves in a depression. On the other band, the debt service payments are small and imports are fairly easy to compress. Allowing liberally for all factors suggesting higher reserves, there seems no doubt that a substantial proportion of the sterling balances could be regarded as available to meet the capital requirements of development. It is equally clear that at the moment the use of existing balances for this purpose should be limited. In Chapter 5 we have indicated the amounts which can usefully be employed in financing the develop- ment program in the next five years. We do not believe that these amounts should be exceeded because the reserves may have to be relied on in the more distant future to supplement the country's current savings when the requirements for capital investment will be larger. This problem and the working determination of the safe level of reserves are matters for which the proposed state bank should have primary responsibility. TECHNICAL REPORT 3 MONEY AND BANKING I CURRENCY The currency in circulation in Nigeria is the West African pound, issued by the West African Currency Board as the common currency of the British West African colonies of Nigeria, the Gold Coast, Sierra Leone and the Gambia. The currency system is based on sterling, and the value of the West African pound is tied directly to that of the pound sterling. West African currency is issued by the Board against the payment of sterling and, conversely, the currency is redeemable for sterling at all times. The issue and redemption take place at the rate of one pound West African currency to one pound sterling. The Currency Board The West African Currency Board was constituted by the Secretary of State for the Colonies, who also issued the West African Currency Board Regulations of 1949 which presently govern the Board's opera- tions. They authorize the Board, subject to the legislation in force from time to time in the West African colonies, to provide, issue and re-issue coin and currency notes in the four colonies. The issue of currency notes in Nigeria is authorized by the Nigerian West African Currency Notes Ordinance, which provides that the currency notes shall be a charge on the assets of the Board and "failing them, on the general revenues of Nigeria." The Board consists of five members appointed by the Secretary of State for the Colonies. The practice has been for one of the two Crown Agents for Oversea Governments and Administrations to serve as chairman, while the other members are from the Colonial 147 148 THE TECHNICAL REPORTS Office and the Bank of England. The secretariat is in the office of the Crown Agents and all meetings are held in London. The sterling acquired by the Board against the issue of West African currency is credited to a Currency Reserve Fund. Part of this reserve is kept in liquid form to meet likely redemption demands. The Regulations authorize investment of the remainder in "sterling securities of the government of any part of Her Majesty's dominions or in such other manner as the Secretary of State may approve." In practice the Board has virtually limited its investments to U.K. securities which constituted 98% of its holdings in June 1953. At no time has the Board invested in any West African securities, although there is no legal restriction on its doing so. In consequence the cur- rency issue has always been backed by external assets and there has been no fiduciary issue backed by securities of the local colonial governments. The Board may, with the approval of the Secretary of State, dis- tribute its income in whole or in part to the four governments. In practice, part of the income has been added to the Currency Reserve Fund. It is the broad policy of the Board to aim at a Currency Re- serve Fund greater than the amount of currency outstanding, while at the same time making reasonably regular distributions to the four governments. The excess, normally of the order of 10%o, is retained against possible depreciation of the securities held. At the end of 1952-53 the Board had reserves valued at 108%o of the currency issue and distributed £ 400,000 for that year to the four West African colonies. Nigeria's share, determined by a formula based on trade, amounted to £ 213,000. The Board will deal with any member of the public in the issue and redemption of currency, provided the amount of each transaction is £ 10,000 or more. It charges a fee of 1/2 So for issue or redemption. As the banks charge the same fee for transfers of funds between London and West Africa, all private transfers take place through the banks. The Board maintains a main currency center in Lagos, and eight subcenters in Nigeria-all of which issue currency and accept cur- rency for redemption. Transfers between all centers and subcenters in West Africa have been free of charge. No regulations have been MONEY AND BANKING 149 issued on the subject but apparently this service is not available to the public. It has been used only by the banks, which themselves charge the public 1/4-s3/8 % for such transfers.' Four of the subcenters were opened early in 1954, thereby relieving the banks of much of the cost of currency transfer. Except for the subcenter in Victoria (Southern Cameroons) which is operated by Barclays Bank (D.C. & 0.), the centers and subcenters in Nigeria are all operated for the Board by the Bank of British West Africa; the Board pays an agency fee to the banks. The charge is quite low and has not increased proportionately with postwar costs. The advantages of the currency board system-used by most British colonies-are considerable. In many respects the result is equivalent to the local circulation of U.K. currency. It removes from commerce any exchange risk with the main markets. It relieves the local govern- ment of all problems of currency management and in particular eliminates the danger of locally created inflations or foreign exchange crises. The currency board system has one advantage over local cir- culation of sterling: profits arising from the currency issue accrue to the colonies rather than to the home government. In spite of these advantages it is clear that the West African Cur- rency Board will have to undergo changes in the near future. Nigeria and the Gold Coast are moving rapidly towards self-government and it will not long be possible to group under one currency board self- governing territories which will not necessarily want to pursue iden- tical internal economic and financial policies. The Board's policy of maintaining external reserves of 100% and over has often been criticized and the suggestion has been made that part of the reserve should be invested in local government securities, thus creating a fiduciary issue as is customary in all developed coun- tries. This suggestion has considerable merit in principle, for circum- stances may well arise under which it would be wasteful to keep the country's external reserves immobilized. However, the creation of a fi- duciary issue to mobilize currency reserves or for any other purpose necessarily involves an element of discretion, and in the absence of re- sponsible management may lead to external insolvency. Moreover, if 1 Until 1951 only Barclays Bank (D.C. & 0.) and the Bank of British West Africa had used this service. In that year the National Bank of Nigeria made the first transfer. 150 THE TECHNICAL REPORTS Nigeria's sterling holdings are pooled, as recommended in Chapter 4, the problem of departing from a 100% currency cover should not arise for many years. These holdings at present amount to more than three times the total currency issue and for the next five years at least there should be no question of their being reduced to a level anywhere near the amount of currency outstanding. The currency board system as now applied is, however, open to criticism on another count-it does nothing to train Africans in monetary management. This is a serious shortcoming, since mone- tary management may present grave problems for Nigeria, once self- government is attained. The financing of an intense development effort requires the highest standards of monetary management if inflation and the resulting excessive loss of reserves are to be avoided. Education towards self-government will fail if an effort is not made at this stage to acquaint Africans as widely as possible with the prin- ciples of sound monetary management. This is one of the main rea- sons for the mission's recommendation for the early establishment of a state bank.2 Recent Currency Trends Since 1939 there has been an extraordinary increase in currency in circulation in Nigeria, surpassing that of any independent sterling area country. During the war years the supply trebled, a very sub- stantial change but one which was paralleled by many other sterling countries. At the end of 1945, the money supply in the United King- dom and New Zealand stood at 21/2 times prewar; it more than trebled in Australia and the Union of South Africa and rose to more than four times prewar in India and Ceylon. The reason for the increase was broadly similar for all these countries: a rise in money incomes, partly as a result of military expenditures, at a time when consumer goods were not available or were severely controlled. In the postwar years, however, the growth of Nigeria's currency in cir- culation did not slow down or cease as it did in many sterling area countries. In fact the rate of increase was almost maintained, with a further trebling occurring in the following seven years. As of March 2 For detailed recommendations, see Chapter 4, p. 96. MONEY AND BANKING 151 31, 1953, currency in circulation was estimated at £ 51.4, million of which £ 4.8 million was held by the banks (see Table 1). TABLE 1 Currency in Circulation (Million £) Notes Coin Total Held by Banks 1939 ............. 0.3 5.5 5.8 n.a. 1946 ............. 3.2 14.9 18.1 1.5 1953 ............. 20.8 30.6 51.4 4.8 1 n.a. = not available. SOURCE: Digest of Statistics, Lagos. The postwar growth was clearly caused by the tremendous increase in export earnings. Although a strong attempt was made to limit the effect of this increase by siphoning off a large part of the earnings through Marketing Board and government action, these measures did not prevent the transmission to the Nigerian economy of the pressures of the rising sterling area price level. The expansion of local circulation in this period is an interesting demonstration of the relative ineffectiveness of cautious Nigerian budgetary policies to prevent the transmission of general sterling area inflation to Nigeria when the currency is tied directly to sterling. Short of an appreciation of the West African pound, which would have been essentially inconsistent with the currency board system. there was no way in which the local administration could have avoided the price inflation which has occurred. Of course, the growth in currency does not merely represent price inflation. The Nigerian economy has developed considerably in the past 14 years, internal trade growing very substantially in volume, so that there is a much greater quantity of transactions to be handled. Moreover, the development of the economy has undoubtedly led to a wider use of money as a medium of exchange transactions and for savings. The withdrawal from circulation of manillas 3 by the gov- ernment left a gap which was filled by West African currency. The development of monetary habits is indicated in striking terms by the 3 Small bronze hoops, shaped ]ike horseshoes, used as unofficial token money in parts of the Eastern Region. 152 THE TECHNICAL REPORTS changed proportion of notes in the currency issue; in 1939 they represented only 4% of the total but by September 1953 the propor- tion had risen to 44%. In part this resulted from higher price levels which made the use of notes rather than coins more convenient, but more significantly it arose from a growing understanding on the part of the African public that notes were equivalent in security to coins. II BANKING General Features Since Nigeria's economy is at an early stage of development, vith most production in the hands of small peasant farmers, deposit bank- ing plays a very much smaller role than it does in developed econ- omies. Demand deposits are less than half the size of the currency issue. This may be contrasted with the situation in the United Kingdom where demand deposits are nearly three times the size of the note issue. Further, this comparison of deposits with currency overstates the use of banking facilities by the private sector, as nearly half the deposits are made by government or by semi-government organiza- tions. For the private sector, currency outweighs deposits more than three to one, compared to a ratio in India, for example, of less than two to one. Finally, it should be noted that banking is even less signifi- cant for the African sector. An overwhelming part of the demand deposits is held by Europeans and European firms. Nigerian com- mercial interests and individuals, on the other hand, use currency probably 10 times as much as demand deposits. The banks accept fixed and savings accounts as well as demand deposits (see Table 2). The amounts held in fixed and savings accounts are small but the savings accounts, in particular, perform an important function. The fixed deposits include considerable sums of public moneys deposited with an African commercial bank-a recent development commented on below. The savings deposits, on the other hand, are almost entirely small African accounts. In keeping these accounts the commercial banks render a considerable public service by popularizing MONEY AND BANKING 153 TABLE 2 Deposits in Commercial Banks, December 31, 1953 (Million £) Demand .... 24.5 Fixed .... 3.8 Savings .... 2.9 Total . 31.2 SOURCE: Digest of Statistics, Lagos. savings. As the cost of operating such small accounts is high, it is probable that this service is operated at a loss. The relatively underdeveloped financial system in Nigeria is strik- ingly illustrated by the assets held by the banks. The proportion held in cash at hand and with banks abroad (primarily with head offices) must be among the highest in the world. These two items cover 69% of all deposits and are nearly equail to the level of demand deposits (see Table 3).4 TABLE 3 Liquid Reserve Ratios of Commercial Banks, December 31, 1953 (Million £) Demand Deposits ............... 24.5 Cash ............. ....... 5.4 Other Deposits ................ 6.7 Balances Abroad ................ 16.1 Total Deposits ................ 31.2 Total Liquid Assets ........... 21.5 Ratio of Liquid Assets to Total Deposits 69% Ratio of Liquid Assets to Demand Deposits 88% SOURCE: Digest of Statistics, Lagos. The corollary of this high liquidity is, of course, a very low level of loans and advances. In December 1953 they amounted to one-third of total deposits. Moreover, loans and advances are highly seasonal. 4 In a country with a developed securities market and a central bank which acts as lender of last resort, the cash reserve ratio to total deposits is frequently no more than 10%. For example, in India the ratio for the "scheduled banks" was only 7½2% in December 1953 while in the United Kingdom the ratio was 82'%. The situation in Nigeria is not directly comparable since there the possibility of holding reserves in the form of readily saleable internal securities does not exist. A more comparable case was provided by Cuba at the time of an International Bank mission's visit in 1950. Liquid reserves were equal to 51% of total deposits, a ratio which was described as high, and recommendations were framed which would lead to its reduction. 154 TIIE TECHNICAL REPORTS December figures normally show a level nearly twice that of June, as shown by Table 4. TABLE 4 Advances of Commercial Banks (Million £) March 31 June 30 September 30 December 31 1951 ................. 3.4 3.0 3.6 5.5 1952 ................. 5.0 4.6 5.6 9.2 1953 ................. 5.8 5.8 6.4 10.2 SOURCE: Digest of Statistics, Lagos. The seasonal fluctuations reflect the high concentration of bank lend- ing for import and export trade, and in particular the importance of financing export crops. Cocoa and groundnuts, the principal export crops financed, have seasonal peaks close together toward the end of the year. The composition of bank advances and their seasonal varia- tions are summarized in Table 5. TABLE 5 Classification of Loans and Advances of Commercial Banks (Million £) Cocoa and Other Export Wholesale and Groundnuts Products Retail 'trade Others Total Dec. 31, 1952 .... 2.5 0.9 3.4 2.4 9.2 June 30, 1953 .... 0.7 0.6 2.8 1.7 5.8 SOURCE: Financial Secretary's Office. Advances to the wholesale and retail trade are made primarily to finance imports. Other advances include (as of June 1953) loans for construction (0.4 million), for manufacturing (0.3 million), and a large number of miscellaneous loans (1.0 million) which includes many small consumer loans by African banks. The low levels of bank advances and the consequent tendency to low income from local loans is partly compensated for by higher inter- est rates. The rates charged by the British banks appear to exceed those in British colonies F outside West Africa. Those charged by s Ida Creaves quotes rates as being 4% to 6% in the West Indies compared with 6% to 8% in West Africa. Colonial Monetary Condilitions (H.M. Stationery Office: London, 1953) p. 47. MONEY AND BANKING 155 the African banks are even higher and are very high in comparison with those of more advanced countries. The business of the European banks has been to provide services rather than to extend credit. The greater part of their income comes from service charges. Internal remittances bear high charges, the rates ranging from /4 So for short-distance transfers such as from Lagos to Ibadan to 1%o for transfer to an outlying branch such as Mai- duguri. These charges, and in particular high minimum charges, have frequently been criticized as excessive. Sir Cecil Trevor reported with respect to the Gold Coast: "Even although appreciable reductions have been made in recent years I was impressed by the high rates charged by the banks for internal remittances especially between centres at which they enjoy free transfers through the West African Currency Board." This observation applies equally to Nigeria at present.' The banks defend these charges by asserting that the costs of maintaining outlying branches are high and that with few accept- able local borrowers there is no other way of recouping them. The mission is not in a position to say to what extent, if any, charges could be reduced, but it is of the opinion that the matter deserves study. The mission also feels that when the Currency Board opens additional currency subcenters, as was done recently, and thereby reduces the banks' costs, it should use its influence to see that the reduction in cost is passed on to the public. The Banking Ordinance Since 1952, the banking business has been regulated. The Banking Ordinance requires banks to be licensed. The requirements for 6 Banks charge up to 9Yd. per £ per month (i.e., 47½% per annum) for unsecured loans. 7 Report on Banking Conditions in the Gold Coast and on the Question of Setting Up of a National Bank (Government Printer: Accra, 1951), par. 123. 8 These charges are frequently avoided by use of Post Office Savings Bank accounts for internal remittances (see p. 161). The mission also heard of instances in which merchants who had to transfer large sums between Lagos and Kano found it profit- able to transport currency notes themselves by plane. 156 THE TECHNICAL REPORTS licensing are, broadly speaking, a minimum capital,9 an "adequate" cash reserve against deposits and an indication of satisfactory conduct. The licensing power is broad and is exercised by the Financial Secretary. The ordinance empowers him to deny a license if in his opinion the circumstances render the issue undesirable in the public interest, and he may cancel a license if a bank fails to maintain cash reserves which are adequate in his opinion, or, in general, conducts its affairs to the detriment of its creditors. The ordinance contains various restrictions on transactions with "insiders" and contains an absolute prohibition against unsecured loans and advances in excess of £ 300 to directors. The ordinance also requires the formation of a reserve fund. Every bank must file with the Financial Secretary quarterly state- ments of assets and liabilities and, in addition. an analysis of cus- tomers' liabilities at the end of quarterly periods, divided by size and type of loan. The Financial Secretary has the right at all times to inspect the banks' books. When the ordinance was enacted in May 1952, existing banks were given three years within which to obtain a license. By December 1953 three European banks and three African banks had been licensed. Several other African banks have made application for licenses. European Banks Banking in Nigeria before World War II could be described as virtually the monopoly of two large British banks, the Bank of British West Africa and Barclays Bank (D.C. & 0.), which are closely as- sociated with the leading banks of the United Kingdom."0 They have provided Nigeria with a banking service which in security of deposits is equal to that of any other country. Since these banks came to 9 Banking may he carried on only by registered companies with a minimum nominal capital of £ 25,000, at least one-half of which must be issued and paid up. Foreign banks operating in Nigeria must have an issued and paid-up capital equivalent to not less than f 100,000. 1O Barclays Bank (D.C. & 0.) is a subsidiary of Barclays Bank Ltd. The Bank of British West Africa is owned largely by Lloyds Bank, the Westminster Bank, the National Provincial Bank and the Standard Bank of South Africa. The Midland Bank is represented on the Board of Directors. Consequently each member of the Big Five is represented in Nigerian banking. MONEY AND BANKING 157 Nigeria primarily to render services in connection with international trade, their relations have been chiefly with the European trading companies and with the government; their lending to and their busi- ness contacts wiLh Africans have been very limited. They have derived their income largely from handling trade remittances and advances against the security of goods entering international trade. They have played virtually no part in developing local African entrepreneurship. Their lending policies in the Gold Coast have been described by Sir Cecil Trevor as "extremely conservative" " and it would seem that the remark applies equally to Nigeria. The two British banks were joined in 1949 by another European bank, the British and French Bank, which is affiliated with the Banque Nationale pour le Commerce et l'Industrie, a large French banking institution. The economic development of Nigeria will require increased credit facilities, in particular for Nigerians. It is the mission's impression that the European banks, which at present control close to 90% of deposits, will contribute rather little to meeting that demand, at least until they feel that the level of business experience and sense of responsibility of the Nigerian community at large approaches Euro- pean standards. The task of providing credit to African enterprise and of educating African businessmen to these higher standards of experi- ence and responsibility will therefore largely fall to African banks and governmental lending institutions. As a result the share of the European banks in Nigerian banking is likely to decrease over the years. African Banks African banking is of recent origin. Two shortlived attempts to establish African banks ended in failure in the early 'thirties. In 1933 a group of Africans associated with the earlier attempts organized the National Bank of Nigeria on a very modest scale. Having learned from the earlier experience to be very cautious, the directors of the National Bank succeeded in laying solid foundations. By 1939 the Bank was firmly established although still on a very small scale. This Bank's progress since 1945 has been spectacular, its share of total 21 Op cit., par. 122. 158 THE TECHNICAL REPORTS Nigerian deposits having risen from about 1.3%o in June 1945 to 9.1% in June 1953. The success of the National Bank has led to a rapid growth of other attempts at African banking. The dangers of this rapid expan- sion were soon demonstrated by the failure of the Nigerian Penny Bank in 1946 with small depositors losing what were for them sub- stantial sums. The government proceeded to inquire into the control of banking, and this led eventually to the adoption of the Banking Ordinance of 1952. But during the intervening period of six years another 20 African banks had been organized, many of them formed by people with little or no banking experience. Some appear to have been created simply to aid fraudulent activities. Consequently, it was not long before 15 failed. Among them was the Nigerian Farmers Bank, which went into liquidation in 1952-53, with deposits in excess of £ 500,000. Surviving this unfortunate period were, as of March 1954, two large African banks-the National Bank and the African Continental Bank, founded in 1947-and four small banks. The National Bank has been licensed, while an application by the African Continental Bank was pending at the time of the mission's visit. Unlike the European banks, the African banks invest a large per- centage of their assets in loans and advances. The National Bank, for example, with an increase of £ 2 million in deposits between June 1952 and June 1953, reported in its balance sheet an increase of over £ 1 million in outstanding loans during the same period. This meant a trebling of its loan portfolio. Expanded lending activity must be welcomed, and there is no doubt that the African banks, through their contacts with and their know- ledge of the community in which they operate, are in a better position than the European banks to appraise credit risks. There is, of course, the danger that the African banks will be overly eager to expand their business and that where their European counterparts err on the side of conservatism, they will err on the side of optimism. In the mission's view it is essential that banks maintain liquid reserves of at least 25% to 30% against deposits at all times. In more developed countries, part of such reserves can be invested in readily marketable local securities and in discounted bills of exchange MONEY ANI) BANKING 159 and recourse can be had in case of need to the central bank as a lender of last resort. In Nigeria these facilities are nonexistent at present and the reserves must therefore be maintained in cash. The creation of a market for government securities would do much to im- prove the position, especially for African banks. The sudden increase in National Bank assets mentioned above re- sulted from large deposits made by the Western Regional Production Development Board and the Cocoa Marketing Board. This movement of public funds to an African bank is symptomatic of a widespread desire to "repatriate" Nigerian funds now invested in London or held in British banks and to use them to finance economic develop- ment, and in particular to strengthen the position of the African banks.12 Various governmental organizations have large balances, destined for use for development purposes and invested or held in London until needed. In Chapter 5, we have proposed that over the next five years a substantial part of those balances should be drawn down in the course of the recommended development program. We therefore strongly recommend against any large-scale transfer of governmental reserves to African commercial banks. If African bank advances were greatly to expand on the strength of this temporary source of deposits, a most dangerous contraction of credit would become necessary when the government began to spend its reserves and consequently reduced or withdrew these deposits. There is another danger which must be pointed out. On the basis of its observation of the Nigerian political scene the mission fears that decisions regarding transfers of government deposits to African commercial banks would not always be free from party-political mo- tives; this might have most serious consequences for the independence and integrity of the banks. We have said in Chapter 4 that in our opinion the proper place 12 The mission noted suggestions in the press that a major portion of the funds of the Eastern Regional Production Development Board should be transferred to the African Continental Bank. The 1952-53 Annual Report of the Colony Development Board mentions a rejected application: "An application in August from the Nigerian Farmers and Commercial Bank Limited for -the deposit by the board of X 100,000 to earn 4% per annum was refused. On December 12 by a resolution at an extraordinary general meeting of the shareholders this Bank went into voluntary liquidation." 160 THE TECHNICAL REPORTS for government reserves is the proposed state bank; such reserves should not be held by commercial banks. Working balances could, of course, be kept in commercial banks, African and European, when to do so is convenient for the government organization involved and when the banks are able to provide the requisite services. The African banks have tended to expand their branch coverage of the country rapidly, perhaps even too quickly. As is true of the expansion of their loans, this tendency has no doubt arisen from a commendable desire to offer increased services to Africans. However, it stems in part also from lack of experience and a consequent lack of caution. Although the expansion of banking facilities by the African banks should be encouraged as much as possible, a too rapid increase in the number of branches will strain their limited resources, especially of trained personnel, and adversely affect their profitability. The problems of the African banks have arisen in the early stages of banking in all countries. African banks have a great task to per- form and there are already some encouraging indications of compe- tence for that task. After the unfortunate experience of the past it is doubly important to pursue a policy which will instill in the African public confidence in the soundness of African banking. The super- vision provided for under the Banking Ordinance is useful in this connection and it has rightly been welcomed in sound African bank- ing circles. The mission contemplates that further guidance and support for African banking will be provided through the activities of the proposed state bank. II OTHER SAVINGS AND CREDIT INSTITUTIONS Post Office Savings Bank The Post Office Savings Bank operated by the government has achieved a fair degree of success in Nigeria as elsewhere in the British colonies. The level of savings deposits held (more than £ 4 million) is considerably in excess of the savings deposits held by commercial banks. The rapid development of postal savings is shown in Table 6. MONEY AND BANKING 161 TABLE 6 Post Office Savings Total Balance Number of Accounts (Thousand £) 1939 ........ 185 45,289 1946 ........ 1,697 123,184 1953 ........ 4,059 197,656 SOURCE: Digest of Statistics, Lagos. The system is operated through all the post offices and a number of post office agencies throughout the country; the total number of branches was 162 in 1953. This system, although very much more extensive than the coverage offered by commercial banks, still falls far short of adequately providing for the whole country. It is therefore necessary for the government to press for further extension of the system as fast as qualified local personnel can be found for the agencies. The working balances necessary for the operation of the Post Office Savings Bank are provided without charge by the Post Office and the charges made for the time of post office personnel on Savings Bank business are nominal. Under the Savings Bank Ordinance any deficit in its operation is met out of the general government revenue. Sur- pluses may be transferred to the general revenue of Nigeria only if and to the extent that they exceed 15% of liabilities. This assistance enables a.relatively high rate of interest to deposi- tors (21/2 % ) to be combined with absolute security of deposits. The investments of the bank are all gilt-edged securities bought in London. No part of the funds is invested in local securities even though under the ordinance up to one-third may be invested in securi- ties of the Government of Nig'eria. The system is used to some extent for purposes not normally in- tended for a savings bank. It has become a depository of rather large sums by native authorities, co-operative societies and charities. The system is also being used extensively for transfers of funds within Nigeria. The high bank charges for remittances are being avoided by use of the savings system which permits withdrawals without charge anywhere in Nigeria, irrespective of the place of deposit. The present arrangements for the investment of funds fail to 162 THE TECHNICAL REPORTS achieve one of the most important aims of savings institutions in underdeveloped countries: the mobilization of capital for domestic use. At the moment the savings are entirely invested outside Nigeria. The mission agrees with the recommendation made by Mr. J. L. Fisher in his report 13 that this should be changed as soon as domestic invest- ments of the required security become available. Co-operative Societies, Loans Boards and Other Sources of Credit Co-operative societies are discussed in Technical Report No. 9. Although their present scale of operations is modest, they can become important centers for savings and sources of credit. A Co-operative Bank (also discussed in Technical Report No. 9) was recently estab- lished in the Western Region and received a grant of £ 1 million from the Cocoa Marketing Board. The institution does not accept deposits from the public and is not a banking institution within the meaning of the Banking Ordinance. The mission believes that every effort should be made to encourage the growth of the co-operative movement and particularly the opera- tions of the co-operative credit societies, because for the time being they are the only important source of small-scale rural credit. Al- though we have not made a detailed investigation of rural credit facilities we feel that for the time being there is no need for a major rural credit institution. The credit requirements of subsistence farm- ing as practised in most parts of the country are small, and export crops are by and large adequately financed under the existing arrange- ments with the buying agents. In early 1954, the government of the Western Region requested the regional loans board to make £ 100,000 available to local agricultural credit committees. We believe that this request has some merit but suggest that operations be kept on a small scale and under close supervision. The scheme may provide valuable experience on which a later expansion of rural credit facilities may be based. The Regional Development Boards (loans boards) are discussed in Chapter 4 and Technical Report No. 5, where a number of recommen- dations are made for their future organization and operations. These boards have occasionally competed on the fringe of some African 13 See p. 96. AIONEY AND BANKING 163 banks' business, notably in loans for busses and lorries. As is said in Chapter 4, they should seek to supplement rather than to replace existing sources of credit and should only make loans which can not be handled on reasonable terms by the banks or other lenders. An interesting and substantial seasonal source of credit to Africans comes from the buying agents of the Marketing Boards who in turn obtain much of it from the commercial banks. The agents advance large sums to middlemen for the purchase of the crop from the farmers. It is reported that these middlemen frequently use the funds in other business transactions before ultimately purchasing the cro0). Several aspects of this type of credit are interesting. First, the size of the sums entrusted and the fact that losses are infrequent, give evi- dence of the creditworthiness of the middlemen. Second. the fact that the middlemen find profit in short-term trading indicates that there is a shortage of trading capital. Thus, it would seem that a wider credit distribution by the banks should be feasible if undertaken on a suf- ficiently selective basis. A small additional source of credit to Nigeria is provided by the Lagos Building Society which channels some U.K. insurance funds into local investment. The society makes loans for various purposes " against the security of mortgages. Its operations have been limited to Lagos in the past, largely because of the greater difficulty of obtaining an undisputed land title outside of the Colony.": It is understood that there are plans to increase the scope of activities. A serious gap in the credit structure is the lack of institutions de- signed to make long-term loans for home construction. Some pro- vision is made for government loans to African civil servants but no other facilities are available. At some future time consideration should be given to the use of government funds, apd possibly Post Office Savings Bank funds, to provide, through suitable intermediaries, building loans to private borrowers. As a first step towards that end a study should be undertaken of possible solutions of the legal diffi- culties which at present impede the development of the business of real estate loans. 14 Building loans seemii to be a niinor aspect of its operations. 16 Lagos and the adjoining districts of the Western Region. TECHNICAL REPORT 4 THE PRODUCE MARKETING BOARDS The functions of the four Marketing Boards have been described in Chapter 4, where we have also referred to their impending reorganiza- tion on a regional basis. Supplementary information as to the boards' organization and activities is contained in this report. It also explains the basis of our recommendations for a price and reserve policy, pre- sented in Chapter 4. A ORGANIZATION AND ACTIVITIES The Marketing Boards are relatively new institutions. The Cocoa Marketing Board was established in 1947; the Oil Palm Produce Marketing Board, the Groundnut Marketing Board and the Cotton Marketing Board in 1949. All exports of cocoa are controlled by the Cocoa Board; exports of groundnuts, benniseed, sunflower seed, groundnut oil, groundnut cake, groundnut meal and soya beans by the Groundnut Board; exports of palm oil, palm-kernel oil, meal and cake by the Oil Palm Produce Board; and exports of cotton and cot- tonseed by the Cotton Board. The establishment of the boards grew out of the systems of controls introduced at the outbreak of World War II. Under these systems, purchase prices were fixed by govern- ment decree but the trading firms continued the physical handling of the export business. In 1942 the West African Produce Control Board was set up. It continued to function until the Marketing Boards were established. All board members (including the chairmen) are appointed by the Governor. The boards have at present a common official member- ship in the chairman (there is the same chairman for all boards), 164 THE PRODUCE MARKETING BOARDS 165 the Inspector-General of Agriculture and the Director of Marketing and Exports. In addition, each Board has three African members appointed as representatives of the producers, and the Cotton Board has one more official member. The four regional boards which will replace the present boards and have jurisdiction over all controlled commodities produced within their respective territories 1 will be constituted as the regional governments decide, and their members will be appointed by the regional govern- ments. The Central Marketing Board will have nine members: a chairman and one member appointed by the Governor-General, and seven members representing the regional boards-two from each of the regions and one from the Southern Cameroons-nominated by the regional boards. The Central Marketing Board will set quality standards, arrange for transportation and sale overseas, and act as a co-ordinating body and a medium for consultation among the regional boards on matters of common concern. The boards will continue to be assisted by advisory committees representing the producers and the firms handling export of the controlled commodities. At present, the central Department of Marketing and Exports acts as the executive agency of the Marketing Boards on a reimburseable basis; it will continue this function for the Central Marketing Board, and for the regional boards as well, until the latter establish their own executive organizations. Each regional government will have its own produce inspection service, but check-testing at the ports will be performed by the federal Produce Inspection Service. Produce inspection will continue to cover such non-Marketing Board produce as rubber and capsicums. All controlled produce is sold in London through the Nigerian Produce Marketing Company, Ltd., the shares of which are held by the several boards.2 They sell to the Company at the price at which it re-sells the produce, less a small margin to cover its expenses. With the exception of cocoa, sold on the open market by individual con- tract, most of the controlled exports have been sold under bulk pur- chase agreements. Until June 1954, all oil palm produce, groundnuts and cottonseed were sold to the British Ministry of Food, except for 1 Produce sold in Lagos will be handled by the Marketing Board of the Western Region. 2 These shares will be transferred to the regional boards. 166 THE TECI-INICAL REPORTS small quantities of each commodity which were exempted from the agreements for sale on the open market. Bulk purclhase agreements with food and soap manufacturers now cover a smaller proportion of total exports of oils and oilseeds and correspondingly greater quan- tities are being sold on individual contracts. Similarly, as from the 1954-55 season, cotton lint will be sold on the free market instead of to the Raw Cotton Commission as formerly. The selling prices under the bulk purchase agreements were ad- justed quarterly by relating them to the average market prices for the preceding quarter as determined by a Joint Price Advisory Committee set up by the appropriate British trade associations. Selling prices for cotton sold to the British Raw Cotton Commission were determined for individual contracts within agreed price limits related to prevail- ing market prices. B PRICE STABILIZATION AND RESERVE POLICY In Chapter 4 we have recommended that the boards adopt a price stabilization policy aimed at keeping year-to-year differences in pro- ducer prices to a maximum of 10%.3 Cocoa could be an exception: because of the abnormally great disparity between the 1953-54 pro- ducer price and current world prices, we would recommend an initial increase in the producer price of more than 10%o. A range of 10% from year to year may appear large but in fact would cover only part of the wide price fluctuations for the controlled products: aver- age year-to-year changes in world prices between 1922-29 were 15% for groundnLits and palm kernels and 20% for palm oil, cocoa and cotton. 3 It has been suggested by some observers, among them P. T. Bauier and F. W. Paisht in "The Reduction of Fluctuation in the Income of Primary Produicers" (Economic Jou.rnal, Dec. 1952, pp. 750-780), that the objective of the Marketing Boards should be the stabilization of producers' income. The mission agrees that this would be a desirable policy objective but believes that its achievement through Marketing Board action is, under present Nigerian conditions, utterly unfeasible. Among other things, it presupposes a reliable system of crop forecasting which is unattainable now or in the near future. The wide fluctuations in agricultural income are largely due to causes other than price movements. In our view, action to reduce these fluctuiations slhouild concentrate on improvement in methods of cultivation, use of fertilizer, selection of drought- and disease-resistant strains, etc. (see Technical Report No. 7). THE PRODUCE MARKETING BOARDS 167 We think that such a price poiicy wili effectively stabilize the prices of export commodities within Nigeria and that it can be carried out with the resources at the boards' disposal without risk of excessive losses. In Table 4 (p. 171), the effects of this recommended price policy are shown against an assumed development of world market prices which would repeat, over the period 1954-59, the experience of the Great Depression of 1929-34. There follows a comparison be- tween the theoretical maximum losses which would be incurred by the boards ' on these assumptions over a six-year period, and their reserves of £ 75.5 million at the end of the 1952-53 crop season, from which, however, working capital requirements of £ 12 million will have to be deducted: (Million £) Reserves at the Theoretical end of 1952-53 Maximum Loss crop year Groundnut Board ......... .......1.... 5.6 18.5 Oil Palm Produce Board ............. 39.0 25.7 Cocoa Board ........ .. . ... .... .. 18.4 25.8 Cotton Board ... .... .. 1.7 5.5 Since these calculations make no allowance for reductions in marketing charges or rates of export duties, even though such reduc- tions would be highly probable during a period of such a drastic fall in prices, the theoretical losses are considerably overstated. Even were this not the case, the existing reserves of the boards, except for palm produce, are thus amply sufficient to cover price fluctuations equivalent to those of the Great Depression. At the same time, as shown by Table 4, producer prices paid by the boards at the time of the lowest world prices wvould still be at least twice as high as they would be if paid on the basis of those prices. In our view there is no reason to expect a recurrence of the dis- astrous price decline of the depression. Present prices are, however, high; lower price levels may be assumed as more in line with the 4 In order to bring out the differences between the four main crops, the calculations are made in the first instance for the old( "products" boards; they are then applied to the new regional boards. 168 THE TECHNICAL REPORTS movement of raw material prices in general.5 The possible order of magnitude of declines from 1953 world prices to "normal" prices may be estimated as shown in Table 1. TABLE 1 Price Projection of Marketing Board Produce (£ per ton unless otherwise indicated) Average Long-run Market Prices "Normal" 1953 Prices Groundnuts and Benniseed, c.i.f. European port ..... 80 60 Soyabeans, c.i.f. European port ........ ............. 45 35 Cotton, New York futures . 331 251 Cottonseed, c.i.f. European port ....... ............. 22.5 16.5 Palm kernels, c.i.f. European port ....... .......... 63 45 Palm oil, edible, c.i.f. European port ...... .......... 72 60 Palm oil, technical, c.i.f. European port ..... ....... 62 45 Cocoa, c.i.f. U.S . .................................. 371 30' U.S. cents per lb. If such price declines occur, then under the price policy outlined above, the theoretical total losses of the boards would be as follows: (Million £) Theoretical Reserves at the Maximum end of the 1952-53 Loss Crop Year Groundnut Board .0.81 18.5 Oil Palm Produce Board .12.3 25.7 Cocoa Board .0.6 25.8 Cotton Board .0.064 5.5 Including 10,000 tons of soyabeans. These prospective losses, with the exception of those on palm produce, appear small when compared with reserves at the end of 5 See Technical Report No. 7 for an evaluation of the market prospects of the com- modities in question. THE PRODUCE MARKETING BOARDS 169 1953. In the case of palm produce, the relatively large loss would be primarily due to the prevailing high producer prices.6 It thus appears that the board's reserves are ample for the purpose of price stabilization along the lines recommended by the mission, and that the boards need not seek to increase them. Only a portion need be treated as first-line reserves, to be kept in liquid form; the balance, after allowance for working capital, could be invested on a long-term basis. The mission recommends that sufficient first-line reserves be maintained to smooth the decline to more "normal" levels and there- after to cover year-to-year world price fluctuations averaging 20%. Allowance must also be made for possible errors of judgment from time to time as to the magnitude, and even the direction, of price changes. Taking all these factors into account, we suggest that the reserves of the boards may be allocated as shown in Table 2: TABLE 2 Distribution of Marketing Board Reserves (Million £) Second-Line and First-Line Working Capital Total Groundnut Board .......... 3.9 14.6 18.5 Oil Palm Produce Board ..... 16.1 9.6 25.7 Cocoa Board ............... 5.0 20.8 25.8 Cotton Board ............... 0.5 5.0 5.5 Total .............. 25.5 50.0 75.5 Upon the reorganization of the marketing boards on a regional basis, reserves will be apportioned among the new regional boards on the principle of derivation. The price stabilization reserve for each of. the regional boards would be as shown in Table 3. 6 The producer price for technical grade oil based on the 1953 world market price would be only £ 44 per ton for grade I and prices corresponding to the 1954 price might be even lower, but the actual producer price for 1954 has been fixed at £ 50 per ton. The producer price for special grade oil has been fixed at £ 65 per ton for 1954 against a 1953 breakeven price of £ 50 per ton. It seems doubtful that even with the large reserves of the board these producer price levels can be maintained for long. The imbalance between the present level of world and producer prices for palm oil should be corrected. Producer prices should be reduced by 10% stages to bring them into line with breakeven points. This would. however, not apply to producer prices for palm kernels; these are relatively low. 170 THE TECHNICAL REPORTS TABLE 3 Distribution of Regional Marketing Board Reserves (Mliillion £) Second-Line and First-Line Working Capital Total' Western Region (inc. Lagos). 7.6 26.8 34.4 Eastern Region ............. ]2.5 2.6 15.1 Northern Region ........... 4.6 20.2 24.8 Southern Cameroons ........ 0.8 0.4 1.2 Total .......... .... 25.5 50.0 75.5 As allocated by Lagos Conference. We recommend that the boards use their second-line reserves to make long-term loans to government for development purposes. The amount available would be close to £ 40 million, a substantial sum in relation to Nigeria's financial requirements, although its distribution over the regions is unequal. Specific recommendations for borrowvings from the boards are made in Chapter 5. In the foregoing calculations it has been assumed that, in line with our recommendations in Technical Report No. 13, the Northern board will sell groundnuts to local processors at the local equivalent of the world market price and that the board will cease to have any direct responsibility for the marketing of groundnut products. The mission believes that the estimates on which it has based its recommendations are conservative and that the recommended level of reserves would adequately protect against foreseeable risks. We recommend, however, that the level of reserves be reviewed periodi- cally in the light of increases in the volume of crops handled by the boards and of the changing medlium- and long-term outlook for prices of each of the commodities. THE PRODUCE MARKETING BOARDS 171 TABLE 4 Estimated Losses by the Marketing Boards Under a Fall in Prices Similar to That Between 1929 and 1934 Theortical Boards' Producer Theoretical Breakeven Purchase Loss (-) or Gain (+) World Prices Pricesi Prices2 (£ per ton (£ per ton) (f per ton) (£ per ton) (Total in c.i.f. Euro- Thouisand £) pean port) Groundnut Board 1953 . 80 44 363 1954 .73 41 36 + 5 +2,100 1955 .55 24 32 - 8 -3,480 1956 . 46 184 29 -11 -3,520 1957 .... 57 28 29 - 1 - 320 1958 .42 14 26 -12 -3,840 1959 .36 9 23 -14 -4,480 Oil Palm Produce Board Palm Oil: 1953 .67 46 655 1954 .64 43 526 - 9 -1,800 1955 .47 26 47 -21 -4,200 1956 .33 14 42 -28 -5,600 1957 .32 12 38 -26 -5,200 1958 .28 8 34 -26 -5,200 1959 .24 5 31 -26 -5,200 Palnm Kernels: 1953 .63 47 347 1954 .57 42 347 + 8 +3,200 1955 .41 27 31 - 4 -1,600 1956 .32 19 28 - 9 -3,600 1957 .34 21 25 - 4 -1,600 1958 .27 14 22 - 8 -3,200 1959 .22 10 20 -10 -4,000 (U.S. cts. Cocoa Board per lb. c;i.f. New York) 1953 .37 202 1708 1954 .29.75 172 170 + 2 + 200 1955 .23.5 138 153 -15 -1,500 1956 .15 85 138 -53 -5,300 1957 .12.5 68 124 -56 -5,600 1958 .12.5 68 112 -44 -4,400 1959 .15 85 101 -16 -1,600 172 THE TECHNICAL REPORTS Cotton Board (U.S. cts. per lb. Cotton: New York futures) (d. per lb.) (d. per lb.) (d. per lb.) (Thousand £) 1953 ........... 33 7.14 6.009 1954 .'.. 27%. . 5.78 5.40 + .38 + .76 1955 ........... 163h 2.86 4.86 - 2.00 - 400 1956 ........... 13% 2.00 4.37 - 2.37 - 474 1957 ........... 101/2 1.15 3.93 - 2.78 - 556 1958 ........... 1414 2.21 3.54 - 1.33 - 266 1959 ........... 20%3/ 3.97 3.89 + .08 + 16 1 Worldl price less present marketing costs and export duities; produce sales tax not deducted. 2 Produce sales tax not deducted. 3 Actual producer price for groundnuts and benniseed. 4 Assuming transport problem solved and cost of long storage in Africa no longer incurred. 5 Actual producer price: edible £ 75.10.0 per ton and technical grade I £ 58 per ton. 6 Actual producer price: edible £ 65, technical £ 50. - Actual producer price. 5 Actual producer price for grade I. 9 Actual producer price for seed cotton. Assumed Volume of Sales Groundnuts: Unsold stock 185,000 tons, new crop 320,000 tons, exports in crude and processed form; assumed 1953.54 export 85,000 tons unsold stock and 320,000 tons new crop; 1954-55 export 100,000 tons unsold stock and 320,000 tons new crop; following seasons' exports new crop only. Benniseed: 15,000 tons. Palm Oil: 1953 export edible grade 40%, 1954 export edible grade 50%, thereafter edible grade 130,000 tons and technical grade 70,000 tons. Palm Kernels: 400,000 tons. Cocoa: 100,000 tons. Cotton: 48 million lbs. Maximum Losses Groundnut Board: £ 15.6 million with loss on soyabeans disregarded. Oil Palm Produce Board: Oil: £ 25 million £ 39 milion Kernels: £ 14 million 3 Cocoa Board: £ 18 million. Cotton Board: £ 1.7 million for cotton, profit on cottonseed disregarded. TECHNICAL REPORT 5 DEVELOPMENT INSTITUTIONS I REGIONAL PRODUCTION DEVELOPMENT BOARDS Organization and Activities The Regional Production Development Boards (RPDBs) were estab- lished in 1949 to administer funds made available for development purposes by the Marketing Boards. A 1951 ordinance defined their authority more specifically and transferred to them all economic development activities of the Marketing Boards. Each board is composed of members of the regional legislature, representatives of the Marketing Boards and government officials, one of whom, the regional Development Secretary, serves as chairman. The Lieutenant-Governor of the region has limited control over the operations of the board. All proposed contracts and projects must be submitted for his approval but approval may be withheld only if the Lieutenant-Governor considers them to be beyond the resources of the board or for an unauthorized purpose. TABLE 1 Financial Position of Regional Production Development Boards, 1953-54 (Thousand £) Grants Received Net Disbursements Reserves at 1949-54 1949-54 End of 1953-64 Northern Board .5,167 1,119 4,049 Western Board .11,317 2,8341 8,484 Eastern Board .5,359 2,203 3,159 Tota2 .21,843 6,155 15,688 1 Including reimbursement of £ 736,000 in respect of agricultural schemes initiated by the Cocoa Marketing Board. 2 Totals do not equal sum of columns because of rounding. SOURCE: Accounts of the Regional Production Development Boards. 173 174 THE TECHNICAL REPORTS Table 1 shows the financial position of the RPDBs at the end of 1953-54. Actual and estimated expenditure by the boards is showvn in Table 2. TABLE 2 Expenditures of Regional Production Development Boards (Thousand £) Acture Estimated Exp,enditure 1949-53 1953-54 1954-55 Northern Board Agricultural Projects' ...................... 516 228 303 Industrial Projects .62 30 50 Research .153 50 50 Road Construction .198 100 100 Scholarslhips .- 1 2 Overhead and Miscellaneous .39 31 41 Total-Northern Board .968 440 546 Western Board Agricultural Projects' .246 260 316 Industrial Projects .535 658 295 Major industrial projects under investigation - - 2,125 Loans ................................... 3 290 - Road Construction .28 224 2502 Scholarships .1 2 120 Overhead and Miscellaneous .447 238 7203 Reimbursements to Cocoa Marketing Board 536 200 200 Total-Western Board . 1,797 1,872 4,026 Eastern Board Agricultural Projects .261 282 279 Industrial Projects .818 242 250 Loans .10 122 122 Road Construction .224 71 51 Scholarships .- 6 6 Overhead and Mliscellaneous .283 60 65 Total-Eastern Board .1,597 783 774 Grand Tota. .4,362 3,095 5,346 1 Including participation schemes and (small) grants. 2 Including £ 100,000 for port of Koko (see Technical Report No. 18). 3 Including £ 500,000 for technical schools. 4 Totals do not equal sum of columns because of rounding. SOURCE: Accounts of the Regional Production Development Boards. DEVELOPMENT INSTITUTIONS 175 The Northern RPDB has concentrated on agricultural projects, in- cluding settlement of farmers and improvement of their production methods, particularly through mixed farming; tsetse control; distri- bution of superphosphate fertilizer, and groundnut cake for cattle feeding; tractor plowing of land for the growing of rice; and experi- ments with corn storage and meat canning. The Western RPDB also has undertaken several large and a number of small agricultural projects. It operates citrus, oil palm and cocoa plantations; a livestock farm; and a rubber estate. It has sponsored partnership schemes under which it joins with local authorities or co-operatives in the establishment of medium-sized plantations. It operates oil mills for the processing of palm fruit, and has sponsored the establishment of rice mills. It has erected a large factory for the canning of citrus fruit and pineapples and two rubber processing factories. The major effort of the E]astern RPDB has been directed to the establishment of oil mills for the processing of oil palm fruit; present plans call for 100 such mills, two-thirds of which are already in operation. In addition, the board has started a number of large-scale plantations for cashew nuts, oil palm, coffee, coconuts and rubber. The rubber project is particularly noteworthy since it is the only RPDB project in which foreign capital participates. The board and British interests, represented by Ethelburga Agencies, Ltd., of London, formed the Oban (Nigeria) Rubber Estates, Ltd. The board sub- scribed 49% of the capital requirements, estimated at £ 800,000; the balance was supplied by foreign capital. An affiliate of the British company has been appointedl managing agent. In addition to these directly productive undertakings, the boards have engaged in operations not usually considered the responsibility of development agencies. Between 1949 and 1954, the three boards expended £ 850,000 on road construction,1 in part through private contractors but largely through reimbursements to the regional public works departments. For the fiscal year 1954-55 a further expenditure of £ 400,000 for road construction is planned. All three boards have contributed to the cost of Marketing Board publicity. The Northern board has employed 26 "production officers" to serve as agricultural 1 Some of the road construction projects were taken over from the Marketing Boards. 176 THE TECHNICAL REPORTS extension agents advising on production methods and techniques; positions have been established for 45 more. It has also bought heavy road building equipment and rented it to the central Public Works Department for use in constructing a new runway at the Kano airport, not an RPDB project. The Western board has financed op- erations of the cocoa division of the regional agricultural department, and the Eastern board has made grants to the Eastern regional agri- cultural department for subsidies to rice mills established by the department. Future Organization Comments on the boards' activities and recommendations for future policy appear in Chapter 4, where the mission has also recommended that the regional governments assume direct financial responsibility for the RPDBs and that the boards be reconstituted. It there refers to the reconstituted boards as "development corporations." The mis- sion further recommends that the operations of the development corporations be set apart from those of the government departments, particularly from the offices of the regional Development Secretaries. The Development Secretaries have too many other duties to permit their devoting the necessary time to the corporations. They might continue as members of the boards of the corporations, assuring co- ordination of activities with those of the respective regional govern- ments. But it would be advisable that responsibility for general ad- ministration be vested in "working" chairmen who would have no other duties to perform, or else in full-time general managers if the chairmen are to serve only part-time because of other duties. The boards of directors should have jurisdiction over policy matters and their approval should be required for all projects and capital expendi- tures in excess of a stated minimum. The "working" chairmen or the general managers, however, should make the day-to-day decisions and should be free to employ their own staffs in accordance with the employment policies set by the boards of directors. The staffs should be qualified to appraise projects, investigate technical and commercial opportunities and prepare detailed plans. Individual projects should, as now, have their own operating and supervisory staffs. The separate development agency recommended for the Southern DEVELOPMENT INSTITUTIONS 177 Cameroons in Chapter 4 should be similar in organization to the regional corporations, on a smaller scale. It is recommended in Chapter 4 that this agency be financed by a grant of £ 1 million from the federal government. The new agency should also assume respon- sibility for the Santa Coffee Estate, the only major Cameroons project of the Eastern RPDB, and should be given whatever share of the assets of the Eastern board may be attributable to the Southern Cameroons on the principle of derivation. From the report of the Committee on Marketing Boards, it appears that this share might exceed £ 300,000, including the investment in the Santa Coffee Estate and a loan by the Eastern RPDB to the Cameroons Co-operative Exporters, Ltd., an organization of co-operative marketing societies in the Cameroons (see Technical Report No. 9). The Eastern board in turn should be reimbursed for head office expenditures incurred in connection with its operations in the Southern Cameroons. The Cameroons develop- ment agency should also be given an appropriate share of the grant commitments of the Oil Palm Produce Marketing Board. II REGIONAL DEVELOPMENT BOARDS Organization and Functions The Northern, Western and Eastern Regional Development Boards and the Colony Development Board, the "loans boards," were estab- lished by ordinance in 1949. The members of the boards are appointed by the regional Lieu- tenant-Governors and the Commissioner of the Colony, respectively. A majority of the members of each of the three regional boards must be nonofficial members of the respective legislatures. The regional De- velopment Secretaries and the senior district officer of the Colony serve as chairmen. The boards are authorized to make loans or grants, or a combination thereof, for projects connected with public works, public utilities and similar projects; for the promotion and development of village crafts and industries and the industrial development of Nigerian products; for land settlement and utilization and similar projects; for the estab- lishment and operation of experimental undertakings by public bodies 178 THE TECHNICAL REPORTS to test Nigerian products; and for projects of public value, authorized by the Lieutenant-Governor or the Commissioner. Loans and grants must be approved by the Lieutenant-Governor or the Commissioner, and loans over £ 10,000 and all grants must also be approved by the finance committee of the appropriate legislature. The Nigeria Local Development Board, the predecessor of the loans boards, was established in 1946 with an initial government grant of £ 1.25 million, payable in equal installments over five years. By the end of 1948 it had received £ 750,000, of which it had committed approximately £ 300,000. The undisbursed £ 500,000 of the govern- ment grant and the Board's assets were transferred to the new loans boards. The Colony Board also received £ 50,000 from the govern- ment and £ 285,000 from the Oil Palm Produce Marketing Board; it set aside the latter sum for grants. The Western loans board added TABLE 3 Available Funds of Loans Boards, March 31, 1953 (Thousand £) Northern Western Eastern Colony All Board Board Board Board Boards Funds Available for Operations Grants received .............. 486 369 355 374 1,584 Borrowings' ................. - 150 - - 150 Net earnings2 ............... 6 21 15 5 47 Total ............... 492 540 370 379 1,781 Disposition of Funds Grants made ................. - - 26 73 99 Loans outstanding ........... 227 212 243 77 759 Loan commitments ........... 129 245 6 1293 509 Miscellaneous4 .............. -5 1 -_ -5 1 Total ............... 356 458 275 279 1,368 Uncommitted Funds .......... 136 82 95 100 413 ' Loan from Western Regional Production Development Board; since raised to £ 290,000. 2 Accrued interest, earnings on invested reserves, loans, etc., minus operating ex- penses, write-off of bad debts, etc. 3 Grant commitment. 4 Fixed assets, vehicles, office equipment, etc. S Less than £ 500. SOURCE: Annual Reports of Regional Development Boards. DEVELOPMENT INSTITUTIONS 179 to its loanable funds by borrowing from the Western Regional Pro- duction Development Board. Table 3 shows the available funds of the loans boards at the end of the financial year 1952-53. Grants were made only by the Eastern and Colony boards, the latter acting in effect as a channel for Oil Palm Produce Marketing Board grants. Table 4 shows the amounts and purposes of loans granted through the end of the financial year 1952-53. TABLE 4 Loans Granted to March 31, 1953 (Thousand £) Northern Western Eastern Colony All Board Board Board Board Boards Agriculture, Forestry and Fishery ................... 7 48 25 6 86 Food Processing ............. 19 22 7 2 50 Rural Industries, Handicraft and Services1 ............. 8 35 21 6 70 Transport Equipment ........ 2 232 3 - 237 Industries ................... 132 68 39 65 304 Public Services2 .............. 86 82 27 2 197 Other Purposes2 ............. 100 19 172 - 291 Total ............... 355 506 296 81 1,2383 1Amounts up to £ 5,000, except for oil mills which are included under "industries" irrespective of amount. "Services" include garages, motor repair shops, and retail shops. 2 Loans made to public bodies. 3 Slight discrepancy in totals due to rounding. SOURCE: Annual Reports of Regiorial Development Boards. NOTE: Undisbursed portions of loans are included. Loans for agricultural production, food processing and rural indus- tries have in general been small, ranging from £ 50 to £ 1,000 to individual borrowers, partnerships or co-operatives. They include loans for the establishment of farms and purchase of farm equipment; rubber plantations and tobacco cultivation; lumbering; rice mills, corn mills and cassava grating machinery; and tailoring, blacksmith, motor repair, cabinet maker and weaving shops. Almost one-half of all 180 THE TECHNICAL REPORTS Western board loans have been made to finance the purchase of busses and motor launches. A total of 17 loans may be classified as industrial, apart from those which financed rural industries and handicrafts; they include loans for the purchase of palm oil mills, sawmills and textile plants and for shoe, tire retreading and ceramics factories, a joinery, a woodworking shop and a dairy. Loans for public services and "other purposes" were all made to public bodies; they account for more than half the Northern board's portfolio and for two-thirds of the portfolio of the Eastern board. Vir- tually all public services loans were for markets and slaughterhouses. Loans were made for such "other purposes" as purchase of corn by a native authority; a fish farm; purchase of ox plows by the regional agricultural department; construction of a native administration school (Northern board); and a resettlement scheme and road construction (Eastern board). The conditions of the loans vary with their purpose, maturity and the type of borrower. Interest rates, which range from 2% to 5%, are very much lower than those charged by commercial banks and private lenders. A few loans to public bodies are interest-free. Ma- turities range from 2 to 20 years and loans are usually amortized in equal annual installments. The loans boards meet no more than three or four times annually; the Eastern board actually met only once in 1951-52. Since decisions are made by the full board, usually on the basis of letters of applica- tion, supplementary correspondence and the advice of government officials, the infrequency of meetings causes considerable delay. There are no technical staffs to analyze applications. If additional informa- tion is required, action may be deferred until the next meeting. In one instance, a loan for oil machinery was granted after three years of negotiations, but funds were not made available for another two years, by which time an increase in the price of the machinery made a second loan necessary. Future Organization and Policies In Chapter 4 we recommend that the loans boards become depart- ments of the newv "development corporations," and we make recom- DEVELOPMENT INSTITUTIONS 181 mendations with respect to future activity of the loans departments. To those recommendations we add the following: Loan policies should be formulated by the boards of the develop- ment corporations, while action on applications should be taken by three- or four-member committees, meeting perhaps every two weeks at the corporation's headquarters. Applicants should be dealt with in person,'as in normal banking practice, rather than by correspon- dence alone. Approval of applications by an executive or legislative body should no longer be required. Such approval is unnecessary if the loans departments perform their function properly. If they do not, the requirement of such approval will not prevent the making of unsound loans, since neither the executive nor the legislature is in a position to make an independent investigation. Approval by the boards of the development corporations might be required in the case of large loans. The loans departments should be headed by managers who, with their staffs. would be responsible for formal processing of applications, for on-the-spot investigations and evaluations of applicants and pro- jects, and for supervision of loans during and after disbursement. They should be assisted by the development corporations' technical staffs. Although participation in loan processing and supervision by the latter will involve expenses which are not commensurate with the size of the loan portfolio, we think that the anticipated benefits to the emerging entrepreneurial class justify the expenditure. Moreover, by reducing the number of defaults, the additional staff will at least partly pay for itself. The loans departments should consider declining to make loans in very small amounts, say less than £ 50 or £ 160. The native admin- istrations or co-operative societies should be able to handle these. Interest charges should be raised to bring them somewhat more in line with those charged by the commercial banks. An economically sound project should yield returns sufficient to support interest of, say, 7%o on a medium- or long-term loan. It would be desirable, how- ever, to provide for periods of grace in repayment of principal, to give the borrower a reasonable time to start operations. As a rule, the borrower should be required to provide a substantial proportion of capital from his own resources. His investment is likely 182 THE TECHNICAL REPORTS to ensure his continued interest and best efforts for success, and should be at least as valuable an insurance against defaults as security or guarantees. Such a policy may also induce prospective entrepreneurs to pool resources in partnerships, co-operatives or other forms of as- sociation. When the borrower's investment is appraised, full account should be taken of the fact that, in most areas, land value is low. While the primary purpose of the loans departments should be to assist African entrepreneurs, there is no reason why, if an applica- tion is otherwise meritorious, a borrower should be excluded because he is a non-African or does not live within the region, as has some- times been the case. Moreover, in no instancc should a loan be re- fused merely because the project would compete with one operated directly by the development corporation, for this would defeat the main objective of the corporations. In CAMEROONS DEVELOPMENT CORPORATION Origin and Purpose At the outbreak of the Second World War a number of German companies and individuals were operating extensive plantations in the Cameroons and the Tiko wharf was operated by a German company. More than 250,000 acres wvere owned by Germans, of which only a part was under cultivation. Under the Trading with the Enemy (Con- trol of Property) Order, 1939, all enemy interests were vested in the Custodian of Enemy Property; he managed the plantations during the war. The Ex-Enemy Lands (Cameroons) Ordinance enacted in 1946 provided for acquisition of the plantations by the Governor of Nigeria, who was to hold them for the use and common benefit of the inhabi- tants of the Cameroons. The ordinance also provided for a lease of the plantations to the Cameroons Development Corporation, estab- lished by the contemporaneous Cameroons Development Corporation Ordinance. The ex-enemy properties and rights were acquired for approximately £ 850,000 and were leased to the Corporation for sixty years, renew- able for an equivalent term at the Corporation's option. Rental was set at approximately £ 40,000 per annum for 35 years. a charge cal- DEVELOPMENT INSTITUTIONS 183 culated to accomplish reimbursement of the cost of acquisition plus interest. The purpose of the Corporation, as stated in the ordinance, is "securing the development of such lands as the Governor may from time to time place under their control and management." The Corpo- ration was empowered to undertake a wide range of activities to carry out its purpose, including construction and maintenance of roads, waterways, railways, quays and wharves, and provision of social and other welfare facilities for its employees. Profits of the Corporation are to be applied for the benefit of the inhabitants of the Cameroons. Agricultural Activities The Corporation assumed responsibility for the restoration and de- velopment of the plantations under serious handicaps. Acute wartime staff shortages had made it necessary to close down many plantations; on the other hand, the rubber plantations had been excessively ex- ploited. Much valuable information concerning past operations had been lost while much machinery and equipment had become unusable. The Corporation's chief crop is bananas. At the end of 1952 there were 19,282 acres of mature plants, 2,630 acres had been planted during the year and a further 2,900 acres had been prepared for new planting in 1953. The Corporation plans to continue extending ba- nana acreage. Notwithstanding the bringing into cultivation of addi- tional lands, production (3.8 million stems in 1952) has remained fairly constant during the last few years as a result of heavy storm damage and increasing losses through Panama disease and cigar end disease. The latter has caused losses as high as 60% in some of the best plantations. Nevertheless, in 1952 banana revenue of £ 1,480,735 represented about 70% of the total plantation revenue. The rubber plantations taken over by the Corporation included a high percentage of unproductive varieties, badly planted and slaughter- tapped during the war. Improved Malayan budding material, first imported in 1947, has proved highly successful; yields of 1,000 to 1,200 lbs. per acre are anticipated from the fifth and sixth years onward, compared with an average of roughly 300 lbs. per acre from the older plantations. The oil palm plantations were scattered, uneconomic units; varieties 184 THE TECHNICAL REPORTS were poor, many of the trees were past productive age and milling facilities were of low standard. The Corporation has tried to improve varieties and to concentrate plantation areas for milling purposes. Its planting program has been slowed down by a seedling root disease which can most probably be attributed to soil deficiency of the nurseries. The Corporation also grows cocoa, tea and pepper; possibilities for expanding the last two appear to be good. It also operates farms to produce food for its staff. The Corporation's effort to rehabilitate and develop the plantations has been impressive. But its technical efficiency has been hampered by lack of a sufficiently strong organization to engage in research and experimentation on soil problems, plant improvement and disease control or to apply the results of such activities performed elsewhere. The West African institutes for cocoa and oil palm research give valuable help and the Corporation has invited the advice of other out- side experts. However, such assistance can be fully effective only if a local staff is able to act on the advice and suggestions offered and to conduct the necessary continuing investigation. The Corporation urgently needs a scientific and research unit as part of its permanent organization. Other Activities The Corporation's palm produce and latex are processed in its own mills; it operates its own lorries, a banana railway, and river and coastwise shipping. It also has a monopoly of wharf operations in the ports of Bota (Victoria) and Tiko. While the Corporation is at present the principal user of these ports, they serve the entire Southern Cameroons. The mission therefore recommends in Technical Report No. 18 that in operating them the Corporation slhould be subject to policy directives by the government. The Corporation provides extensive social welfare, medical and education services for its labor and is engaged in carrying out a housing program. Although the services are in no sense extravagant, their availability has made employment with the Corporation attrac- tive. It is probably at least partly for this reason that independent farming, especially in Cameroons Province, suffers from a lack of DEVELOPMENT INSTITUTIONS 185 manpower. In the mission's view, this problem can be met by the gradual development of similar services by the government outside the areas administered by the Corporation, financed out of profits of the Corporation, as is envisaged by the ordinance establishing it. Management, Staff and Labor At the end of 1952 the Corporation employed 173 senior service officers, 1,008 persons in the intermediate and junior service and a general labor force of 24,561. In 1951 the first Cameroonian was ap- pointed to a senior service position. The Chairman of the Corporation also was its chief executive and managerial officer until 1952, when a General Manager was appointed. The Chairman now spends only part of his time at the headquarters of the Corporation. Considering the relatively isolated location of the Corporation's activities and the desirability of regular contact with commercial, financial and agricultural circles overseas, the separation of the offices of Chairman and chief executive officer seems advisable. The organization was built up during a period of rapid expansion. It should be possible to reduce the number of senior service staff as the organization becomes more settled. In view of the importance of building a permanent operational and scientific career staff, it is recom- mended that the Corporation continue its efforts to create work con- ditions designed to achieve that purpose. Since its recruitment efforts compete with those of plantation enterprises in other parts of the world, it may be necessary to model the pay system on some of the systems followed in other countries. Most of the Corporation's employees are Cameroonians, represent- ing some 80 different tribes, but some Nigerians, mostly from the Eastern Region, are also employed. It is characteristic of the strong regionalism throughout the country that the Corporation should be criticized for the employment of what the Cameroonians consider "foreigners." However, until the level of education in the Cameroons is raised, the Corporation will have to employ a certain number of Africans of non-Cameroonian origin. 186 THE TECHNICAL REPORTS Financial Policy The Corporation received no capital funds to run the enterprises transferred to it or to rehabilitate and expand the estates and other properties. It was, however, given the power with the Governor's approval to borrow up to a maximum of £ 1 million with or without a government guarantee. In fact, the Corporation decided to finance its capital expenditure as far as possible out of current revenue. This policy was carried out consistently and by the end of 1953 the Corporation had financed im- provements to leasehold concessions, equipment and motor vehicles of a value at cost of approximately £ 3.3 million and had net current assets of over £ 500,000; its outstanding borrowings amounted to £ 1.1 million, consisting of a government loan of £ 500,000 repayable over the period 1956-70, a short-term loan of £ 200,000 from the govern- ment, and a loan of £ 400,000 from Barclays Overseas Development Corporation. The Corporation also decided to write off capital expenditure on its leasehold lands (planting, buildings, etc.) in full, and as far as possible out of revenue in the year in which they were completed. Capital expenditure on machinery, factory equipment and similar assets was to be written off over a period of five years. This policy was followed until the end of 1951, when it was decided to write off buildings and other construction on leasehold concessions over a period of three years. The condensed balance sheet of the Corporation as of December 31, 1953 (Table 5) reflects the financial and accounting policies described above. The figures show that the Corporation's development efforts had strained its financial resources to the utmost, leaving it at the end of the year with cash funds below the level of average monthly expenditures. Moreover, according to a note appended to the balance sheet, the Corporation had, by December 31, 1953, entered into com- mitments for capital expenditure estimated at £ 450,000, which in the absence of new borrowings would have to be covered out of 1954 earnings. During the year 1953 a number of steps were taken to prepare the way for further expansion. Short-term loans from Barclays Overseas Development Corporation were funded into a £ 400,000 eight-year DEVELOPMENT INSTITUTIONS 187 loan at 51/2 %, repayable in equal annual installments, and the limit of the Corporation's borrowing powers was raised from £ 1 million to £ 2.5 million. The mission understands that early in 1954 negotia- tions for an extension of the £ 200,000 3 % short-term government loan were in progress. TABLE 5 Cameroons Development Corporation, Condensed Balance Sheet as of December 31, 1953 (£) Assets Improvements to leasehold concessions ................ 2,381,355 Less: written off ................. ................. 1,819,775 561,580 Equipment .......................................... 713,153 Less: written off . .................................. 412,595 300,558 Motor vehicles ...................................... 192,400 Less: written off ................... ............... 152,831 39,569 Work in progress .............. . . 459,987 Stocks (stores and produce) .894,568 Debtors, etc. ........ . . ................. 251,710 Cash at Bank and in hand .56,142 2,564,114 Liabilities Loans Government of Nigeria ........... ................. 700,000 Barclays Overseas Development Corporation ......... 400,000 1,100,000 Creditors and Provisions .657,634 Reserve for Retiring Gratuities to workers not members of Provident Fund .100,000 Deferred maintenance .46,195 Reserve in accordance with Section 19 of Ordinance No. 39 of 1946 (future development) .600,000 Unappropriated Profit balance 1952 .60,285 2,564,114 SOURCE: Cameroons Development Corporation, Condensed Balance Sheet, 1953. 188 THE TECHNICAL REPORTS Financial Results The figures given in Table 6 show the growth of the Corporation's operations, with proceeds of sales in 1953 more than five times the 1947 figures. The heavy losses in banana production during 1952 and the sharp fall in the price of rubber account for the fact that, not- withstanding the increased banana acreage, sales proceeds in 1952 were at about the 1951 level, whereas costs had risen considerably. As a result, the margin of trading profit, which had remained close to 50% from 1947 to 1951, dropped below 35%. A recovery took place in 1953, due mainly, so the mission was informed, to the higher banana prices during the year and the increased weight per bunch. As appears from the Table, the difference between the trading profit and the net profit is largely accounted for by the heavy depreciation charges discussed above. TABLE 6 Cameroons Development Corporation, Summary of Profit and Loss Accounts (Thousand £) 1947 1948 1949 1950 1951 1952 1953 Total Sales .................. 513 948 1,306 1,632 2,221 2,166 2,786 11,572 Less Production costs ... 274 470 670 840 1,122 1,423 1,551 6,350 Trading Profit .......... 239 478 636 792 1,099 743 1,235 5,222 Less other charges (net after other income) . . 34 93 cr. 7 164 25 44 cr. 2 351 Profit before Depreciation 205 385 643 628 1,074 699 1,237 4,871 Less Depreciation ..... 27 41 280 295 438 468 888 2,437 Net Profit .............. 178 344 363 333 636 231 349 2,434 Less Provision for Income Tax ........ 158 209 260 280 350 . 80 190 1,527 Net Profit after Income Tax .......... 20 135 103 53 286 151 159 907 Less appropriation to reserves for future de- velopment, etc.' ..... - 100 80 - 230 100 99 609 Balance paid or to be paid to Governor of Nigeria'. 20 35 23 53 56 51 60 298 1 In accordance with Section 19 of Ordinance No. 39 of 1946. SOUftCE: Annual Reports of Cameroons Development Corporation, 1947-52. Figures for 1953 derived from abridged financial statements. DEVELOPMENT INSTITUTIONS 189 Future Development and its Financing During its first seven years the Corporation has made an impressive and considerably successful development effort. It now faces a double task. It must consolidate its gains and protect the plantations against the hazards of disease. It must improve and further expand produc- tion, and continue its program of staff housing and social welfare facilities. The Corporation's development program calls for further heavy capital expenditure over many years. The sum total of all projects now being considered by the Corporation amounts to some £ 5 million. While the rate at which the projects are undertaken can be adjusted from time to time in the light of the Corporation's finances, neverthe- less wve think that the financial implications of a development program of this magnitude require a critical reappraisal of the financial policies of the Corporation and of the government vis-a-vis the Corporation. As regards the past, the Corporation's policy of plowing back nearly all of its profit has been wise. It has built up a sizeable enter- prise with a considerable earning capacity, while incurring only mod- erate debt. To have distributed its earnings during the early years and to have relied during that period on borrowings for development financing might easily have led to disaster had the Corporation's operations suffered reverses. Such a policy would certainly not have been in the interest of the people of the Cameroons. Moreover, while most of the earnings have been reinvested, the Cameroons have directly benefited from the Corporation's operations through payment of £ 1.3 million in income tax and distributed profits of £ 238,000 over the period 1947-52. On the other hand, we question the wisdom of the write-off policy. This has resulted in a balance sheet which considerably understates the true value of the Corporation's assets and which accordingly gives a very unclear picture of earnings in terms of return on investment. Another unfortunate consequence is that borrowings are made to seem excessively large in relation to "net worth." It seems to be the policy of the Corporation and the government that the Corporation's activities should be financed as far as possible without recourse to government or a government guarantee, yet the present accounting policy is likely to make it more difficult to achieve 190 THE TECHNICAL REPORTS that objective. It is true that, the leases to the Corporation being non- transferable, neither they nor the improvements to the leaseholds can be pledged as security. If this is deemed an obstacle to the Corpora- tion's borrowing ability, the remedy lies in a reconsideration of the lease provisions. The fact that assets cannot be pledged is no reason for writing them off. We think that the Corporation should revalue its assets (including improvements to leasehold concessions made prior to 1946) and recast its accounts. While this would not make the Corporation richer or justify distribution of a higher proportion of profits, it would give a clearer picture of the Corporation's financial status, thereby facilitating borrowing should that become necessary or desirable. The future development and financial policy of the Corporation should be determined in the light of the broad interest of the Southern Cameroons. This interest unquestionably requires conservation and further development of the Corporation's extremely valuable assets. But it also requires a weighing of the investment needs of the Cor- poration against those of other sectors of the Cameroonian economy. This gives rise to the question whether to continue plowing back the bulk of the Corporation's profits or whether to pay out a substantial portion to provide investment capital for other sectors of the economy. If the latter, the Corporation would either have to slow down its development program or to borrow. We think a sound utilization of resources would now justify distribution to the Southern Cameroons of as large a share of the Corporation's profits as is consistent with prudent administration. We have included in our financial projec- tions (Chapter 5, Table 3, and Appendix C) the sum of £ 200,000 annually over the next five years as distribution of profits to the gov- ernment of the Southern Cameroons. We consider this sum to be a minimum, and recommend that a larger sum be paid out if earnings and financial position make it practicable. The magnitude of the Corporation's development program makes it likely that borrowing would be necessary even if reinvestment of earnings continued. Present assets and earnings are such that in our opinion the Corporation could prudently borrow in London to finance its development program. In addition to the recommendation that DEVELOPMENT INSTITUTIONS 191 accounts be recast, to facilitate such borrowing, we recommend that the Corporation improve its liquidity, the only weakness in its position. Conclusion It was difficult to decide, in 1946, how to put the ex-enemy planta- tions to best possible use for the benefit of the inhabitants of the Trust Territory. The mission wishes to record its opinion that the estab- ment and operations of the Corporation have been of great benefit. It has made available the economic and technical advantages of planta- tion production, has provided for the social and educational welfare of its workers, and the earnings of the enterprise it has built up will contribute to the development of the Southern Cameroons. TECHNICAL REPORT 6 THE PATTERN OF NIGERIAN AGRICULTURE INTRODUCTION Agriculture, forestry and fishing occupy an estimated 80% of the active population of Nigeria and in 1952 produced 66% of its gross domestic product of i 680 million. More than 90% of the country's exports result from crop and animal husbandry. Nigeria's economic development and the improvement of its living standards thus depend largely upon the growth and progress of the agricultural sector of the economy. Nigeria's arable land resources are extensive, the water supply is abundant though not well-distributed, and the climate permits rates of growth close t6 the maximum attainable in any country. But produc- tivity is often limited by mediocre soil fertility, primitive production methods and crop varieties with comparatively low yields. The follow- ing pages outline the physical environment of Nigerian agriculture, the vegetation which has naturally developed in this environment, the utilization of land and existing agricultural practices. Individual agri- cultural commodities and the means by which we think their output can be increased are the subject of Technical Reports No. 7 and No. 8. Production Field crops accounted for 44.8% of the 1952 gross domestic pro- duct; tree crops for 11.3%; livestock products for 5.1%; forest products for 4% and fish for 0.9%. Yams and cassava together con- stituted 40%o of the total agricultural product; grains, 1.7%o; palm 192 0 0 . 0 0 0 -o AOA0 0~~~~~~~~0 t °. 0 0 , )A, S 0 0 0 0a *w c.: hX o-.~ A '* A o/, 0 A 4, AOA A * A * A A .. * o 0 , ? ^ * o o * * c o A o * . * * 0 * {** A A0 CA O ,uO *A A 0 0- 0 0 . 00 c + * c A A . 0 0 0* A_\ A =c 0 0 0Oa O OA _AM. IID A A A * A 0 0 A A x, 0 0 * * * A* 00 * -)M X C X C * o A Jt +CM'a,h *X 0 +W- E A ' -"' *AA 'N. 0 *a00 * C AM 0 0 0~~~~~~~~~ A, A -A X C ,* * p ASV Xc0 0 0 X 6 ~ ~ ~ ~ r aCSa,0 A' C* O ..A A AA A 0 0 ~*&* X 0 A .00 WLv9z~r C * M + , / 90 5/Dt R~SSECES A 0 AA 0 C 0 .6 0 0 * 0 X _ _ + x A ' + + K~~~~~~~~~C A' NIEM X + + X U 20 U +~~~~~0 13 0 ~ ~ ~ ~ ~ ~ o x 0 A 9~~~~~~~~~~~~~~~~~~~~~~~~~MLE A 13c0~~~~~X ~ IC c M 0 +x 0 +~~~~~~~~~~~+0 x M+ +, M c~~~~~~~~~~~~~~(.(C/ YBO~COO CE PA~E AM + r+ 4c ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~ 0406 B 0 104 DEEM E 15 MA M ME MN S/LEA THE PATTERN OF NIGERIAN AGRICULTURE 193 produce, 8%; cocoa and groundnuts, each 4%.' Numerous other crops are produced in relatively minor quantities. In the North, the agricultural economy is based on grains, cattle and groundnuts; in the South, on root and tree crops and on forestry. Farming is concentrated around the numerous villages, separated by stretches of woodland and water in the South and by grass and scat- tered trees in the North. A variety of crops is grown in the village fields but there is usually a main crop of yams, cassava, groundnuts, guinea corn or millet. Irrigation is not common; in the North, pro- duction depends almost entirely on seasonal rains, which are copious but of limited duration. The distribution pattern of major food and export crops is shown on Map 2. The areas under field crops are listed in Table 3 (p. 201). Problems of Expanding Production In every region there is substantial capacity for expansion of pro- duction, if a number of problems can be solved. There is a fairly widespread insufficiency of soil nutrients (phosphorus, nitrogen, sul- phur and some of the trace elements), intensified by pressure of culti- vation, especially in some parts of the Eastern Region. This prejudices nutrition and increases plant, animal and human susceptibility to disease. Much of the Northern Region is liable to long periods of no rain; water supplies are often inadequate, especially toward the northern border. Despite the variety of production in the country as a whole, most crops and types of livestock are identified with a specific climate and soil environment. Crop production tends to be specialized; alternative crops or rotational farming are the result of necessity rather than conscious planning. Cattle raising in the Southern and central parts of the country is inhibited by the prevalence of the tsetse fly. Farming methods are primitive. The plow is seldom seen and hand tillage is the rule. Nevertheless, the mission was impressed by the innate wisdom of the people of Nigeria in devising ways of producing foods for their own consumption and adapting them to the local environment. They have an understandable and frequently justified distrust of foreign innovations which, though suited to the conditions I See Appendix B, Tables 14. 194 THE TECHNICAL REPORTS of the temperate zone, are often inappropriate to the environment of tropical Africa. But it is now possible to draw upon an increasingly large body of knowledge, based on the practical experience and re- search of countries with a technically developed agriculture and tested under tropical conditions. Provided such knowledge is effectively adapted to local practices and needs, it can produce substantial divi- dends in a country as well endowed with natural resources as is Nigeria. To do this effectively, it is essential to have strong permanent technical services. The mission recommends that priority attention be given to building up the federal and regional services in agriculture, veterinary medicine and hydrology and to ensuring their long-term continuity and competence to serve as the primary source of technical guidance for the country's agricultural development. CLIMATIC FACTORS The Nigerian climate is generally favorable for quick plant growth. Day length varies from 111/2 to 121/2 hours in the North and from 113/4 to 121/4 hours in the South. In the South, clouds may seriously reduce the light at certain times of the year but on the whole the prevailing conditions of cloudiness, continuously high temperature, high humidity and reasonably sustained rainfall are ideal for the South's oil palm, cocoa tree, rubber tree and indigenous food crops. Atmospheric changes are governed by southwesterly monsoonal systems accompanied by rain and mist, and by dry northeasterly to easterly winds, the influence of which increases with distance from the coast. The easterly and southwesterly air currents are divided along an east-west axis which moves from the extreme south of Ni- geria in January-February to the region beyondI the northern border in July-August. This annual shift varies from year to year and its variability strongly affects seasonal crop fluctuation, especially in the North. AIAY 3 r / SOKOTO , - -SK-T SOKOTo .m / ~~~~~KATSINA / \ 30, t KANO MAIDUGURI > > e ~~~~~~~~~~~ZARIA\ .~~~~~ / ~~~~~KADUNA 40* 8aucHI\ J2 0 JOS M MINNA af~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~CL IN --ILES -r 9,4 t ; ~~~~~~~~~~~~~0 20 40 60 eo 00o 120140 DEBUN/DSCHA 3755 200OECEMBER, 1953 ___________________________________________________________________ DEEMER,96 THE PATTERN OF NIGERIAN AGRICULTURE 195 Moisture Moisture is abundant to excessive for much of the year except in the North; only in a small area between Nguru and Lake Chad, shown on Map 6 (facing page 201) as sahel savannah (dry open scrub- woodland), does the mean annual rainfall fall below 25 inches. The coastal region, except for the westerly portion, and the Southern Cameroons as far north as Mamfe and Bamenda, receive over 100 inches; as much as 400 inches is received southwest of Buea Moun- tain in the Cameroons. Much of the oil palm belt averages more than 80 inches. Most of the cocoa is grown with an annual rainfall of 45 to 60 inches, spread over eight to nine months; north of the Benue a similar rainfall spreads over six to seven months. North of Kaduna and Zaria the rainfall sharply declines to some 25 inches over the course of four to five months. Table 1 shows for selected localities the distribution of rainfall through the year. The months of the wet season in each locality are indicated by figures in italics. Where monthly rainfall is significantly less than two inches, the rains are largely dissipated by evaporation and have little value for plant growth. Average annual rainfall over the country is shown on Map 3. Temperatures and Relative Humidity Maximum daily temperatures in the South are highest from Feb- ruary to April and in the North from March to June. The mean daily maximum and minimum temperatures over the year are 94°F and 66°F in the North, and 87°F and 72°F in most of the South. Such temperatures are very favorable for plant growth. The relative humidity of the atmosphere near the coast is normally 95-100% at dawn, falling to 70-80% in the afternoon. Northward from the coast relative humidity steadily declines. At Kano it ranges from 90%To at dawn to 60% in the afternoon from mid-June to October, falling to 35% at dawn and 12% in the afternoon between November and April. The skies are generally cloudy in the South, except in January and February; many successive days of unbroken cloud are common during July and August. To the North, clouds are slight to absent for much of the dry period but the harmattan, a dry wind from TABLE 1 Mean Monthly Rainfall at Selected Centers (inches) x of Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Total : Record Benin ............... (44) .76 1.25 3.63 6.62 8.17 12.04 12.28 8.07 11.94 9.45 2.98 .58 77.77 b Enugu .............. (33) .75 1.05 2.62 5.93 10.36 11.36 7.61 6.69 12.76 9.79 2.07 .54 71.53 0 Ibadan .............. (46) .38 .88 3.49 5.49 5.88 7.46 6.31 3.38 7.00 6.12 1.65 .38 48.42 - Jos ................. (29) .11 .11 1.04 3.49 7.86 9.09 12.95 11.57 8.42 1.60 .12 .08 56.44 E Kano ............... (46) .00 .01 .07 .37 2.55 4.45 7.99 12.45 4.96 .48 .00 .00 33.33 Sokoto .............. (35) .00 .00 .03 .42 1.97 3.52 5.84 9.31 5.73 .51 .00 .00 27.33 Maiduguri .......... (34) .02 .01 .01 .26 1.58 2.69 6.93 8.80 4.07 .77 .01 .00 25.15 Nguru .............. (12) .00 .00 .00 .09 1.11 2.07 4.99 8.93 4.41 .22 .00 .00 21.83 SOURCE: Meteorological Services Headquarters, Lagos. ..Y.~~oKANO ......... ~~~~~~~~~~~~~~~~~~~~~~~~~~~AIDLJGURI v KA D~~~~~~ N 0 R T H E R N .. .. .. E G I 0 N~~~~~~~~~~~~~~~~LOATC CLO TXTRA POPRTE Jos~~~~~~~~~~~~~~Lk hdbssge opasi ly ut os ad W.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~nrhr rne os ad NNA ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~bont cmotslyfn ad N I G E R I A fffII1IJI~~~~~~~ H~~ntherr. siddle reddioh porous sands to sandy clays~~~~~~~~~TO L 'S"R S' ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Suhr etIoO oru\ed o od lp ILORIN~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~bon (sesieylahd 'T ffT 'T~~~~~~~~~~SateeCceon ron fibl ldd lp A F E R H I A F o, ~ S u ny e oe ro fl r dd sh f ia leL OoKO J Ao dy cl p W E S T E R N R E I 0 N I~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~p Mntsy(trngylechd S C A L E IN M I L E S ~ ~is4 sJ~l EJ tree sos ther grey to naeds A clay oith housic topsoil II3AuAN~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ht ne rehae-oc 0 2 0 0 6 8 0 0 0 2 0 1 0 B I E r e e s o a h er br w ni h n u te d al u ciK c ds e dE bloc-k gro DECEMBER, 1953 ~~~~~~~~~~~~~BEI M11 ~ : ,.nt C 0~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ *1 . 0 0.. 000' ,@ > ~~~~~~~~~~~~~~~~a o 0L 0 0 o ....u 0 /= ~~~~~~~~~~~~~~~~~~~~~~~- - - - - - - - ,- E ' e , ° ' * :''- ! -- (8 e tt ltl,0 0.000' ' I _ _ ~ ~ ~ ~ ~~~~~~~~~~~~~~ _ _ _ _ r _ _ _- A ~ ' - O --2/{owSZZ/o\ , . - e .. = -._ =__. 0 :'' _________'= g LY~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~L LLJ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~u 0 Z~~~~~~~~~~~~~~~~~~~~ .r,~~~~~~~~~~~~ - - -a - - - Z y//wZ- < 6wt wa t h ~~~~~~- - - - - ,, -- - - - -~~ -Z -2' -'-i - - -E - - - - - - -- (o THE PATTERN OF NIGERIAN AGRICULTURE 197 desert regions north of Nigeria, carries minute particles of dust which reduce both light intensity and temperature. This condition lasts for approximately six months in the North and two to three months along the coast. in SOILS Nigerian soils (see Map 4) are almost universally acid in varying degree; neutrality is rare and alkalinity virtually absent. Regional Characteristics The soils of the principal groundnut-producing areas, in the North, are derived from desert sand, formed in a past arid phase. Leaching by heavy rainfall has accentuated their acidity. The presence of granite or gneiss fairly close to the surface, as in the Kano and Zaria areas, makes available minerals lacking in the desert sand itself and these reserves of fertility are tapped by deep-rooted plants and legumes. Gneiss is present around Zaria, where the soil is a fine, silky sand which sets on the surface when dry. It is suitable for guinea corn, millet and cotton but too compact for groundnuts. Acidity of the surface soil is comparable to that in the Kano area. The soil's ten- dency to set favors sheet erosion at the beginning of the rainy season, especially where cover is slight after clean cultivation or burning. Farther south, especially in the Middle Belt and forest areas, soils other than the deep sands, river-borne sands and alluvial muds have been directly formed from the parent rocks beneath. Extensive areas are characterized by the presence of concretionary ironstone. Here the soils are acid, tend to set on the surface when dry, and are generally deficient in essential plant foods. In the cocoa-growing areas, soils tend to be less acid and to have reduced leaching, better fertility, a high content of clay but good drainage and greater retention of moisture over a three- to four-month period of low rainfall. In the areas of highest rainfall, such as eastern Calabar Province, the surface layer is strongly acid. 198 THE TECHNICAL REPORTS Very deep reddish sands of the Benin type occur widely over the area of cretaceous and tertiary secliments shown on Map 5. These lack reserves of mineral plant food and, although productive at first, they rapidly lose fertility under intensive cropping. The oil palm is well adapted to these soils and to the yellowish-brown sands of the South, provided that the young plants receive added nutrients where necessary and that fertility reserves at depth have not been depleted by earlier heavy production. Since the Benin sands, and allied types such as those occurring in the Middle Belt betveen Mokwa and Lafia, cover extensive areas over which rainifall is liberal and well distributed, we recommend that high priority be given to investigating deficiencies of these soils and finding economic means of overcoming them. Fertility and Productivity Persistent cropping leads inevitably to soil exhaustion; productivity is maintained by transferring cultivation to a new site. Where popu- lation is sparse, as in most parts of the North, land is abandoned for an indefinite number of years. In the South, land is left unused and uncontrolled generally for five to seven years, but sometimes, as in the Eastern Region, where population pressures are great, for no more than two or three years. In contrast to the North, the more abundant rainfall of the South induces a spontaneous regrowth of native herbs, thin-stemmed shrubs, small trees and creepers on untilled land. This practice is known as "bush fallowing." The value of bush fallow is that the protective cover guards against erosion. while the soil is improved by the transfer of essential nu- trients from the lower layers of the subsoil to the topsoil and by the surface accumulation of leaf and other plant residues. A speedier means of restoring and improving fertility must, however, be found. Higher productivity may result from (a) occurrence of basement complex rocks beneath the surface soil and subsoil, as at Kano and Ibadan; (b) very deep penetration of roots, as by the oil palm; (c) accumulation of human and other wastes at the sites of villages and towns; or (d) deposition of animal manure. All these sources of enrichment are recognized by Nigerian farmers, but they have not generally realized that the extensive tracts of less productive land between the towns and villages can be greatly improved in fertility W . . .. .... s 0 g 4 . TE RT ARY -PL EIS TOC ENE ... o s r M / O O L E E O C E S E , E O C E £ [ PLEISTOCENE-RECENT RIVE'R ALIUV/UIM,DLADPSS CRETACEOUS URON/IAVPOST-a PRE-5URONIAIV 9 . m 7 ~~~~~~~~~~~~~~~~~TERTIARY-RECE-NT | VOLCAIVIC ROCKS I- 0JYONGER OR 'PtArEAU" GRANITE, SYENITE ANVO PORPHYRIES SCECE MN MILE, TINSTONE AREAS 1) 0 20 40 60 so 100 120 140 .- DECE ABER, 1953 THE PATTERN OF NIGERIAN AGRICULTURE 199 and production by modern scientific methods of land development. Here again investigation of soil deficiencies and ways of overcoming them is called for as a first step toward making these large tracts more productive. Organic Matter and Nitrogen Organic matter is generally low even in soils under forest. Pre- dominance of grass in the Middle Belt has improved both the structure and the organic content of the soil, but the ratio of carbon to nitrogen is high. There is a relative shortage of available soil nitrogen for much of the year throughout the country, particularly in almost all parts of the South. The long period of rainfall during which nitrate content is low, even in a relatively productive soil, accounts for the low protein content of food produced in southern Nigeria. It has been found that maize, rice and root crops respond to the application of nitrogen in the form of sulphate of armonia but this procedure is expensive and does not build long-term fertility. The practice of alternating crops and soil-building green manure also improves crops but entails a loss by interrupting production. We think that one major solution of the soil fertility problem lies in establishing legume-grass pasture mixtures and treating them with appropriate phosphate trace-element fertilizer mixtures, keeping dis- ease-resistant livestock and developing mixed livestock-food crop farming. Investigations of soil deficiencies, then, should be closely linked with the programs of research on pasture and livestock im- provement discussed in Techniical Report No. 8. iv LAND UTILIZATION About 10% of the total area of Nigeria is under cultivation for farm or tree crops. Forests cover 32%o and 57%o is uncultivated or kept fallow (see Table 2). The low proportion of land used for agriculture indicates land resources are ample but it also reflects the primitive agricultural methods which require periodic fallowing and permit cultivated land to revert to bush. Land utilization is to some extent affected by the Nigerian land 200 THE TECHNICAL REPORTS tenure system. The system is complicated and does not lend itself to a brief or general description. Essentially, it is communal in charac- ter. Individual ownership is rare and rights to land may be held by a small family group or a large village or tribal group. The system of land classification in Nigeria does not permit a clear-cut distinction between fallow and uncultivated land; probably almost all land has been under cultivation at some time. Cropping periods vary from one to five years. The compound gardens around dwellings are farmed more or less continuously and human excrement and household wvastes are used as fertilizer. TABLE 2 Pattern of Land Utilization (percent)' use Northern Wlestern Eastern Southern Average Use Region Region2 Region Cameroons Nigeria Under farm crops .......... 6.8 9.3 20.5 3.0 8.8 Under tree crops3 .......... - 7.0 2.7 2.7 1.2 Bush fallow ............... 9.3 22.2 42.5 24.4 13.8 Forest reserves ............. 6.14 15.6 8.1 13.9 7.8 Other forests .............. 31.24 0.7 2.35 8.4 24.1 Built-on areas .............. 0.8 1.0 1.7 0.7 0.9 Uncultivated bush pastures, wasteland ............... 45.8 44.2 22.2 46.96 43.4 Total .............. 100 1.00 100 100 100 1 Total area of Nigeria, 373,250 sq. miles divided as follows: Northern Region: 281,782; Western Region: 45,403; Eastern Region: 29,484; Southern Cameroons: 16,581. 2 Part estimate; data on Oyo Province not available. 3Includes plantations under crop; 34 sq. miles ini the West and East, 118 sq. miles in the Southern Cameroons. 4 95% represented by savannah forest producing firewood only. 5 Mangrove forests. 6 Includes 1,141 sq. miles of good quality mountain grassland. souRcE: Sample Census of Agriculture, 1950-51 and Annual Report of the Forest Administration, 1952-53. A substantial part of the farm land of Nigeria is inter- or double- cropped. Intercropping is practiced throughout the South, where cassava and yams are planted with a crop like maize or cowpeas; the latter is harvested when ripe and cassava root is left for a second year to round off the rotation. Double-cropping is possible where rains F RE NC H W E S T .t . . . . . . . -. . . . . . . . -. . . >~~~~~~~~~~~~~~~~~~~ . . . . . . . . . . . . . . . . . < t r 2\> \ st-- : ~~~~~~~~~~~~~~~~~~~.. .... ......... . ..~ ~ ~~~~~~. .. .. .. .. C~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. ... . .- . . :: . . . . k. ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ i. _.... . . . .: = SCAL~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ERIV ESD-- X GUINEA SAVANNAH IlIlli tBUE s - ~~~~~SAHEELSSAAANAAH DECEMBER, 1953 -- THE PATTERN OF NIGERIAN AGRICULTURE 201 occur through most of the year, or where the land can be irrigated in the dry season. New irrigation schemes can substantially increase the area of double-crop cultivation. According to the 1950-51 census of agriculture, some 20 million acres of land were under farm crops, of wlhich 62.5% was in the North, 15%o in the West, 20% in the East and 2.5% in the Southern Cameroons. Table 3 shows the relative size of areas occupied by various field crops. TABLE 3 Area Under Principal Field Crops (% of first and second crop areas combined) Northern Western Eastern Southern Region Region, Region Cameroons Nigeria Guinea corn ................ 33.5 - - 20.0 Millet ......................25.4 - - - 14.4 Maize . 3 .0................. 3.0 28.8 5.0 40.4 9.4 Paddy . 2 .4................. 2.4 0.4 0.9 1.8 2.0 Yams . 4 .1.................. 4.1 26.0 35.5 1.6 14.3 Cassava.2 ..................... . 20.2 34.5 18.1 11.6 Cocoyams .................... . 6.0 9.6 15.9 3.2 Cowpeas ..................... 8.8 1.0 0.2 6.2 Groundnuts .................. . - 0.2 0.8 4.8 Other farm crops2 . 1............ 9.8 13.3 21.2 14.1 Total . 00...............0. 100.0 100.0 100.0 100.0 1 Partly estimated; data for Oyo Province are lacking. 2In order of 'area planted: cotton, acha, melonseeds, pigeon peas, sweet potatoes, benniseed, tamba, bambarra groundnuts, peppers, okra, tobacco, sugarcane, onions, etc. (Acha and tamba are grass grains). souRcE: Sample Census of Agriculture, 1950-51. v ZONES OF VEGETATION The combined resources of climate and soil and the resulting pat- terns of land use are reflected in the vegetation. Although there are considerable variations within short distances, certain distinct zones can be identified, each indicating a specific potential for agricultural development. The country has been broadly classified into eight zones, according to the dominant types of native vegetation, shown on Map 6. 202 THE TECHNICAL REPORTS Mangrove Swamp The red mangrove (Rhizophora racemosa) occupies an estimated 99% of the coastal area, which consists of tidal swamp interwoven by numerous creeks and lagoons. The deltaic deposits tend to erode sea- ward but soft alluvial muds cover a million or more acres. Where they are stabilized and nonsaline for enough of the year, they offer good possibilities for rice. (See Technical Report No. 8.) Fresh-water Swamp Within the mangrove swamps are shallow lagoons of fresh water. Here grow the raffia palm (Raphia spp.), yielding "tombo" palm wine, mats, poles and stiff piassava fiber; the pandana palm (Panda- nus), from which sleeping mats and baskets are woven; and floating grass (Vossia cuspidata). Clappertonia ficifolia, a possible source of fiber, is also common. Fish and fibers are the chief products of this zone. High Forest Within the belt of high forest lie the oil palm-, cocoa- and principal root crop- and maize-producing areas of the South. The oil palm, although native, attained its present dominance only through wide- spread clearing of the forest. Yams, cassava and bush fallow vegeta- tion are plentiful. Timber trees tend to be sparsely distributed. This zone will remain the principal source of oil palm products and cocoa. Oil palm output can be greatly expanded, that of cocoa at least sus- tained. The zone is also well suited to rubber and banana production and to sylviculture, as distinct from natural forest regeneration. A wider range of food crops could be grown, and eventually considerable livestock could be raised. However, to obtain increased yields of food, and especially of protein, a solution to soil fertility problems must be found. Derived Guinea Savannah The derived guinea savannah was originally high forest, now largely destroyed by burning and replaced by grass; forest still remains along THE PATTERN OF NIGERIAN AGRICULTURE 203 streams and in low-lying areas where surface water accumulates. Grasses are of poor quality; toward the northern limit Andropogon, Hyparrhenia and Pennisetum become prominent. A few oil palms re- main. On heavy clay flats subject to inundation the fan palm (Boras- sus aethiopum) occurs. Livestock production should eventually be possible, once trypanosomiasis is controlled and good quality pastures developed. Guinea Savannah Annual rainfall, duration of the wet season and humidity in the dry season are less in the guinea savannah than in the derived guinea savannah; relative humidity in the driest month falls to 15%o, com- pared with 40%o in derived savannah. Tall grasses occur extensively and are annually swept by fire. The fire-resistant doka (Isoberlinia doka and I. tomentosa) frequently dominates uncultivated land. For- est outliers of locust bean or dorowa, the shea butter tree and the mango are characteristic of previously cultivated areas. Kyasuwa (Pennisetum pedicellatum) is abundant where soil fertility is mod- erately good or taller grasses have been reduced by cutting or grazing; this is said to be Nigeria's most valuable forage grass. Nomadic livestock are restricted by the availability of water in the dry season. Farming is most active around well-defined centers, such as Zaria, Bauchi and Yola. There are good potentialities for improved live- stock raising and mixed farming. Tobacco culture is rapidly expand- ing and the production of guinea corn, groundnuts, cotton and forage can be greatly increased. The Plateau, at 4,000 feet and over, has distinct geology, climate and soils. Its extensive plains are heavily farmed and grazed but here, too, methods are primitive and production is low in relation to climatic resources. Studies of methods to improve soil fertility and of hydrology are especially important for this zone. Sudan Savannah Annual rainfall in the sudan savannah is only about 25 inches, the wet season is reduced to four or five months, and relative humidity at 1 p.m. is only 8%o in the driest month. This zone is the chief 204 THE TECHNICAL REPORTS source of groundnuts, guinea corn and millet. Permanently cultivated land extends far beyond the villages and towns although extensive areas have become unproductive from long-continued cropping. A saltbush-type vegetation remains, utilized for rough grazing. Eco- nomic pasture improvement based on the use of superphosphate, development of mixed farming in conjunction with livestock raising, improvement of crop varieties, grain storage, fodder conservation and mechanization can greatly increase productivity in this zone. Small irrigation projects can be undertaken. Sahel Savannah There is relatively little sahel savannah in Nigeria, although the country extends far northward. Annual rainfall in this zone is about 20 inches and the wet season lasts only three months in most years. The umbrella-topped Acacia raddiana and the gum arabic tree occur sparsely. A type of saltbush provides salt, obtained by burning its leaves. The grass is short and ephemeral. Papyrus borders Lake Chad, extending well out in the shallow waters. Possibilities for improved production in this zone are limited, apart from those of reclamation and irrigation adjacent to Lake Chad. Montane Altitudes in the Cameroons above 5,000 feet, and most characteristi- cally at 6,000-7,000 feet, carry montane vegetation in patches sepa- rated by deep valleys or gorges, difficult of access by mechanized trans- port. This vegetation includes mountain forest with dwarf moss and lichen-bearing trees, and mountain grassland in the Bamenda area. Of all West African areas, this most closely approximates European condi- tions. Production of livestock, maize, coffee, tea and a wide variety of temperate climate crops could be expanded immediately. Tem- peratures are relatively low while rainfall is sufficient and humidity high throughout the year. TECHNICAL REPORT 7 AGRICULTURAL EXPORT COMMODITIES I PRODUCE CONTROLLED BY MARKETING BOARDS A OIL PALM PRODUCTS The oil palm is native to Nigeria; stands extend throughout the South where it has multiplied in the high forest zone as forest clearing has permitted. It is one of the hardiest of tropical plants. Settlement, cultivation and the build-up of soil fertility through human waste have contributed to its transition from the wild to the cultivated state. Its improvement, in turn, has given Nigeria its most important export commodities. Although traders have purchased palm oil for at least four centuries, the current export trade has developed essentially within the past 50 years. Now palm kernels and palm oil combined account for over 30% of total exports in value. Palm oil, a rich source of vitamin A, is an indispensable constituent of the basic diet in the Eastern and Western Regions. It is blended in cooking with carbohydrate-rich foods such as yams and cassava. The palm leaves and leaf ribs are used for a variety of structural purposes, including roofing. The sap contains substantial amounts of vitamin B complex; palm wine, a popular local beverage, is made from it. Production Exact data on total production of palm oil are not availablc. Oil purchases by the Oil Palm Produce Marketing Board 1 averaged some 186,000 tons per annum over the period 1949-53 and annual purchases of palm kernels during that period amounted to 378,000 tons. Palm See Technical Report No. 4. 205 206 THE TECHNICAL REPORTS kernels are not consumed locally; virtually the whole production is sold for export. On the basis of sales of palm kernels, contained in the fruit in the proportion of 7 parts of kernels to 10 parts of oil by weight, total yield of palm oil has been estimated at around 550,000 tons. The average extraction rate being only 60%, this suggests an effective yield of oil of some 330,000 tons per annum, of which some- what less than half appears to have been consumed locally. Exports Annual exports of palm kernels in the years since 1934 ranged from 236,000 to 410,000 tons, averaging 382,000 tons in the last five years. Palm oil exports since 1934 varied from 101,000 to 201,000 tons annually, with an average of 172,000 tons per year in 1949-53. Efficiency of Extraction Most of the palm oil is still extracted by the traditional African method of pounding by hand after boiling; this method removes, as a rule, 45-55 % of the oil in the pericarp or fleshy part of the fruit. The extraction rate of hand-operated presses (of which 5,000-6,000 are now in operation) is 65%. Power-driven Pioneer oil mills,2 de- signed and introduced into Nigeria by the United Africa Company (UAC) extract up to 94.5%o; in 1953 they accounted for only 3% of total output. The mission believes that increased use should be made of power extraction wherever supplies of palm oil are sufficiently large and concentrated. The extension of mill operation would help to improve the quality as well as the amount of oil produced. Where power mills are not practicable, we recommend that wider use of hand presses be encouraged. Quality Palm kernel oil and palm oil with a free fatty acid (F.F.A.) con- tent below 4.5%o are to some extent interchangeable with other vege- table oils in cooking and the making of margarine. The lower grades are used in the manufacture of soap and candles and in the tinplate 2 See Technical Report No. 13. AGRICULTURAL EXPORT COMMODITIES 207 industry. The 1954 producer price set by the Oil Palm Produce Marketing Board for special grade oil (not exceeding 4.5% F.F.A. content and less than 2% extraneous substance including water) is £ 65 per ton ex-scale port of shipment; the ex-scale bulk oil plant price for grade I oil (not more than 9% F.F.A.) £ 50 per ton, for grade II (9 to 18% F.F.A.) £ 38, and for grade III (18 to 30% F.F.A.) £ 33. By offering premium prices for higher quality, a marked rise in standards has been obtained: whereas in 1949 only a negligible pro- portion of the oil purchased by the Oil Palm Produce Marketing Board was of special grade, by 1953 more than half of such purchases met the standard for that grade. These improvements resulted from more efficient harvesting to secure mature fruit, prompt transfer to the extraction site and cleanliness of the operation from harvest to final collection of the oil. Market and Price Prospects for Oils and Fats The long-term prospect is that prices of palm oil and palm kernels and of oils and fats in general 3 will be maintained at relatively high levels. The rise in world production of fats and oils has been sufficient only to maintain per capita consumption but the demand for margarine and compound cooking fats continues to rise. Increasing domestic consumption in advanced producing countries will tend to restrict exports; the limited possibilities for increased production (mainly of animal fats and marine oils) in importing countries should keep the demand for imports strong. Palm, palm kernel and coconut oils may be expected to provide an increasing proportion of the world supply, since the oil yield per unit area is higher than that of other vegetable oil crops and is capable of considerable improvement. Supply of and demand for these oils will strongly influence prices for all oils and fats. During the next few years, however, prices for oils and fats may be expected to decline from present levels with fluctuations over a fairly wide range. Four main factors will influence price develop- ments: 3 The outlook for groundnuts is closely related to that for palm oil and palm ker- nels. 208 THE TECHNICAL REPORTS (a) Per capita consumption of oils and fats in Western Euro- pean countries has recovered to, or exceeds, prewar levels; thus consumption is likely to increase at a reduced rate in the future. (b) Production of coconut, palm kernel and palm oil has been greatly stimulated since the war and export supplies are increasing, while the demand for these oils for soap continues to decline and supplies of tallow are ample; this should cause oil prices to weaken. (c) Demand for United States exports of soyabeans, lard, tallow and cottonseed oil, other than on an aid basis, may be expected to decline as increased supplies from nondollar sources become available. United States copra imports, on the other hand, are likely to decline because of the very great increase in the use of detergents, reported in 1953 to be manufactured in larger quan- tities than soap (a number of American coconut oil plants have closed down recently). (d) United States stocks of soyabeans, cottonseed oil and butter overhang the international market and have already had a depress- ing influence on prices. Their final disposal will have a consider- able effect, even if a sudden break in prices is avoided by spreading it over several years. Assuming that general world economic conditions do not deteriorate markedly and that no sudden demand is generated by war or threat of war, world prices for oils and fats may be expected to decline by 15-25% to new normal levels, still subject probably to considerable fluctuations.4 The price outlook for Nigerian oils and fats is broadly similar to the world outlook, but some of the loss from declining prices may be offset in other ways. In the case of palm oil, improvement in the average quality of the product will reduce the impact of a general decline in prices; furthermore, output of oil can be increased even over a comparatively short period by the use of more efficient methods of extraction. In the medium and long term, Nigerian producers may offset a price decline by increasing yield per unit area through re- placement of existing trees by better types and through improved maintenance of the stands generally. A more stable, scientific and 4 See Technical Report No. 4. AGRICULTURAL EXPORT COMMODITIES 209 organized production of palm oil should also materially increase the supply of kernels for export, by reducing the amount wasted. Cultivation and Maintenance of Trees The culture and maintenance of the oil palm is done almost entirely by individual farmers; plantations account for less than 1%7 of total output. Commercial plantings are maintained by the UAC in eastern Nigeria and by the UAC and the Cameroons Development Corporation in the Southern Cameroons. There are some smaller plantations at which research is carried on. Although the available figures are not sufficiently accurate to permit exact comparison, it is certain that production per acre in plantations greatly exceeds that .of native groves. The optimum density in plantations is considered to be 50-60 trees per acre, spaced in a triangular arrangement with trees 27-30 feet apart. Generally, however, the palm has been allowed to grow spon- taneously, after forest clearing for field crops has let in enough sun- light for the trees to become established; it is then left standing but untended during subsequent farming operations. As a consequence, most stands are overdense and irregularly spaced, frequently planted with 140-150 trees per acre or nearly three times the optimum. As a consequence, the light available for oil synthesis is substantially re- duced and the root development of individual trees is limited. Thin- ning of overdense stands to 30-40 per acre and filling in with selected seedlings to give the optimum density will permit considerable increases in both oil palm products and interplanted food crops. The mission recommends that the Eastern and Western regional depart- ments of agriculture develop field demonstration programs at selected centers to acquaint farmers with the advantages of thinning and replanting with improved stock. The aid of the co-operatives could usefully be enlisted in carrying out such programs. Varietal Improvement Many of the naturally-occurring types and some of the strains used earlier for plantation development have thick-shelled nuts and a low yield of oil from the pericarp. Considerable progress has been made 210 THE TECHNICAL REPORTS in developing and propagating improved types. Their future use depends on research findings regarding nutrition and disease control. Research The technical needs of oil palm producers in all of British West Africa are served by the West African Institute for Oil Palm Research (WAIFOR), an intergovernmental agency. The main station is near Benin and there is a substation in Calabar Province, in the heart of the palm belt. Much of the Institute's expenditures to date have been for capital improvements such as housing, laboratories and ancillary services. Normal running costs will be met from an expendable endowment fund to which the Nigeria Oil Palm Produce Marketing Board has contributed 82%, the Sierra Leone Produce Marketing Board 12% and the Gold Coast Agricultural Products Marketing Board 6%, for the period up to 1967. The Institute is short of staff and we recom- mend active recruitment of qualified staff for both demonstration work and long-term research. The Institute should be the center for fundamental research and, in collaboration with regional departments of agriculture and co-operatives, it should test the applicability of the results of research under conditions of commercial production in the various production zones. Short-Term Projects The need for improved harvesting and processing and the thinning of over-dense stands has already been referred to. Improved varietal material is available and the techniques of seed germination, mainte- nance of nursery stocks and successful transplanting to the field have been worked out. More attention should be given, however, to improved nutrition of new plantings and to the interplanting of soil- building crops that will furnish food and provide ground cover to avoid erosion. With this emphasis, the mission recommends an active expansion of replanting with high-yielding varieties. AGRICULTURAL EXPORT COMMODITIES 211 Longer-Term Research In the main oil palm belt the health, vigor and output of the oil palm stands are governed by both soil fertility and moisture supply. The root system has been found to extend 70 feet or more below the surface in the Benin sands; this provides abundant reserves of mois- ture in the dry season, as well as leached nitrates, sulphates and molybdates. Exceptionally dry conditions from December to March with low rainfall in April and excessive cloudiness can prejudice suc- ceeding yields. Long-term research is needed to determine the rela- tionship between oil production and seasonal climatic changes. Knowledge regarding the nutritional needs of the oil palm is incom- plete, and detailed investigation should be made of these requirements. B COCOA Development of P'roduction Cocoa is second only to oil palm produce in its contribution to Ni- geria's export receipts. Like groundnuts, it was introduced originally from Brazil, but whereas groundnuts have become adjusted over sev- eral centuries of annual propagation and. natural selection, there have been only a few generations of cocoa in the 60 or 70 years during which it has been grown in the Western Region. It is an extraordinary achievement of Nigerian cocoa farmers to have made the country a major world supplier in so short a time, especially as little technical guidance was available until production approached current levels. Cocoa was introduced before 1890 and commercial plantings soon developed in the vicinity of Ibadan. Nigeria's first shipment of cocoa was 21 tons in 1895; exports were 205 tons in 1900, 9,260 tons in 1915, and rose steeply thereafter, reaching 103,000 tons in 1937. After a sharp drop during the war years, exports have fluctuated around the 100,000-ton level throughout the postwar period. The quick recovery of cocoa plantings after wartime neglect shows that better cultural management of existing trees can overcome or forestall serious decline in production of aging trees, until such time as recent and projected plantings can come into bearing. The bulk of the cocoa of Nigeria is grown in a fairly limited area around Ibadan. The Western Region has accounted for 95% of total 212 THE TECHNICAL REPORTS output and about 3% has come from the Southern Cameroons. There are limited possibilities for further expansion into the Northern Re- gion and new plantings can be made in the Southern Cameroons and the Eastern Region as suitable soil is found. Quality and Price After being cut from the tree, the pods are left in covered heaps for some days, occasionally being turned, and are then cut or broken; the beans are extracted by hand. After a period of fermentation they are dried, graded and roasted. Fermentation is an important factor in the processing of cocoa-beans. During the war years under-fermenta- tion was common, with a resulting deterioration in quality. In 1947 the Cocoa Marketing Board established four grades of cocoa with marked price differentials. In response to these incentives the pro- portion of top-grade cocoa produced rose from 23% in 1947 to 95% in 1951. The purchase of grades III and IV was discontinued in 1950. Since the beginning of the 1951-52 cocoa season the purchase price paid by the Marketing Board has been £ 170 per ton. Before that it varied between £ 62 and £ 120. In most years selling prices were much higher, resulting in large profits to the Marketing Board. The present purchase price of £ 170 is also low, relative to world market prices.5 Market and Price Prospects World production of raw cocoa averaged 130,000 tons per year in 1901-05, 493,000 tons in 1926-30 and 702,000 tons in 1945-53; in the last few years, it has remained more or less stable. About 90%o of production enters world trade. Over the period 194i-53, Nigeria was third in world production, supplying 14.8% of the total, compared with 34.2% from the Gold Coast and 18.2% from Brazil. The United States, the United Kingdom, Germany, the Netherlands and France together account for about 80%o of total cocoa imports; economic conditions in these countries consequently have a marked effect on cocoa prices. Before the war it was customary for importing countries to hold about a year's supply. While this should have had a stabilizing influence on prices, there were in fact great annual fluctua- 5 See Chapter 4, p. 88. AGRICULTURAL EXPORT COMMODITIES 213 tions, averaging 21% on the falls and 28%To on the rises between 1922 and 1939. Since the war, when stocks in importing countries have been at a minimum, price fluctuations have been even more severe; the fall between 1948 and 1949 was 46%o and the rise between the first half of 1953 and the first half of 1954 was 81%. These fluctuations were largely due to speculation engendered by the technical difficulty of estimating forward cocoa crops and the known wide variations in the size of crops from season to season. The future course of world cocoa prices will depend on a number of factors that cannot be assessed with any degree of certainty. Age of trees, rate of new plantings and incidence of disease will affect future world supplies. Demand will depend primarily on changes in per capita income in the five major importing countries. But technolo- gical changes in the manufacture of confectionery and changes in consumer preference, brought about to some extent by the recent high cocoa prices, may adversely affect the long-run demand for cocoa. Assuming that world economic and political conditions do not deteriorate seriously, world prices for cocoa can be expected to remain at relatively high levels for the next five years. However, very marked swings in prices are to be expected. A new "normal" level for cocoa might be put around 30 cents per lb. c.i.f. New York, with prices tending to rise suddenly from and to fall back to that level. Cocoa quotations averaged 32 cents per lb. over the past five years but actual sale prices were probably slightly lower. Prices for Nigerian cocoa can be expected to follow world prices very closely. Fluctuations in the Nigerian crop, representing one- seventh of world production, will have only a minor effect on world prices. Research and Improvement Although the demand and price prospects for Nigerian cocoa are good for the immediate future, it is important to safeguard the industry through research, rehabilitation and continuous improvement of qual- ity. The Cocoa Marketing Board has allocated funds for West African cocoa research and has financed an economic survey of cocoa-produc- ing areas. It has also made a further endowment of £ 1 million in 214 THE TECHNICAL REPORTS 1950 for expansion of the faculty of agriculture at University College, Ibadan. Establishment of the West African Cocoa Research Institute (WACRI) at Tafo, Gold Coast, in 1944 marked the beginning of well- organized and large-scale research on the cocoa production of West Africa. A cocoa survey was started in both the Gold Coast and Ni- geria, so far directed primarily to disease and insect pest control. Maintenance and Extension of Plantings There are an estimated 560,000 acres of cocoa in the Western Region. The rate of planting steadily rose to a maximum in 1926-31, when perhaps 25,000-35,000 acres were planted per year. Since 1934-36 yearly plantings have tended steadily to decline. Scarcity of accessible new land, wartime conditions, increasing recognition of insect and disease problems and a growing appreciation of the need for approved conditions of soil, husbandry and sanitation have dis- couraged extensive replanting pending the outcome of current surveys. In Nigeria, trees attain peak production between 10 and 15 years of age generally, although under exceptionally favorable conditions it may be reached at age 20-22. In 1953 it was estimated that approxi- mately half the trees were more than 25 years old and that consider- ably more than 70% were 15 or more years of age; the bulk are thus past peak production under existing management conditions. A high percentage of the newer plantings may have limited production capacity owing to the difficulty of finding suitable soils. While these circumstances may result in a considerable decline in production over the next 5 to 10 years, such a downward trend is by no means inevitable. Fairly good returns can be sustained up to 35 years or longer under good maintenance with proper disease con- trol. The mission recommends intensification of the advisory and educational work of the Western Regional Department of Agriculture on improved cocoa management. About 20,000 acres of new plantings should be made each year under favorable conditions of soil management. There is urgent need for improved planting material, combining adaptability to Nigerian AGRICULTURAL EXPORT COMMODITIES 215 conditions with assured high quality. A competent examination and assessment of soils is essential, however, before planting is extended. Cocoa Diseases Cocoa diseases include swollen shoot, a complex of viruses trans- mitted by mealy bugs; black pod disease, a fungus; and damage through toxicity caused by capsid insects. Swollen shoot has had most attention and publicity, but the other two conditions have pro- duced more serious loss. The preliminary cocoa farm survey, begun in 1944, found swollen shoot to be fairly widespread and to affect about 10% of the trees. Failure of an enforced cutting-out program, started in 1946, led to sealing-off in 1950. A determined attempt has been made to close off the area of mass infection, 479,000 acres, and to protect uninfected areas by a "cordon sanitaire." The cocoa farmer is given every pos- sible assistance to control the spread of the disease by cutting-out. Where it is inadvisable to replant with cocoa, alternative crops such as kola, citrus and oil palm have been recommended. Average annual production from the area of mass infection has been estimated at 11,000 tons and loss of production due to the virus at more than 1,000 tons. Black pod disease (Phytophtora palmivora), a fungus which attacks pods, pod stalks and eventually the trunk, has been known in the Cam- eroons since 1905; it is considered to account for 15% average annual loss of Nigeria's total crop, about 15,000 tons. Where it is present, a minimum loss of 50%o is usual and damage frequently exceeds 70%. There appears to be a correlation between infestation and wet condi- tions in July and August but neglect has also been a major factor. A proven method of control by spraying with a solution of copper sulphate and calcium carbide has been extended from the experimental to the pilot phase on 24,000 acres in Ondo Province. However, at present the cost of this method makes its use profitable only where yield capacity is high and loss from disease substantial. Capsid insects (Sahlbergella singularis, Distantiella theobroma), which attack young plants especially, can be controlled by painting DDT emulsion on the stems. Treatment of mature trees is more difficult but could become practicable with spraying equipment. Where 216 THE TECHNICAL REPORTS capsids are present, effective treatment should improve yields by at least 30%. Steps to Be Taken To meet the problems outlined in this section, several things must be done: (a) Application of what is known about disease control, field management and cocoa fermentation, through intensified demon- stration work carried out by the departments of agriculture, with the assistance of the co-operative societies. (b) Continuation of field surveys, especially soil surveys, to find new areas for cocoa planting. Such surveys should be carried out by the regional departments of agriculture under the guidance of the agricultural research institute. (c) Encouragement of new plantings following surveys, financed perhaps by the development corporations or the Co-operative Bank.' Financing should be confined to plantings on soils previously sur- veyed and should be conditional on adoption of officially approved planting and cultural methods. (d) Development of cocoa plantations, preferably undertaken by the development corporations 7 in partnership with the co-opera- tives, and designed to foster settlement by approved farmers. (e) Intensified research on production under Nigerian con- ditions; to this end a sub-unit of WACRI should be set up in the Western Region, with financial support of the regional government if necessary. It should be independent of, but work in close collab- oration with, the agricultural research institute and the regional de- partment of agriculture. (f) Prompt application of substantiated research findings through the regional departments of agriculture. The responsibility for these measures rests mainly with the regional governments, especially that of the Western Region. 6 See Technical Reports Nos. 5 and 9. 7See Technical Report No. 5. AGRICULTURAL EXPORT COMMODITIES 217 C GROUNDNUTS AND BENNISEED Groundnuts and benniseed are grown for edible oil principally in the Northern Region. The former originated in the Andean region of South America and has been cultivated in Nigeria for about four centuries. Benniseed, cultivated extensively in India and Ceylon, is considered native to tropical Africa. Groundnut Production Groundnuts are third in importance among Nigeria's exports. They are grown on over one million acres primarily in Kano and Katsina Provinces (see Map 2 facing p. 193). A nitrogen-fixing legume, the crop is not dependent on soil nitrogen. The shelled grain has a high protein content (26% on the average) and contains 43% oil. The 1950-51 sample census of agriculture indicated a total produc- tion of 299,000 tons in Nigeria and the Cameroons, but the 1950 season was affected by drought conditions. On the basis of the samples taken, the Northern Region produced 287,000 tons from 1.036 million acres. Production is now about 35 %o above the prewar level after a decline during the period 1939-45. There are, however, marked year-to-year fluctuations in output. Purchases by the Groundnut Marketing Board, which averaged 303,000 over the last five years, ranged from 143,000 tons in 1950-51 to 431,000 tons in 1952-53. Domestic consumption is estimated to amount to 100,000 to 150,000 tons, tending to rise in years of poor crops. The average selling price c.i.f. European ports ranged from £ 53 per ton in 1950 to £ 91.10.0 in 1952, dropping to £ 79.10.0 in 1953, while the basic producer price paid by the Board was £ 21.4.0 in 1950 and 1951 and £ 36 in 1952 and 1953. Exports and the Export Market for Groundnuts Exports in 1934-38 were on the average some 230,000 tons a year; after a decline in the early years of the war, they recovered rapidly, and now exceed the prewar level by more than one-third. Oil exports began in 1949 following the introduction of commercial oil extraction 218 THE TECHNICAL REPORTS at Kano and have risen rapidly; the 19,000 tons of oil exported in 1953 correspond to about 50,000 tons of groundnuts. Exports of groundnuts during 1951-52 and 1952-53 have been very much less than the quantities purchased because of transport difficulties (see Technical Report No. 17). Before the war, Nigeria accounted for 29% of African exports of groundnuts and 12% of world exports; it now contributes 5070 of African exports and (because India is no longer a principal exporter) 30% of world exports. Its position as the world's largest exporter is not likely to be challenged in the foreseeable future. Groundnuts are preferred over other oil seeds, nuts and kernels as a source of edible oil but current price relationships do not completely reflect this preference. The price outlook is closely related to the demand and supply position of all oils and fats and in view of the prospect of a slight decline in prices of these commodities over the long term,8 it seems reasonable to expect that in the next few years the price of groundnuts will recede from its 1953 average of £ 79.10.0 per ton, c.i.f., to perhaps £ 60. If the Marketing Board is neither to make a "profit" nor absorb a "loss," this would require a reduction in the producer purchase price from £ 36 to £ 27. The price relationship between groundnuts and groundnut oil may come to favor the latter, since the prices determined by the Joint Price Committee in London, which sets quasi-market prices for oils and fats every week, seem to have reflected a preference for ground- nuts. There has been a keen demand for the smaller supplies of oil- bearing materials, for the United Kingdom mills have been working at about two-thirds of effective capacity. The price of groundnuts, which before the war was about 45% of the price of groundnut oil, is now about 54% of the price of oil. Since the Committee price for groundnuts seems to be in line with other groundnut prices, its price for oil appears low. Imports of groundnut oil into the United Kingdom have been relatively small until recently, but are likely to rise. It will become more important to ensure a correct price relationship between nuts and oil if Nigerian exports of oil increase. 8 See pp. 207-208. AGRICULTURAL EXPORT COMMODITIES 219 Place of Groundnuts in Nigerian Agriculture A principal contribution of the groundnut to permanent agricul- tural welfare lies in its capacity as a legume to combine inert nitrogen from the air with hydrogen to form ammonia and subsequently plant protein. Emphasis on the oil production capacity of this crop has tended to obscure its importance as a basic, protein-rich food and perhaps under certain conditions as a soil-improving crop, at least as far as nitrogen is concerned. Factors of Climate and Soil The great fluctuations from year to year, both in the acreage planted to groundnuts and in the volume of production, are due to the variable rainfall in the North. Lack of effective rainfall in May or early June greatly prejudices the success of the subsequent crop; later plantings, especially under wet conditions and in soils of heavier texture than typical sandy groundnut soils, increase susceptibility to rosette virus. We agree with the decision to conduct soil surveys of existing and possible new areas of production, along the lines already followed in the cocoa soil survey, but believe that special attention should be given to fertilizer needs. At all Nigerian centers so far investigated, groundnuts have re- sponded to superphosphate, containing both monocalcic phosphate and calcium sulphate. Experiments with superphosphate at various Northern points pro- duced increases in yields ranging from 30% to 50%. The fertilizer may be applied either in the production year or to a preceding crop of guinea corn. In an experiment conducted at Kano, the response to superphosphate was on the average equivalent to an increase of 200 lbs. to 300 lbs. of shelled groundnuts per acre, with a value, at a basic producer price of £ 36 per ton, from £ 3.4.0 to £ 4.16.0 per acre. For an expenditure of 10/- per acre-the cost at the time of the mission's visit of an application of 50 lbs. of superphosphate in the Kano district-the initial returns would be about £ 2 to £ 4 per acre with further increases in the two succeeding years at no addi- tional cost. 220 THE TECHNICAL REPORTS Moreover, not only groundnut production but also the yields of associated crops grown in rotation, such as guinea corn, millet and cassava, are increased by the use of fertilizer; pasture and forage crops grown as leys in rotation with groundnuts are also improved. There is evident scope for a campaign by the Northern Regional De- partment of Agriculture to extend the use of superphosphate both for groundnuts and associated crops. The mission recommends that such a campaign be started as soon as possible and be pursued as vigorously as additional staff will permit. The mission is aware of the difficulties and resistance which the introduction of phosphate fertilizer has encountered in the past. But we believe that they can be overcome by intensified extension work and the use of demonstration plots in the villages. We also think that the native authorities themselves should have a financial stake in the fertilizer program; we therefore recommend that initially at least part of the cost of the fertilizer be borne by the native treasuries and that funds be allocated for this purpose in the estimates of native authorities. The groundnut crop will benefit by closer association with rota- tional cropping systems, instead of being grown on the same land year after year. There should be research on further varietal im- provement and experiment with mechanization of planting, harvesting and decortication. The mission also suggests that there is scope for greater local oil extraction and local use of the protein-rich residue as human food and for supplementary animal feeding. Storage of Groundnuts Groundnuts are decorticated by the producers and stored in shelled form. Frequently a high percentage of nuts is broken in the process. Storage in the shell reduces insect damage and keeps the F.F.A. content low, but the extra cost of additional bags and present method of mechanical decortication before shipment makes it uneconomic. Storage in the open air, in pyramids covered with tarpaulins, is preferred to warehouse storage. The better ventilation and more violent diurnal changes of temperature are considered to be less favorable to insect multiplication; damage to the bottom layer of the AGRICULTURAL EXPORT COMMODITIES 221 stack by absorption of moisture from the ground is outweighed by other advantages. Research on problems of groundnut storage is being undertaken by the West African Stored Products Research Unit (see Technical Re- port No. 9). The principal insect pests are the flour beetle (Tribolium casta- neum), the primary pest of groundnuts, which also affects guinea corn, millet and capsicums; the Khapra beetle (Trogoderma granar- ium), which is active at high temperatures and develops particularly in the center of the stack; the West African cocoa moth (Ephestia cautella), the chief cocoa pest, which also affects guinea corn and millet; and the groundnut bruchid (Caryedon fuscus), which affects groundnuts stored in the shell for seed. The flour beetle and West African cocoa moth have been effectively controlled by means of contact poisons such as DDT applied over the outsides of the uncovered stacks. The Khapra beetle can be eradi- cated only by fumigation. A wide range of fumigants is now avail- able and future research should determine those most economical to apply. Improvement of Groundnut Production Improvement should take the form of increased stability of annual production through wider use of superphosphate, rotational and mixed farming, increased local extraction of groundnut oil and better trans- port facilities. The work of the West African Stored Products Re- search Unit should be expanded with the support of the federal gov- ernment. We estimate that the combined effect of these measures will be an annual increase of 5 % in the volume of nut and oil exports over the period 1955-60, aside from a considerable increase in local consumption. Benniseed Benniseed (Sesamum indicum), known elsewhere as sesame and gingelly, appears in both a wild and a cultivated state. The local types are well adapted, especially to the Middle Belt, but are relatively inferior to those grown in other countries. The seed's oil content aver- 222 THE TECHNICAL REPORTS ages 51% and its protein content 18%. The oil, of high quality, is uised principally for margarines and cooking and as a substitute for olive oil; it has long served as a food in Nigeria. On the whole, the crop is easy to grow. It is of value as an alter- native oil crop for the Northern Region, especially in the Middle Belt, but it requires a higher level of fertility than that of most soils on which it is currently grown and is susceptible to insect attack. Yields per acre are considerably lower than those in North, Central and South America, the Sudan, Pakistan and Europe, but higher than those in India and Burma. Exports of Benniseed Exports of benniseed have fluctuated considerably. They rose from 3,000 tons in 1927 to a peak of 18,000 tons in 1934-39. In 1953, 12,250 tons valued at £ 797,029 were exported. The mission sees no immediate prospect for greatly increased ex- ports; export levels over the next five years may increase by 5% per year, rising perhaps to 18,000 tons. Nevertheless, in view of its domestic importance, research should be directed toward finding means to improve varieties, establish their place in permanent farm- ing systems, and determine the most productive fertilizer treatment, crop rotations, measures for insect control and methods of harvest that will minimize loss by shattering. In time, the development of local facilities for oil processing, as for groundnuts, may help to assure stability of the crop. D COTTON Cotton is cultivated by peasant farmers, but unlike the other export crops it is the product of deliberate scientific selection following numerous introductions and trials of types; seed distribution is con- trolled. The improvement of cotton furnishes a good example of varietal improvement for other Nigerian crops. Asian cotton has long existed as a perennial in Nigeria but has no commercial value. American varieties were introduced shortly after discovery of the New World; types deriving therefrom are still culti- vated, but not for export. The present-day cotton industry of Nigeria AGRICULTURAL EXPORT COMMODITIES 223 owes its origin both to the British Cotton Growing Association, which sought to develop production in British Africa and the West Indies from 1902 onward, and to the Nigerian Department of Agriculture. The Association deserves great credit for its outstanding pioneering work. Cotton requires loam to clay-loam soils, deep and of high fertility, a liberal rainfall and long periods of bright sunshine. Only a restricted area in Nigeria offers this combination. Known as the black soil region, it occurs largely in Zaria, Katsina and Sokoto Provinces, stretching from the vicinity of Gusau to Zaria, but extends also north- west in Sokoto Province and to the east in Bauchi Province. The cotton in the North is largely Nigerian Allen (Gossypium hirsutum), developed from North American Allen. An improved selection, "Samaru 26C," is now extensively grown. To the south, an earlier introduction from Peru, known in Nigeria as "Ishan" (G. barbadense), is grown and used in local handicraft manufacture; it is not suitable for modern spinning and only a small amount is exported. The two types are not separated in the distribution of cotton production shown on Map 2 facing p. 193. Samaru 26C is characterized by an un- usually high ginning percentage for cotton of this type; it runs 33-35%o in some gins. A relatively inferior type of American upland (G. hirsutum var. punctatum) occurs in peripheral dry areas of the North. Production and Local Consumption According to the national income estimates, total production of seed cotton ' in 1952-53 was some 84,000 tons, equivalent to 26,000 tons of lint cotton.'° During 1953 the Cotton Marketing Board pur- chased about 50,000 tons of seed cotton yielding 17,700 tons of lint cotton. This suggests that in 1952-53 about 34,000 tons of seed cotton remained in Nigeria or moved to French territory. The producer price of seed cotton has been 6d. per pound for the 9 Seed cotton, or cotton plus seeds, contains about 33% of lint cotton in the case of improved varieties, and below 30% lint cotton in local short staple varieties. A bale of Nigerian cotton lint weighs 400 lbs. 10Tbis estimate is believed to be reasonably accurate and more reliable than the conclusion of the sample census of agriculture for 1950-51, that production of seed cotton amounted to 136,000 tons. 224 THE TECHNICAL REPORTS last three years for Nigerian Allen top grade. Quality of the cotton purchased has varied but on the whole the percentage of higher grade cotton is steadily tending to increase. Ginneries Thirteen ginneries have been established by the British Cotton Grow- ing Association, of which 10 were operating at the time of the mission's visit. The total ginning capacity is 146,000 bales per year; 20,000 bales capacity will be added during 1954. The Association owns and operates all ginneries and acts as the ginning agent of the Cotton Marketing Board. In time, there may be considerable possibilities for industrial use of cotton seed to produce meal, cake and oil. About 400 tons are now fed to cattle. Cotton seed for sowing is given free to the farmers and transported at the expense of the Association. Demand Prospects An increase of 50%o over current production would be required to meet local textile needs. This alone would justify substantial expan- sion of cotton output. On the other hand, development of an efficient textile industry takes time and it is not clear how quickly it should be built up. The prospective overseas demand is immediately relevant, however. It can be expected that even a substantially expanded production will find a ready market in the short term, although the more distant outlook is less assured. During the next five years, no very significant increase in world production outside the United States is foreseen. World consumption in recent years has been fairly steady at around 33 million bales, while synthetic fiber production capacity, now equiva- lent to 13 million bales of cotton, continues to increase. This competi- tion will tend to keep cotton prices down. Since United States stocks of cotton are likely to be maintained or increased under its present production policy, there will be growing pressure to increase exports. Some fall in prices below the United States support level (or the equivalent in special deals for export) may be expected. On the basis of these factors, assuming no marked deterioration in the world eco- AGRICULTURAL EXPORT COMMODITIES 225 nomic situation, the price of cotton as represented by United States Middling 15/16 might be expected to fall to between 25 cents and 30 cents per lb. spot United States during the next five years. A conservatively estimated price for Nigerian cotton would be the equiva- lent of 25 cents per lb. spot United States, corresponding to a Ni- gerian producer price of 5-51/2d. per lb. for seed cotton, compared to the current price of 6d. Extension of Cotton Production The knowledge and improved varieties now available should permit doubling of cotton output in the next 10 years in existing areas of production by effective extension agronomy. The mission therefore suggests that the advisory services of the Northern Regional Depart- ment of Agriculture, in collaboration with the Empire Cotton Growing Corporation, foster an active extension program designed to improve acreage yields of existing farms and to open up new lands for plant- ings on the basis of soil surveys. Cotton is now a proven crop and can be grown two years in suc- cession. It tolerates the soils with a high carbon-nitrogen ratio common in uncultivated areas of the North, soils that are less suitable for grain crops. It is important, however, that the land be prepared efficiently and that seeding be accurately timed; cotton planted in early July yields twice as much as that planted three weeks later. Application of artificial fertilizers will become increasingly important; it appears certain that superphosphate and possibly some nitrogenous fertilizer will be required for the most efficient cotton production. Mechanization can be of considerable value in list-plowing, prepara- tion for seeding, seeding and manuring, weed and grass control and control of insects. We therefore recommend experiments with mechan- ized equipment, although mechanized production may not be prac- ticable for some time. The chief limitations on production are soil fertility, decreasing rainfall to the north, and increasing insect attack towards the south. The cotton strainer (Dysdercus superstitiosus) is a principal pest from north to south, and four other types of bollworm, including the pink (Platyedra gossypiella), the spiny and American bollworms and the false codlin moth could also do serious damage. 226 THE TECHNICAL REPORTS ii OTHER AGRICULTURAL EXPORTS A RUBBER Rubber exports have become increasingly important in recent years. Climatic conditions in the southern forest areas are excellently suited to rubber production. There are at least 10 indigenous rubber-pro- ducing plants. Funtumia elastica, the Lagos silk rubber tree, and F. Africana have both been extensively tapped. Several species of Landolphia occur as vines, with stems often four to five inches in diameter. Species of Cardopinus and Clitandra have also been tapped commercially. Moreover, the facility with which standard para rubber (Hevea brasiliensis) has been grown, and its yield in the Western and Eastern Regions and in the Cameroons, indicate potentialities for increased rubber production. Since its introduction about 50 years ago, Hevea rubber has been grown by small landholders in the dense, irregularly spaced stands common in the eastern part of the Western Region, and in plantations in the Eastern Region and the Cameroons. The United Africa Com- pany's rubber estates at Ikot Mbo, near Calabar, and near Sapele exemplify the efficiency attainable in both field culture and factory operation. Improvement of budding material and adoption of high field and factory standards by small landholders through co-operatives could assure a greatly expanded rubber export industry. Exports Exports from Nigeria and the Cameroons have increased from an annual average of some 2,300 tons in 1934-38 to over 21,000 tons in 1953. Smallholder and Plantation Production Between 1944 and 1952 the amount of rubber produced by small- holders and graded by the Department of Marketing and Exports ranged from 3,400 tons in 1947 to a peak of 15,600 tons in 1951. Plantation rubber, which is not graded, varied from 2,800 tons in 1948 to 5,900 tons in 1951. The peak output in 1951 corresponded AGRICULTURAL EXPORT COMMODITIES 227 to a period of maximum world prices. Both smallholder and planta- tion production fell subsequently but recovered in 1953, when exports reached a new record volume though at prices far below those which prevailed in 1951. Expansion of Production A mission of the London Rubber Trade Association, which visited Nigeria in the latter part of 1953, concluded that a substantial expan- sion of rubber production was advisable despite the uncertainty of world demand for natural rubber resulting from the growing competi- tion of the synthetic product. We agree with this conclusion. Nigeria's rubber output, even if it expands many times in the next few years, will represent only a minor addition to the total world production of over 2.5 million tons of natural and synthetic rubber, and Nigeria clearly has the potential to become an efficient low-cost producer. Significant shortcomings in present methods of rubber production can be overcome on the basis of knowledge and materials already available. New plantings should be organized through co-operatives, with proper technical guidance. Provision should be made for immediate collection by truck, organ- ized tapping and appropriate factory accommodation. Construction of two factories by the Western Regional Production Development Board provides a means for improving the quality of rubber from smallholders' latex and assuring fair prices to the pro- ducer. One, at Ikpobo, is to be supplied entirely by nearby small- holders."1 The other is planned in conjunction with a plantation of 4,000 acres at Usonigbe to yield five million pounds of rubber per year. An area of 1,000 acres was planted in 1953. The latter project will combine commercial production with practical research on bud- ding and on the most efficient spacing of trees, permitting intercrop- ping with food crops such as cowpeas and cassava, and, when the trees are mature, with legume-grass forage. 1i See Technical Report No. 13, p. 390, for comiiient on the commercial possibili- ties of this undertaking. 228 THE TECHNICAL REPORTS Cameroons While much of the Nigerian rubber has been of the soft type, though with high modulus and good ageing properties, Cameroons rubber is said to be of a good quality hard type, with good wearing properties; it is suitable for tires. The Cameroons Development Corporation is currently producing rubber on 17,000 acres with excellent results. Its current rate of planting is about 1,500 acres per year. It is estimated that a minimum of 25,000 acres of the lands leased to the Corporation could be effec- tively developed for rubber production. We think considerable possibilities exist for additional rubber pro- duction outside the Corporation's plantations; they should be investi- gated through a survey of soil resources, taking into account food crop requirements, forest needs and the possibility of alternative export crops. Eastern Region Possibilities for increasing rubber development exist also in the Eastern Region, especially east of the Cross River in Calabar Province, but much of this area is occupied by forest reserves and consideration must be given to competing food and forest requirements. Organization Requirements The mission suggests that the production development recommen- dations of the London Rubber Trade Association be acted upon without delay. The first requirement for efficient operation of plan- tations in all regions is the training of tappers, tank collectors and processors. Trainees of the Western Regional Production Develop- ment Board have been given specialized training in nursery pro- cedures, budding and grafting, plantation management, tapping and rubber processing. It is recommended that such training be inten- sified in the Western and Eastern Regions and the Southern Cam- eroons. For the time being, this type of training and experience can probably be best obtained in Nigeria, under the conditions that will govern future local production. Later, it may be desirable to select AGRICULTURAL EXPORT COMMODITIES 229 a limited number of promising young Nigerians to take additional training at the Rubber Research Institute in Malaya, with a view particularly to providing guidance to smallholders through co-opera- tives. The mission recommends appointment of several senior rubber production advisers, responsible to the directors of agriculture for the Western and Eastern Regions and the Southern Cameroons respec- tively. Their qualifications should include advanced technical training and extensive practical experience in rubber production. The mission further recommends as a matter of high priority that, in order to overcome the reputation of Nigerian rubber for extreme variations of quality with a high proportion of inferior grade, produce inspection be more rigidly enforced and grades be adopted in strict conformity with accepted world standards. To facilitate the change from present methods of purchase and trade, a series of special grades may be required for a time, in line with those used at Singapore. B BANANAS Sources of Production Bananas for export are grown in the Southern Cameroons. The variety is Gros Michel. Although the climate in the south of Nigeria proper is suitable on the whole, an entirely favorable combination of soil and atmospheric conditions is rare. The plantain banana (Musa paradisiaca) is grown extensively in the South, together with coco- yams, and banana trees are used increasingly to provide early shade in cocoa re-planting. Except for a small quantity produced by the Bakweri Co-operative Union of Farmers, Ltd. which has over 100 members, banana exports have come entirely from plantations leased to the Cameroons Develop- ment Corporation and Messrs. Elders and Fyffes, a subsidiary of the United Fruit Company. These covered 8,400 and 5,000 acres respec- tively in 1946. Expansion has been pushed rapidly and plantings by the Cameroons Development Corporation alone have increased to approximately 25,000 acres. Under arrangement with the British Min- istry of Food, shipping and marketing facilities were provided and a target for the Cameroons of four million stems was attained in 1948. 230 THE TECHNICAL REPORTS From 1951 onward the target was eight million stems per annum but, largely because of wind damage and disease, only 75% of this amount was produced and a little over 70%o shipped in 1952. There was a marked gain in average weight per stem, however. World Demand World exports of bananas now probably exceed the prewar level of some 2.5 million tons. During the war banana exports and produc- tion fell sharply. A supply shortage after the war, as trade was resumed, caused a substantial rise in prices to some 127%o above the prewar level in 1952. Central America supplies almost half, South America one-third and Africa (including the Canary Islands) one-sixth of world exports. The Southern Cameroons contribute 3% of the world total. Europe accounted for 30% of world imports before the war; by 1952 Euro- pean imports exceeded the prewar level. Increased European, and particularly U.K., consumption should maintain a strong demand for the Cameroons' exports. Soil Conditions and Fertility A 1949-50 soil survey by the United Fruit Company, on behalf of the Cameroons Development Corporation, rated 28,900 out of 82,800 acres surveyed as first-class banana land, a further 9,900 acres as second-class and the remaining 44,000 acres as unsuitable for banana cultivation from the standpoint of soil texture. The basis of selection was primarily physical, however, and did not take adequate account of nutritional properties; on many of the sites surveyed natural leach- ing, past cropping and to some extent erosion have impoverished soils. Moreover, hazards of exposure to wind and occasional sudden drops of temperature were not considered. The soil fertility problem in particular requires further investigation. The mission believes that it is particularly important to apply fertilizer in the early stages of development. But since no investigations have been made in the Cameroons of the nutrients required by the soils in which bananas are grown, it is uncertain that sulphate of ammonia, which has been extensively supplied, meets the specific requirements of the Cameroons. AGRICULTURAL EXPORT COMMODITIES 231 The mission hesitates to suggest a reduction of the fertilizer program but stresses the need for a continuous program of field tests to deter- mine the amounts of sulphate of ammonia required on different soil types according to the age of the banana plant, and the amounts of additional nutrients such as phosphorus, copper, molybdenum, mag- nesium, zinc and potassium that may be required. It is most impor- tant that fertilizer tests be conducted during the various seasons and over a period of years, so that the effect of seasonal changes on nutritional needs may be observed. These tests should be conducted by co-operative arrangement between the Southern Cameroons de- partment of agriculture and the Corporation. Wind Damage and Disease When the Corporation's activity began in 1947 it was recognized that storms of unpredictable incidence and severity were likely to occur at the start of the wet season, so that the Corporation would have to budget for a loss of between 10% and 20 % of its annual production. The mission believes, however, that the damage could be reduced by establishing forest plantations at strategic points, as wind-breaks. The two principal diseases of the export banana are Panama disease (Fusarium oxysporum var. cubense) and leaf spot (Cercospora musae). The latter has not been troublesome in the Cameroons but the former has spread rapidly. Cigar end disease (Stecliybidium theobromum) has not previously been regarded as a particularly serious cause of loss in exporting countries but in the past two years crops in some of the best plantations in the Southern Cameroons suffered severe damage from this disease. The downward movement of cold air currents from Cameroon Mountain at critical times may be partly responsible. Research on Bananas The mission's recommendations for the proposed agricultural re- search institute at Ibadan and for the establishment of a Cameroons department of agriculture provide means for attacking the research problems of banana production. Research in four main fields is needed: 232 THE TECHNICAL REPORTS (a) determination of nutritional requirements of the Cameroons banana soils and of practical ways to overcome the deficiencies; (b) tests of disease control by spraying; (c) varietal improvement; and (d) tests of forest plantations as shelter belts. The work of varietal improvement should include the breeding of disease-resistant types of good marketable quality. Tests in com- parison with standard Gros Michel should be made with Cavendish (Musa cavendishii) and new hybrid material as it becomes available from the Imperial College of Tropical Agriculture, Trinidad. The tests of forest plantations should be carried out by the Corporation in consultation with the Institute of Forest Research, Ibadan, and the Cameroons Forestry Department. No time should be lost, however, in establishing plantations of trees already known to grow rapidly in the Southern Cameroons. The mission has already stressed the importance of soil survey gen- erally; we recommend that surveys be undertaken to locate additional good banana-growing areas. C HIDES AND SKINS Hides and skins are among the 10 most important Nigerian export commodities, accounting in 1953 for receipts of £ 3.4 million. The record exports of 1951 reached almost £ 8 million. In most years goat skins make up more than half the exports. They come almost entirely from the Northern Region, largely from domestic slaughterings but partly also from animals in French territory. Cattle hides also come mostly from the Northern Region and French areas, although some are bought in meat-consuming centers in the South. Some 95%o of all goat skins and almost all hides and sheep skins are exported untanned, after a minimum of processing. Tanning of goat skins is practised as a rural craft in the Northern Region, using a local extract from the pods of Acacia arabica. Tan- ning is not a major industry, although some expansion to cover local leather requirements is possible."2 Nigerian hides and skins enjoy a reputation for good quality in export markets. The skins of red Sokoto goats are widely used in 12 See Technical Report No. 13, p. 388. AGRICULTURAL EXPORT COMMODITIES 233 the production of "Moroccan" and other fine kid leathers. Nigerian sheep skins make good grain and suede glove leather. Careful handling on the part of export firms. further assures high quality standards. The Veterinary Department has helped to spread improved methods of flaying and drying. Exports of Nigerian origin are likely to increase in the future, in line with the expansion of the livestock industry and the growth of meat consumption. There are, however, two aspects of the trade which require attention. One is the heavy incidence of skin diseases, particularly the Kirchi disease, which adversely affects the quality of cattle hides. Investigations and tests to find the most effective remedial measures under Nigerian conditions are required. The other is the need to provide economic incentives for more efficient processing. The fact that payment of slightly higher prices for suspension-dried hides and skins has resulted in general adoption of suspension drying indi- cates that improvement may be expected from the introduction of quality differentials. D OTHER PRODUCTS Present Production and Exports A large number of export products is derived from plants occur- ring naturally, minor crops and other sources. There has been con- siderable variation in the volume exported from year to year, depend- ing on price levels and available supplies. It is not proposed to deal with these minor exports in detail; a summary of their volume and value in 1952 and 1953 is given in Table 1. Possibilities for Development Some of the products listed in Table 1 and others not specified in the Table offer good possibilities for improvement and development. Chief among them are copra, gum arabic, peppers, citrus fruit and cashew nuts. Copra, from the coconut plant (Cocos nucifera), has frequently been of low quality. Artificial drying, if successful, would greatly enhance the prospects for this product. The coconut palm grows readily on 234 THE TECHNICAL REPORTS TABLE 1 Exports of Miscellaneous Produce (all figures in thousands) Quantity Value (£) Commodity Unit 1952 1953 [952 1953 (a) Nuts and dried fruit Shea nuts .................. ton 15 1 497 18 Copra ...................... ton 4 6 200 402 Coconuts ................... no. 520 416 8 7 Kola nuts' ............... lb... Ib. 554 487 7 7 Dried bananas ........lb...... lb. 524 519 27 26 Other ...................... Ib. 1 557 0.2 17 (b) Gums Gum arabic ............. l.... b. 5,633 4,098 218 134 Other ...................... lb. 445 374 37 57 (c) Spices Ginger .....................l b. 1,022 465 62 16 Peppers, chillies ........ ..... lb. 413 717 37 50 Capsicums ................ l.. b. 9 11 0.4 0.7 Other ...................... l b. 60 33 5 4 (d) Fibers Piassava .................... lb. 3,547 5,545 114 202 Kapok .................l.... lb. 530 575 54 36 Other fibers ........... lb..... lb. 217 4 8 0.3 (e) Fresh fruit and fruit juice Pineapples ................ lb.. Il 17 9 0.2 0.2 Other frnits ............. lb.... I. 175 843 2 16 Fruit juice .................. gal. 46 39 19 8 (f) Other Beeswax .................... l b. 110 98 17 14 Bones and horns.. - - 62 52 Ghee (clarified butter) .....l. b. 5 52 0.3 7 Oilseeds other than benniseed and cotton seed.- - - 317 264 Grains, pulses, flour, meal2 . - - 301 446 1 Estimated total production 1952-53, 120,000 tons; domestic long-distance ship- ments by rail and lorry, 60,000 tons. 2 Including maize and palm kernel meal. souRcE: Nigeria Trade Summary, Lagos. AGRICULTURAL EXPORT COMM%IODITIES 235 the light, sandy soils bordering the coast. Coir from its fibers could probably be used in a wide range of locally manufactured products; it has an overseas market for use in filling upholstery and mattresses. In view of the adaptability of the coconut palm to condlitions in the South, the variety of products that can be obtained from it, and a reasonably certain overseas demand for some of these products, the mission believes that the development of this. crop should be given early attention. We recommend that plantations be dleveloped at first on a moderate scale by the proposed development corporations of the Eastern and Western Regions, in consultation with the proposed agri- cultural research institute anid the departments of agriculture of the two regions. Investigation of the possibilities for expanding the output of gum arabic and measures to improve methods of tappingz and preparation should be undertaken by the Northern Regional Department of Agri- culture. Peppers include the red peppers, chillies and capsicums (Capsiclunl spp.), and the black and whlite pepper (Piper nigrurtn). Nigeria's exports are species of Capsicum. The mission believes that the depart- ments of agriculture of the regions, in consultation with the agricul- tural research institute, should undertake a studly of both the red pepper group and black pepper, wvith a view to improving the types grown, production per acre, preparation for market and quality to suit overseas demand. Citrus grows exceptionally well in the lbadan area and some orange trees have produced good yields up to the age of 20 to 30 years. Excellent budcding material from proven stock is available at Moor Plantation; because of scab on sour orange stock in the nursery, sweet orange stock has been employed. Since large exports of fresh fruit from Nigeria have not been con- sidered practicable, the aim has been to produce concentrated orange juice for canning (see Technical Report No. 13, p. 379). To supply this project, a target for citrus plantings was set originally at 1,750 acres and in 1952 was revised to 3,000 acres to be planted by 1954; actual production has lagged three years behind the target figures. The planting of some 350 acres of citrus was planned as a partner- ship project of the Western Regional Production Development Board 236 THE TECHNICAL REPORTS and the Asejire and Odeyika group of co-operatives but a soil survey indicated that most of the land was unsuitable. Since it is still planned to proceed with such projects the mission emphasizes the importance of prior study by the expanded technical services recommended in Technical Report No. 10. The cashew nut tree (Anacardium occidentale), native to Central America and the West Indies. had been developed on 800 acres up to 1953. Expansion of this plantation and the establishment of other plantations has been planned by the Eastern Regional Production De- velopment Board, which allocated £ 200,000 for the project. Useful production is expected in five years with maximum production in about 10 years. The cashew nut is the only economic source of natural phenol. The fruit contains 20% of kernel and 20% phenol, plus drying oil in the pericarp. In view of the overseas demand for the nut and the adaptiveness of the tree to the poorer sandy soils in the Eastern Region, the mission recommends extension of this crop after soil surveys by the Eastern development corporation in consultation with the regional department of agriculture. Other Crops Coffee (Coffea arabica) has been grown successfully in the Bamenda area of the Southern Cameroons and could well be extended in this region. First, however, the appropriateness of the varietal material now in use, the requirements of the soil and the present techniques of planting and management should be reviewed. The mission recom- mends that an expert on coffee production be asked to report on whether the crop is ready for immediate expansion or whether further local research is needed, and in the latter event to define the lines of such research. Tea (Camellia sinensis) has been grown successfully near Buea in the Southern Cameroons. It is likely that a considerable area could be planted to tea at suitable elevations. The mission recommends that an expert on tea production be employed to make a survey and report on the areas in which tea could be developed, the varieties that should be subjected to local test, safeguards against soil erosion and methods of pruning, harvesting and preparation for producing a high quality product. If the report is favorable to development, a tea adviser should AGRICULTURAL EXPORT COMAMODITIES 237 be appointed to the department of agriculture of the Southern Cam- eroons, and commercial plantings should be undertaken by the Cameroons development agency when the necessary studies have been made. Pineapples (Ananas sativa) and tomatoes would be valuable crops for canning. Pineapples have been grown successfully in both the Western and the Eastern Regions but initial testing is still at an early stage. Many varieties have been grown; it is essential to utilize the smooth cayenne type. Tomatoes, a source of vitamin C, could be developed on sufficiently fertile soil in all three regions. Pawpaw or papaya (Carica papaya), indigenous to Central America and the West Indies, is readily grown in the southern part of Nigeria and in the Southern Cameroons, where fruit forms within 12 months from planting. The unripe fruit produces latex containing the enzyme papain which is used in medicine, beverage manufacture and meat tenderizing. There should also be a good local demand for the ripe fruit. Before developing this crop the improved American varieties should be tested in comparison with local types, and soil requirements, cultural methods and techniques of tapping and processing papain should be verified locally. The avocado or alligator pear (Persea gratissima) is also suited to Nigeria and should receive early attention because of its high nutritive value. The types so far grown in Africa are inferior, on the whole, to the improved varieties now available in Central America and the United States; these should be imported and tested locally before com- mercial development is planned. TECHNICAL REPORT 8 DOMESTIC CROPS, LIVESTOCK AND FISHERIES For many years scientific research and commercial enterprise have concentrated on export crops, while locally consumed foods have received little attention. Yet the future welfare of the country and its capacity to support an increasing population depend largely on in- creased production of foodstuffs for local consumption. Food production is largely on a subsistence basis; only a small proportion of the vegetable food grown enters into trade beyond the village markets. The collection of wild vegetable produce has been important in the past, but will probably give way to a greater depen- dence on cultivated foods as development progresses. THE BASIS OF NUTRITION Gieneral Nutritional Standards Average food consumption in Nigeria compares favorably witlh that in many other underdeveloped countries although it is unsatis- factory by European or North American standards. Since only a small proportion of arable land is under cultivation, gross food short- age will not be a problem for some time to come. In some areas, hiowever, particularly in the Eastern Region, population pressures have become serious in recent years, leading to disregard of traditional fallow metliods; soils are being exhausted and yields lowered. In the North, the high variability of seasonal rainfall causes alternating periods of abundance and scarcity; this situation is aggravated in the Middle Belt by failure to employ proper storage tecl-niques. Comprehensive data on nutrition are not available. From produc- tion figures, however, and some studies of diets in particular areas,1 a i Studies made by Dr. B. Al. Nicol, adviser on nutrition to the Inspector General of M1 edical Services. 238 DOMESTIC CROPS, LIVESTOCK AND FISHIERIES 239 reasonably accurate general picture of nutritional standards and the composition of the diet can be obtained. Calories Average calorie intake in Nigeria is about 2,250 calories per day. In the grain-producing North it is higher; in most of the higlh forest areas it is well below the average. Protein Vegetable protein is available in sufficient quantity in the North, where guinea corn, groundnuts, pulses and locust beans are part of the diet, and in urban areas. It is insufficient in the South generally, particularly in the diet of the fishermen in the area of the mangrove swamps. The animal protein intake is generally very low because meat pro- duction is severely restricted by the prevalence of the tsetse fly. Most of the animal products are consumed in urban centers, in prosperous sections of the Western Region, in fishing districts ancl in tsetse-free areas where animal husbandry is concentrated. Imported dried fish is consumed principally in urban areas of the South, two-thirds by the Eastern Region. The animal protein available for the majority of the population is considerably lower than the national average. Milk is wholly-absent fromn the diet of at least three-fourths of the popu- lation. Protective Nutrients Calcium is deficient in all rural diets except that of fishermen. Iron may be considered generally adequate by European standards but is not sufficient to counteract the heavy infestations of malaria and intestinal parasites prevalent in Nigeria. Iodine is deficient in parts of the Middle Belt and the Plateau area where potassium carbonate is used instead of salt. The palm oil and palm wine of the forest zone are sources of Vitamin A but that vitamin is deficient in some parts of the North. Vitamin B. is generally sufficient and vitamin B2 (ribo- flavin) deficient. Vitamin C is deficient, although partly supplied by 240 THE TECHNICAL REPORTS chillies. Vitamin D is sufficient in areas where there is not an im- portant deficiency in calcium and where the exposed body receives enough ultraviolet rays from the sun. In Table 1, estimates for Nigeria are compared with data on other countries. The Table indicates a per capita calorie intake similar to that of Egypt, Brazil and Southern Rhodesia, substantially below that of Europe, North America and Cuba, and significantly higher than that of the Belgian Congo and India. A Nigerian average over sev- eral years would possibly be lower than 2,250 calories; 1952-53 was a good crop year. The Table also shows the exceedingly low level of protein consumption, particularly of animal protein. TABLE 1 Calorie and Protein Content of National Average Food Supply Number of Protein per Capita per Day Countries Years Calories per (grams) Capita per Day Vegetable Animal Total Nigeria ........................ 1952-53 2,250 45 5 50 average of recent years Developed Western countries .... 3,000 45 45 90 Cuba ........................ 1946-49 2,740 42 26 68 Brazil ........................ 1946-49 2,340 38 26 64 Southern Rhodesia ............. 1949 2,300 52 16 68 Egypt ........................ 1946-49 2,290 58 11 69 Belgian Congo ................. 1946-49 1,930 37 5 42 India ........................ 1949-50 1,700 38 6 44 SOURCE: Nigeria: estimates of mission; Other countries: Second World Food Survey, United Nations Food and Agricultture Organization, Rome, 1952. Underlying the national average are wide variations within the country in calorie and protein intake. Table 2, which summarizes the findings of the enquiries mentioned earlier shows the extent of these variations. DOMESTIC CROPS, LIVESTOCK AND FISHERIES 241 TABLE 2 Variation in Nutritional Standards Protein in grains Occupation Calories Vegetable Animal Total Northern Region Bida ................... Farmer 2,639 70 5 75 Kontagora ............... Farmer 2,431 72 1 73 Zuru ................... Farmer 2,947 87 2 89 Western Region Warri ................... Trader 3,003 34 50 84 llu ................... Farmer 2,252 26 17 43 Soragbemi ............... Fisherman 2,191 12 68 80 Requirements for Improvement Correction of the main dietary deficiencies will require increased consumption of animal protein in the villages and by the poorer urban population, increased calorie and vegetable protein intake in the for- est belt, and provision of additional calcium and riboflavin for the whole population. The solution of the problem of animal protein deficiency will re- quire time and effort. Production of animal protein is expensive in terms of agricultural resources, since it takes seven vegetable calories to produce one animal calorie, and there is no surplus of vegetable products available for animal feed. Nevertheless the general pattern of climate and soils provides a good basis for expanding livestock production and building soil fertility at low cost. Pasture improve- ment and livestock husbandry can utilize these natural resources, while providing for an expansion of food crop production as a long- term consequence. Intercropping with leguminous forages and the extended use of animal manure will also do much to improve soil fertility. But Nigeria will also need to secure better animal disease control in order to take full advantage of the opportunities available for livestock production. Specific recommendations on disease con- trol anA pasture improvement are made at pp. 265-275. In other tropical countries protein deficiency has been partly met by increased supplies of fish, the cheapest form of animal protein. Recom- 242 THE TECHNICAL REPORTS mendations for the expansion of fisheries production can be found on p. 281 below. The vegetable protein deficiency in the forest belt is believed to be due primarily to a lack of soluble nitrogen in the heavily leached soils and a relative paucity of legume grains. Soil analyses have shown that the nitrate content of the soil may be high at the beginning of the rainy season but that it soon falls acutely with the ensuing heavy rains. Here increased cultivation of legumes, whichi provide vegetable protein and at the same time correct the nitrogen deficiency, should be undertaken. A change from roots to grains as staple food in the forest belt would also improve the intake of vegetable protein. Rice production in the mangrove swamps, as well as maize production, could be developed in the South. Studies should be made of the com- parative nutritional value of various available supplements to the basic diet of root crops in the South, such as palm oil, groundnut products, other pulses and animal protein. In the North, apart from some overpopulated areas, the supply of both calories and vegetable protein is generally adequate in good crop years. The main problem is the periodic occurrence of droughts. Their effect can be reduced through tilling and sowing at appropriate times and through better fertilizer practices. Improved grain storage also can help to overcome both the annually recurring shortages and the acute famines of the drought years. ii FOOD CROPS A ROOT CROPS Relative Importance Root crops represent an estimated 53% of the value of all food produced for domestic consumption. They are the basis of nutrition throughout the South. Yams and cassava are the most important, accounting for over 90% of total root crop production as against 5% for cocoyams and 2.5% for sweet potatoes. Yams (Dioscorea rotundata, D. cayenensis, etc.) grown in Nigeria are of West African DOMESTIC CROPS, LIVESTOCK AND FISHERIES 243 origin; cassava (Manihot utilissima), commonly used in the form of meal (gari), is a native of South America. According to the sample census of agriculture, 1950-51, 3 million acres under yams produced 9.3 million tons, and 2.5 million acres under cassava produced 10.6 million tons. The root crops are essentially producers of calories. Their protein content is low: 0.9% for cassava and 2.1% for yams. These two crops have made available for human consumption 11,410 billion calories a year as compared to 8,900 billion from guinea corn and millet. But although the volume of root crop production in 1950-51 was seven times that of guinea corn and millet (19.9 million tons and 2.8 million tons respectively), the root crops produced only 182,400 tons of protein as against 215,000 tons from the grain crops. The census data indicate that cassava produced a higher gross yield than yams from a smaller acreage; the more modest nitrogen require- ments of the cassava, which is reflected in its lower protein content, chiefly accounts for this. The yam crop is generally more exacting: it requires a more liberal, extended and dependable rainfall; it has to be staked, will perish if left in the soil after harvest-time, and a com- paratively high proportion of the crop has to be used for replanting. For these reasons farmers tend to prefer cassava, especially under con- ditions of soil depletion, despite the higher nutritive value of yams. The suitability of cassava for pig feeding will further encourage its cultivation. Distribution Map 2, facing p. 193, shows the distribution of these and other food crops based on the 1950-51 census. The Eastern Region ac- counted for almost 60% of Nigeria's total output of both roots. Yams were grown in greatest quantity in Ogoja and Owerri Provinces of the Eastern Region and Benue Province of the Northern Region. Most cassava was produced in Owerri, Onitsha and Calabar Provinces of the Eastern Region. Yields per acre tended to increase from west to east;, for yams they ranged from approximately 4,000 lbs. to 10,000-11,000 lbs. per acre, and for cassava from 3,000-4,000 lbs. to 11,000-12,600 lbs. per acre. The emphasis on yam production toward the more north- 244 THE TECHNICAL REPORTS erly parts of the Eastern and Western Regions and in the drainage areas of the Benue and Niger valleys reflects higher soil fertility and coincides with heavy demand. in the larger cities and towns immedi- ately to the south. Cassava predominates on the less fertile lighter soils nearer the coast, with some production in the Kano, Bauchi and Bamenda areas. Responses of Yams to Fertilizers The importance of increased soil fertility for food crop production in the Eastern and Western Regions is stressed by numerous field experiments of the departments of agriculture. In one such experi- ment, conducted in Onitsha Province, a 50%o increase in yield per acre was obtained after application of artificial fertilizers in the pro- portion of two parts of sulphate of ammonia to one part of super- phosphate and one part of potassium chloride, at the rate of three cwts. per acre. Cocoyams Cocoyams (Colocasia esculenta), supposedly introduced from India via Northeast Africa, are confined mainly to wet areas, principally in Ogoja, Calabar and Owerri Provinces of the Eastern Region, with smaller amounts in the Western Region and the Southern Cameroons. According to the 1950-51 census, production was 965,000 tons, about two-thirds from the East. Yields per acre are low, reflecting the poverty of the soils in which the crop is grown. Sweet Potatoes Sweet potatoes (Ipomaea batatas), indigenous to South America, are intermediate between yams and cassava in nutrient value, but require friable soil of good fertility. The sugar content of the tubers and the value of the leaves and stalks for livestock feeding or for human consumption in the form of greens make them advantageous. Total production in 1950-51 was 475,000 tons, of which 23,000 were grown in the Cameroons. The crop is cultivated most exten- sively in the area south of the Benue and Niger, with yields approxi- DOMESTIC CROPS, LIVESTOCK AND FISHERIES 245 mating 5,700 lbs. per acre; higher yields of 8,300 lbs. per acre were obtained further north where the soil is more fertile, and in Bamenda Province. Research and Extension Local studies should be made on both yams and cassava, with regard to varietal differences, nutritional requirements, their role in mixed farming systems, storage and possibilities for improved processing. The short-run value of sulphate of ammonia in improving soil fer- tility has been demonstrated but it should be supplemented by research on permanent soil-building leguminous forage. The mission recom- mends that the departments of agriculture intensify current programs of fertilizer trial and demonstration with yams and cassava in localities where the crops exhibit clear symptoms of the need for soil improve- ment. The lack of success of the fertilizer program of the Eastern Regional Production Development Board indicates clearly the need for a vigorous educational campaign to convince producers of the advantage of fertilizers. One aspect of this campaign should be the establishment of demonstration plots with the co-operation of village authorities and co-operatives. It is also recommended that the depart- ments of agriculture collaborate with the proposed agricultural re- search institute in a research program on methods of permanent soil improvement through the growth of legume forages and legume-grass herbage mixtures, combined with fertilizer application and sound crop-rotation systems. The usual practice of leaving the crops in the ground after harvest time entails heavy loss through spoilage. The mission recommends investigation by the departments of agriculture of the most effective means of storage for both yams and cassava. In view of the importance of root crops in the food economy of the South and Middle Belt the recommended research should have high priority in the agricultural program. B GUINEA CORN, MILLET AND RELATED GRAINS Guinea Corn Guinea corn (Sorghum spp.) is currently the most important grain crop of Nigeria. According to the 1950-51 census, 1.9 million tons 246 THE TECIINICAL REPORTS were grown on 4.3 million acres in 1950, more than one-quarter in Kano Province and a further 25% in Adamawa and Bornu Provinces. Yields averaged 950 lbs. per acre but were as high as 1,300 lbs. in Sokoto Province. Guinea corn commonly grows 10-12 feet high in northern Nigeria. The dry stems are used for fuel, basket and mat making and a variety of structural purposes, and as stakes for climbing plants such as yams, gourds and beans. Green leaves can be used as fodder for livestock. The entire crop may be cut for direct feeding, silage or hay. Guinea corn is more drought-resistant than maize, is safer to store and possesses a comparable food value. An increase in yields can be obtained by the use of improved varieties, by raising soil fer- tility, by more effective use of the crop in rotational mixed farming and by increased mechanization. Work on improvement of guinea corn varieties was started at Samaru in 1951 by arrangement with ECA, following a 1949 report on agricultural problems and research needs in British Africa. It has since been interrupted because of shortage of technical staff. Im- proved material, including varieties with shorter straw adapted to mechanical harvesting, was brought to Nigeria from the United States. The mission recommends that breeding work on guinea corn be intensified and continued at a number of selected Northern centers. The soil requirements of guinea corn are similar to those of maize but it is adapted to more arid conditions. Guinea corn requires a good level of soil fertility; this has long been recognized by the Hausa farmer, who places a high value on animal manure. It is probably uneconomic to apply nitrogenous fertilizer but the application of superphosphate to groundnuts not only improves groundnut yields (see p. 219) but also those of guinea corn grown in rotation with groundnuts. This appears to be the most economic method of increas- ing guinea corn yields. The mission therefore recommends more extensive rotational grow- ing of guinea corn and groundnuts, in order to derive greatest ad- vantage from the increase in soil fertility contributed by the ground- nut crop, to assist livestock maintenance and production and to gain better control of diseases and insects attacking each crop. The mission also believes that increased mechanization wvould be DOMIESTIC CROPS, LIVESTOCK AND FISI-IERIES 247 advantageous in land preparation, seeding and harvesting thc crop- the last requiring use of shorter, more appropriate varieties. Although failures have occurred as a result of unsuitable machinery, unskilled operators and insufficient provision for maintenance, mechianization experiments should be intensified. Millet The term "millet" refers to several relatively inferior tropical or subtropical small grains. In northern Nigeria bulruslh or pearl millet (Pen,nisetum typhoideumn) is grown, frequently in association witl guinea corn, the earlier types maturing some two months before the guinea corn crop. The guinea corn and millet crops in Nigeria to- gether produce more protein than the root crops and more than the combined total of maize, rice, pulses and legume kernels consumed in the country. The estimated production of millet in 1950 was 958,000 tons, grown on 3.1 million acres. Its distribution is shown on Map 2 facing p. 193. The crop is adapted to a shorter growing season and less rainfall than guinea corn; it can withstand more drought. Yields per acre are smaller, in line with its more modest requirements. Guinea corn and millet are frequently intersown. Dates of planting vary considerably with location and season. Millet becomes available when reserve stocks of grain from the previous harvest are low and before the guinea corn crop comes in. The earliest varieties, matur- ing three months after sowing, are used in the far north where there is a high risk of drouglht; later types are associated with more rainfall, farther south. Our comments on improvement of guinea corn also apply to millet, but we believe research on guinea corn should receive first priority. Acha and Tamba Acha (Digitaria exilis) and tamba (Eleusine corocana) are low- grade crops restricted to the wetter and poorer soils of the Plateau. They are essentially grasses, the seeds of which are harvested as human food in a primitive economy, much as higher-grade grain crops are cultivated under the more fertile conditions of European 248 THE TECHNICAL REPORTS agriculture. The mission believes research for the Plateau area should be directed toward finding economic ways of improving soil fertility. When these have been found it is almost certain that higher-grade crops, such as wheat and barley, can take the place of acha and tamba. C RICE Present Production According to the sample census 246,000 tons of paddy were pro- duced on 422,000 acres in 1950. More than four-fifths was produced in the Northern Region with water from natural flooding or irrigation. Niger and Sokoto Provinces each produced almost 50,000 tons. The yield of paddy per acre varies widely, but the sample census indicated an average of 1,306 lbs. in 1950. This is one-third of yields customarily obtained in Japan, about half the average for the United States, slightly below yields in Indonesia, Burma and Pakistan and comparable to those of Thailand and India. The sample census indi- cated 950-1,000 lbs. per acre in Benue, Sokoto and Zaria Provinces, and 1,600-1,650 in Bauchi and Ilorin Provinces. The yields of paddy in the Western Region were lower, ranging from 500-750 lbs. per acre. Yields of rice depend on variety, duration of water supply, soil fertility and efficiency of harvesting. The varieties G.79 and GEB.24 have proved suited to conditions in Nigeria but there is need for seed purification, multiplication and controlled distribution and for tests to discover still more productive strains. Mechanization would help to improve land preparation, planting and harvesting. Future Developmentt Given the rapidly rising demand for rice, the adequacy of natural water resources, a suitable climate, the relative ease of cultivation and less susceptibility to disease compared to other crops requiring large amounts of water, it should be possible to expand rice produc- tion by many times. There are four typical situations in which rice may be grown in Nigeria: on naturally flooded areas, irrigated land, land neither flooded nor irrigated but receiving a sufficient rainfall, and tidal mangrove swamp. DOMESTIC CROPS, LIVESTOCK AND FISHERIES 249 Naturally Inundated Areas The production of rice in Nigeria began on periodically flooded or inundated river-bottom land, known as ladamas. Such lands are usually physically suitable and of fair initial fertility but the variability of the floods introduces a hazard in some seasons. The rice cannot be sown or planted until moisture is avail- able; if land is flooded too soon after planting the entire crop may be lost. This danger can be insured against by raising the plants in nursery beds and planting them out after flooding has receded, and by effective flood control.2 The mission believes that Sokoto Province and extensive areas to the west of Makurdi have good possibilities for expanded rice pro- duction in fadamas and on irrigated land. To the northeast of Ma- kurdi, in the direction of Yola, are numerous smaller locations that merit survey and evaluation. A further likely area lies north of Maiduguri in the direction of Lake Chad. Some 20,000 acres in the drainage system of the Ngadda River in that area are suitable for early development under rice; field plots established in 1952 pro- duced yields of a ton of paddy to the acre. Irrigated Land The Badeggi irrigated rice scheme should provide valuable guidance for future rice production. About 20,000 acres near Badeggi can be irrigated under small schemes. Taking the plains of the Bida-Badeggi area as a whole, from the Kaduna River eastward, more than 100,000 acres could eventually be developed for rice pro- duction with supplementary irrigation under the guidance of the irrigation branch of the regional department of agriculture and, when- ever necessary, with the technical assistance of the proposed federal department of hydrology. Irrigation could also be extended in the Rima valley of the Sokoto area. Uplands Yields of paddy under upland conditions have been very much less, mainly because of soil factors. But upland rice development has potentialities in both Western and Eastern Regions and the re- spective departments of agriculture should undertake necessary field trials and research. Mangrove Swamps Rice could be produced on roughly one million acres of mangrove swamp in the South. Areas subject to tidal inunda- 2 For technical recommendations on flood control and irrigation and some tech- nical problems of rice cultivation, see Technical Report No. 12. 250 THE TECHNICAL REPORTS tion may be used if the salt content of the water is not too high. Experimental plantings in 1952 gave average per acre yields of 2,000 lbs., and a peak yield of 2,250 lbs. In view of the need for greater food supplies in the Eastern Region, plans should be prepared for developing extensive areas of mangrove swamp alluvium for rice production.' The present rate of development, approximately 200 acres per year, should be sustained until the necessary surveys are completed and areas suitable for expansion satisfactorily defined; the rate of expansion can then be greatly accelerated. The mission recommends that the first surveys aim at locating 100,000 acres of mangrove swamp land for rice culture, at an estimated developmental cost of £ 1 million. The work should be undertaken by the development corporation of the Eastern Region under the guidance of the Eastern Regional De- partment of Agriculture in consultation with the proposed agricultural research institute. Organization of Development Future rice development will be closely allied to the findings of the federal department of hydrology recommended by the mission and of the Rice Research Station at Badeggi working with the West Africa Rice Reseafch Station at Rokkupr in Sierra Leone. Reciprocal ex- change of information between Rokkupr and Badeggi should benefit both Nigeria and Sierra Leone. The mission recommends that the staff at the Badeggi station be increased as soon as possible, that the technical advisory work for improved rice production be the respon- sibility of the regional departments of agriculture in consultation with the federal agencies for hydrology and rice research and that develop- ment be undertaken by the development corporations of the regions concerned. In view of the serious food problem in the Eastern Region, the mission recommends early expansion from the experimental site near Calabar, where operational headquarters should be established. 3The technical aspects of this schelie are descriibed in Technical Report No. 12. DOMESTIC CROPS, LIVESTOCK AND FISHERIES 251 D MAIZE Present Production On the basis of the 1950-51 sample census, 1950 production of maize was 535,000 tons on 1.4 million acres.' Bamenda, Ibaclan and Kano Provinces together produced 44% of the crop, and the Western Region accounted for more than one-third. Yields in the latter region ranged from 500-1,400 lbs. per acre for early maize; in Bamenda Province early maize yielded 1,200 lbs. per acre and in Calabar and Onitsha Provinces about 1,100 lbs. per acre. In the North, yields averaged 940 lbs. per acre. These yields are comparable to those in Asia, Central America and South Africa; they are lower than in Egypt and South America. United States ancd Ca- nadian yields are substantially higher. The conditions of climate, especially in southern Nigeria, should permit at least a doubling of current yields and a considerable expansion of the area planted to maize, provided the problems of varietal limitation, heavy incidence of disease and insufficient soil fertility are overcome. Disease Control In 1950 an unprecedented epidemic of maize rust (Puccinia poly- sora), not previously recorded in Nigeria, seriously affected early maize in the Western Region, as well as in Dahomey and the Gold Coast, with losses up to 50% of the crop. The disease can be effec- tively controlled only by developing strains that combine local adapt- ability and high production capacity with resistance to maize rust. Research on the control of the disease is being undertaken at Moor Plantation. More than a hundred varieties of maize from Central America and the Caribbean area, which show a higher order of resistance, have been imported for breeding experiments under local conditions. Tests showed that American varieties in the presence of rust, although partially susceptible, gave substantially liigher yields than local types. 4 The total of 1.997 million acres given in the census report results from double- counting of some 588,000 acres of the Western Region, on whiclh twso crops of maize were growvn in the saine year. 252 THE TECHNICAL REPORTS The importance of this work cannot be too much stressed. Testing and breeding centers should be established in all three regions and the Cameroons, in co-operation with the local departments of agri- culture. Breeding for maize rust resistance should be accompanied by research into effective methods for controlling bacterial rots and stem borer. The mission's recommendations and projections for an agri- cultural research institute, in Technical Report No. 10, include pro- vision for this and other research on control of disease and insects. Soil Fertility Experiments carried out in the Western Region have demonstrated increased yields of maize following application of fertilizer, but it is doubtful whether the use of artificial fertilizers alone will solve the problem of soil fertility. Use of appropriate legume-grass mixtures, now being tested at Moor Plantation with supplementary phosphate and trace elements, would bring about permanent improvement in soil fertility for maize production as well as foster livestock produc- tion. Interplanting of cowpeas, soybeans and other legumes with the maize crop, appropriately fertilized, should also increase yields. Future Development Expansion of maize production will be a longer term process than that of rice, largely because the necessary plant breeding and soil improvement programs may take as much as 10 years. The import- ance of both crops for raising the standard of nutrition has been recognized by specific financial provision for maize and rice research at Ibadan and Badeggi respectively; research findings should be sig- nificant not only for Nigeria but also for all West Africa. The capital cost is met in each case from Colonial Development and Welfare funds, which also cover a major part of recurring costs. In order to mini- mize any bias due to locality, research on either crop should not be over-centralized; in the case of both crops, emphasis should be placed on regional requirements and specific environmental situations. DOMESTIC CROPS, LIVESTOCK AND FISHERIES 253 E PULSES Importance Pulses are field crops of legumes, such as peas, beans, groundnuts and vetches. The acacias (e.g., Acacia senegal), cassia spp., alfalfa or lucerne, clovers and other kinds of herbage legumes belong to the same family. All produce seeds in pods and bear nitrogen-fixing bac- teria in nodules on the roots. They are unique in possessing the capacity to derive inert nitrogen from air and convert it to protein while increasing soil fertility. In view of the fact that Nigerian soils are frequently deficient in avail- able nitrogen and that the country as a whole is poorly supplied with protein, the mission believes that increased cultivation of pulses and herbage legumes should be given major emphasis. Cowpeas Apart from groundnuts, discussed in Technical Report No. 7, the most important legume grown for kernels is the cowpea (Vigna sp.). According to the sample census, 237,000 tons of shelled cowpeas were obtained in 1950 from 1.3 million acres. Four-fifths of the crop was grown in the Northern Region, of which 23% was produced in Kano Province and 20%o in Bauchi Province. Cowpeas are a principal source of vegetable protein for domestic consumption and an impor- tant article of trade in the North. The average yield for Nigeria in 1950 was close to 400 lbs. per acre, varying, chiefly with soil fertility, from 150-200 lbs. per acre in Ijebu, Ilorin, Plateau and Bornu Provinces to about 500 lbs. per acre in Katsina and Adamawa Provinces. Experiments conducted at Ibadan in the Western Region and Umuahia in the Eastern Region indicate that early maturing strains, such as New Era and Mauritius C.70, are superior in yield to local varieties, and can be recommended for general adoption in each region. As already noted, cowpeas can be advantageously combined with maize. In future trials special attention should be given to nutri- tional requirements of cowpeas and the correction of soil deficiencies; the place of cowpeas in crop rotation, type of soil preparation re- 254 THE TECHNICAL REPORTS quired, and best time for planting according to seasonal characteristics should also be determined. Additional varieties should be introduced, with appropriate quarantine measures, and should be tested over a period of years. Other Pulses The pigeon pea (Cajanus cajan) is a deep-rooted shrub growing to six feet or more. Production in 1950 was estimated at 60,000 tons (sshelled) or one-quarter that of cowpeas. The crop was produced from only 181,000 acres, mainly in the Middle Belt. Bambarra groundnuts (Voandzeia subterranea), a genus distinct from the ordinary groundnut, were produced on 120,000 acres, yield- ing in 1950 some 41,000 tons. Three-quarters of the crop was grown in Bamenda Province of the Southern Cameroons, the remainder in the Northern Region. The kernels are harder than those of the ex- ported groundnut and cannot be eaten raw. They contain only 6% oil but are high in protein. The soyabean (Glycine soja) has not so far been very successful in Nigeria. The mission believes that the crop can be grown satisfac- torily but expansion must be preceded by considerable researchl to determine which of the several hundred varieties are most suited to Nigerian conditions. Future Research on Legumes The mission recommends that an intensive program of research on legumes be given high priority by the agricultural research institute; extensive tests on both pulses and herbage legumes for pasture should be conducted by the regional departments of agriculture and the re- search institute; strains of the legumes discussed above and additional legume species should be tested along the lines suggested for cowpeas. The mission suggests that assistance be sought from the Food and Agriculture Organization both in the acquisition of varieties for testing and in the conduct of the research. F FRUITS AND VEGETABLES Many varieties of fruit and vegetables can be grown successfully in Nigeria. Farmers, particularly in the North, already plant or foster DOMESTIC CROPS, LIVESTOCK AND FISHERIEIS 255 such food-producing trees as the mango (Mangifera indica), the locust bean (Parkia filicoidea), dorowa (Tephrosia vogeliii) and the shea butter tree (Butyrospermnun parkii). The wild date (Phoenix dactylifera) is prized in the dry zone of the sahel savannah. The bread fruit tree (Artocarpus incisa) grows well in the wetter parts of the South. Kola is grown in cocoa areas. Okra (Hibiscus esculentus ), the principal vegetable product of southern Nigeria, is mucilaginous and is used for thickening soups and stews; production was estimated at 16,000 tons for 1950-51. Onions also are an important item in the Nigerian diet and in internal trade; estimated production in 1950-51 was 60,000 tons, chiefly in Sokoto Province. Melonseeds are used in the preparation of stews; an estimated 25,000 tons of unshelled seeds were produced in 1950-5 1, mainly in the Middle Belt and the Western Region. The mission saw numerous small vegetable-growing projects, most of which indicated considerable promise. Tomatoes are well adapted to the climate of the couintry, and beans, carrots, cabbages, cauli- flowers, beetroot, sweet potatoes, spinach, parsnips ancl numerous other vegetables grow successfully where soil fertility is improved by compost or farmyard manure and water for irrigation is present. Vegetable-growing projects are naturally most important near the larger towns, where both water and organic wastes are available. The most efficiently run market garden seen was at Enugu where, under the guidance of the Eastern Regional Department of Agricul- ture, an exceptionally wide range of vegetable crops was grown for sale at moderate prices. The mission recommends that the develop- ment of market gardens be fostered by the regional departments of agriculture, in consultation with research agencies where necessary. Need for Research The horticultural department of the proposed agricultural research institute at Ibadan should test the major fruit and vegetable crops for their suitability in different parts of Nigeria. Much material alreacly exists within the country; some species, such as kola, citrus, cashew nuts, avocados andl pawpaws, have been grown long enough in Nigeria to ensure a high clegree of local adaptation. These are referred to in 256 THE TECHNICAL REPORTS Technical Report No. 7. There is need, however, for testing improved South and Central American and Indian horticultural varieties. Introduction and initial testing of this material should be the func- tion of the proposed research institute, but field tests should be carried out by the regional departments of agriculture in a number of care- fully selected centers. It is important to ensure that new material is most effectively placed, that all the adapted types growing in different parts of the country are made available, and that attention is given to problems of nutrition, insect and disease control. G SUGAR CANE Production and Consumption According to the sample census of 1950-51 Nigeria produced in 1950 550,000 tons of sugar cane on 24,000 acres. Production is largely confined to the watershed country extending from the Jos- Bauchi area through Zaria and Makarfi, and northwest to Gusau, in the direction of Sokoto. Zaria Province is the most important source of production. The cane is grown in small plots of two acres or less, mainly in the swamp alluvium which develops in local catchments near the summit of the watershed. The estimated sugar content of the 1950 crop was some 50,000 tons. Much of it is consumed by chewing cut pieces of raw cane. According to the Annual Report of the Agriculture Department for 1950-51, there were 689 cane crushing mills in the Northern Region, of which 655 produced an estimated 10,200 tons of crude brown sugar. There are no facilities for producing refined sugar. Imports of the latter have ranged in recent years from 8,000 to 13,500 tons. Improvement of Sugar Production The production of refined sugar on modern lines would require minimum units of 5,000 acres of first-class sugar-producing land, each within easy reach of a modern mill. Suitable land presupposes a com- bination of high soil fertility with a liberal supply of soil moisture, either from natural sources or supplementary irrigation, for at least 9 or 10 months of the year. It is doubtful that these conditions can DOMESTIC CROPS, LIVESTOCK AND FISHERIES 257 readily be found in Nigeria. It is suggested that surveys be directed to finding units that might be developed economically for sugar pro- duction, either with natural rainfall or with supplementary irrigation. Areas meriting consideration occur to the south of Jos, in the Benue area, northeast of Mamfe and around Kumba in the Southern Cam- eroons. Meanwhile, the mission recommends that investigations directed toward increasing sugar production per acre in the existing areas of cultivation be intensified. in OTHER CROPS A TOBACCO Production Nigerian conditions of climate and soil are favorable to tobacco. Its cultivation is an old practice and numerous types have become adjusted to the country's varying conditions. Stimulated by the Ni- gerian Tobacco Company, a subsidiary of the British-American To- bacco Company which started the manufacture of cigarettes in Ni- geria in 1933, production of leaf tobacco increased sharply in recent years from 835,000 lbs. in 1949 to about 3.36 million lbs. in 1952, and to an estimated 5 million lbs. in 1953. There are three principal types of tobacco. Northern air-cured to- bacco comes chiefly from Zaria Province, with lesser quantities from Sokoto, Kano and Katsina Provinces. In parts of this area, where flooding occurs regularly (jadamas), a second or dry-season crop is planted as the water recedes. Such plantings, which produce better quality leaf, have increased considerably in recent years. Southern air- cured tobacco comes entirely from Oyo Province in the Western Re- gion, around Ogbomosho and Oyo. The planted areas are somewhat scattered. Flue-cured tobacco is grown only in the northwest portion of Oyo Province. Statistics on production for each category are shown in Table 3. 258 THE TECHNICAL REPORTS TABLE 3 Tobacco Production by Type of Leaf Area Planted (acres) Production (thousand lbs.) 1949 1950 1951 1952 1949 1950 1951 1952 Northern air-cured ..... 950 2,206 4,280 7,769 301 739 1,315 2,210 Southern air-cured ..... 1,035 734 1,029 1,327 362 335 412 670 Flue-cured ............. 435 740 830 863 163 349 400 333 SOURCE: Nigerian Tobacco Company, Lagos. For the last few years, the tobacco company has pursued a price policy designed to encourage improvement in quality. It raised the price of grade I tobacco by 50-150% but left the price of grade III unchanged. As in the case of palm oil, this incentive for quality im- provement has been highly successful. It is unlikely that tobacco will be exported for many years to come. Substantial improvement in quality would be required to make Nigerian tobacco competitive in the markets of the tobacco importing countries. However, there is a growing demand in Nigeria for better quality tobacco, which is now imported; increased domestic output of higher grade leaf can come to supplant imports. Survey and Research The effective technical reconnaissance and experimental work done by the Nigerian Tobacco Company, in advance of its efforts to pro- mote expanded production, contributed greatly to the rapid success of those efforts. It demonstrates the practical value of such investigations for new agricultural projects generally. In 1953, the Nigerian Tobacco Company engaged in experimental work at Gombe, east of Bauchi, and in a wide area of the Middle Belt, north of the Niger and on both sides of the Benue. Tobacco seedlings are grown by arrangement in village communal nurseries. The company selects and pegs out the seed beds, usually some 60-100 to a village. The timing of fadama nursery seedlings is staggered to follow up the water as it recedes. Incentive payments are made to assure proper nursery bed supervision and maintenance. Seedlings are distributed free for the first three years in a new area and the farmers are then persuaded to grow their own seedlings. 260 THE TECHNICAL REPORTS This work has been attended by numerous technical difficulties. Now that initial reconnaissance is done, the mission recommends selection of a small number of fiber plants for more intensive future trial and research-clappertonia, urena, sunn hemp, rama and coir, with exploratory tests of manila in the Southern Cameroons and of flax (linseed) at altitudes above 5,000 feet. Future Investigations Local research on both the culture and processing of fibers should precede any large-scale development. Experience throughout the world has demonstrated the hazard of embarking on large-scale fiber development projects without careful investigation of such technical factors as the adaptability of the crop, its soil and cultural require- ments, the effectiveness of retting or decortication, the availability of supplies in sufficient concentration to supply a mill and the problems of grading, baling and storage.5 The mission recommends that each regional department of agri- culture conduct tests on a maximum of three fiber-producing crops and that the problems of retting and processing be investigated by the proposed technical research institute. Should large-scale commercial possibilities affecting more than one region appear practicable, a com- mittee to advise on the technical and economic aspects of fiber develop- ment should be set up by the development corporations and the federal government. iv LIVESTOCK PRODUCTION A INTRODUCTION Importance The livestock industry has long been an essential part of the Northern economy and recently there has been intensified official interest in its improvement throughout the country. In 1949, the 5 See, for illustration, the discussion of the sack factory project at Onitsha, in Technical Report No. 13, p. 384. DOMESTIC CROPS. LIVESTOCK AND FISHERIES 259 Some disease has appeared, leaf curl being the most serious. Fu- ture needs for technical work oin disease control, varietal and agrono- mic improvement, soil fertility maintenance, and the place of the tobacco crop in permanent agriculture in different localities should be met adequately by the proposed strengthening of technical agri- cultural services through the proposed agricultural research institute and the regional departments of agriculture. B FIBER CROPS Background Fibers are needed in Nigeria as raw material for bags, fabrics, carpets, mats, ropes, twines, fishing nets, filling for mattresses and upholstery, and wrapping paper. About 10 million bags are imported and re-exported each year and the cost of bags, cordage, twine and other fiber products amounts to about £ 2 million annually. Climatic conditions favor fiber production; 21 species recognized as commercial sources are grown. But aside from the recent expansion of cotton acreage, fiber production has not been an important part of Nigerian agriculture. The Department of Commerce and Industries appointed a fiber officer in 1947 and a fiber utilization officer in 1951. Fairly extensive surveys have been carried out, with particular attention to rama (Hibiscus cannabinus), also known as kenaf. Rama is one of the soft or bast fibers. Varieties from a dozen countries have been tested at Samaru and a small pilot rettery has been established there. Other species examined have included clappertonia (Clappertonia ficifolia) known in Nigeria as bolobolo, another bast fiber, which occurs extensively in the fresh water swamp region of the South; sunn hemp (Crotalaria juncea), also a bast fiber, which is of interest as a legume that improves soil fertility and as a source of raw material for paper pulp; ramie (Boehmeria nivea), known also as China grass, which has given promising results in the Southern Cameroons; coir, an important source of unretted mattress fiber; and urena (Urena lobata), closely related to rama, which is being grown in parts of Ilorin, Bida and Benue Provinces. Some limited tests have been con- ducted, including retting trials at Samaru. DOMESTIC CROPS, LIVESTOCK AND FISHERIES 261 Colonial Office appointed a Livestock Mission to study the industry in Nigeria and make recommendations for its development. Although the Nigerian government has decided to accept few of the recommen- dations, the Mission's report served to focus attention on the many problems of livestock husbandry in Nigeria. Subsequent reports on cattle published in the United Kingdom also include much valuable information on Nigeria and on West African breeds of livestock.6 Livestock in Nigeria is important as a source of animal protein and other essential nutrients and of hides and skins for export; it is a crucial factor in soil improvement and the development of a perma- nently balanced agriculture. The acute deficiency of the Nigerian diet in animal protein and milk has already been stressed. The mission believes that a fourfold increase of present livestock production is justified on this ground alone. Such an expansion, of course, will take considerable time. Our recommendations are designed to indi- cate the conditions and means for such long-term growth and for accomplishing it as fast as possible. Livestock Population No reliable data on Nigeria's livestock population are available. There are gaps in the 1950-51 census figures, and furthermore, where they are based on the annual count for tax purposes they are probably understated. There is considerable variation among estimates by FAO, the Nigerian Veterinary Department and the Livestock Mission. Table 4 is based on the best data available, still with a wide margin of error. Conditions and Problems of Livestock Production Nigeria seems to have excellent livestock material on which a multiplication and breeding program can be based. 6 T. Shaw and G. Colville, Report of Nigerian Livestock Mission (Colonial Office Publication No. 266; London, HMSO, 1950) ; Colonial Advisory Council of Agricul- tural Animal Health and Forestry, The Improvement of Cattle in British Colonial Territories in Africa (Colonial Office Publication No. 2; London, HMSO, 1953) ; 1. L. Mason, The Classification. of. W17est.African Livestock (Technical Commonwealth No. 7 of the Commonwealth Bureau of Animal Breeding and Genetics: Farnham Royal, Bucks. 1951). See also Proceedings of a Conference called to consider the Report of the Nigerian Livestock Mission (Government Printer: Lagos, 1953). 262 THE TECIINICAL REI'ORTS TABLE 4 Livestock Population, 1953 (Thousand head) Cattle Goats Sheep Horses Donikeys Pigs Northern Region ........ 4,830 5,510 2,015 212 940 62 Western Region' ........ 70 650 295 -2 - 108 Eastern Regioni ........ 200 1,220 590 -2 - 22 Southern Cameroons 200 120 110 - - 28 Total .5,3003 7,500 3,000 212 940 220 Mostly dwarf animals. 2 Negligible. 3 FAO figure for 1950. SOURCE: Mission's estimates on the basis of the agricultural sample census of 1950-51, estimates of the Livestock Mission of 1949, Reports of the Veterinary Department 1949-50 and 1951-52, FAO Yearbook of Statistics 1952. Reports of Department of Commerce and Industries (Lagos). 1953. The chief limitation to a wider distribution of livestock is the incidence of the tsetse fly (Glossina spp.), the carrier of the wasting disease trypanosomiasis which affects (according to the species of trypanosome) both humans and livestock. The various species of tsetse, each a potential transmitter of the disease, infest 80% or more of the country. Other livestock diseases, such as bovine pleuro-pneu- monia, rinderpest and parasitic diseases, also cause considerable losses. It is possible to reduce the damage caused by the tsetse fly through the use of trypanosome-resistant strains of cattle, prophylactic measures, and the control of uninhabited woodland and bush in which the tsetse fly thrives. The quality of livestock as well as its resistance to disease are sub- stantially affected by nutrition. There is little reliable information about the carrying capacity of the many types of pasture in Nigeria. In the North it is said that one ox requires 15 acres; in the valleys further south, where pastures are better, six acres will probably main- tain one head of cattle. There is considerable room for pasture im- provement and for use of supplementary feeding. Much of the grass in both the valleys and upland pastures rapidly declines in value for grazing as the season progresses, becoming fibrous, unpalatable and low in protein content. These stands of tall, tough grass are fired and wasted each year; if they were mowed early and conserved, their pro- ductivity would be much increased. DOMESTIC CROI'S, LIVESTOCK AND FISHERIES 263 Improved processing and marketing of products would greatly increase the efficiency of livestock production. The mission's recom- mendations on all these matters are discussed in more detail in subse- quent parts of this section. The Fulani Problem The nomadic Fulani are the most skillful graziers and breeders of livestock in Nigeria. They keep cattle for milk; the sale of slaughtered bullocks is incidental. In the northeast many of the Fulani possess large flocks of sheep, but for the most part their economy is based on cattle. Fulani cattle have a strong constitution, are admirably suited to their environment and living conditions and are among the finest to be founcl in Africa. Their various breeds provide excellent foundation stock for both beef and milk production; great care should be taken to avoid degeneration through too drastic changes in Fulani husbandry practices. Stabilization of the Fulani is considered of major importance in the expansion of livestock production. There are indications that many of the Fulani would prefer to follow a settled existence. Nomadism has probably been a matter of necessity rather thani of choice; if permanent water and year-round tsetse-free pastures can be developed, the need for seasonal movement will disappear, although the excellent practice of rotational grazing should continue. The mission was ad- vised that in Sokoto Province more than 60%o of the Fulani families is already partly settled; they keep a small milk herd on a home pasture while trusted relatives take the bulk of the herd to valley pas- tures. It is unlikely, however, that more than limited settlement of the Fulani can be achieved for many years to come. Nevertheless, the mission believes that some of the problems in- volved should be faced immediately. The Fulani now have few, if any, land rights in Nigeria or the Cameroons. At present they are tolerated if they do not damage standing crops; but the expansion of cultivation and the development of mixed farming will exclude them from many of their traditional grazing facilities. The mission recom- mends that early steps be taken in the Northern Region to establish land rights for the Fulani. 264 THE TECHNICAL REPORTS Two lines of action are suggested: (a) establishment of grazing reserves protected by law, where cultivation would be restricted under permit and grazing rights would be subject to supervision, the re- serves to be selected on the basis of a reconnaissance survey, taking account of water supplies and the scope for pasture improvement; and (b) study of the Fulani problem in all its aspects, with special attention to the possibilities for their permanent occupancy of land. We believe that the Shendam-Shemankar area between the Plateau and the Benue is most suitable for pasture and pasture improvement. We therefore recommend that a grazing reserve of 100,000 acres be set aside in this region and that the Northern development corporation, in co-operation with the regional agricultural department and veter- inary services, prepare plans for the project, including provision for tsetse control, pasture improvement, permanent water supplies, soil conservation and some timber production. If this project proves successful, other grazing units should be developed elsewhere in the Middle Belt; we believe that suitable land is available in the areas of Yola, Kontagora and Mokwa. Mixed Farming Disease, fear of theft and the labor of feeding and watering have discouraged a settled husbandry in Nigeria. Peasant farmers gen- erally maintain only a few goats, sheep and poultry; the Hausa farmers in the North also keep horses and donkeys. These animals receive little care apart from being fed hay and crop residue. In the Eastern and Western Regions, small numbers of tsetse-resistant dwarf cattle occur in a semi-wild state and are slaughtered at tribal cere- monies. Water buffalo, occuring in Calabar Province, are trypano- some-resistant. In the North the agricultural department has introduced the plow and the cart to integrate cattle with peasant farming. The scheme is for two working bulls, a hand plow (and, recently, two heifers) to be provided for each mixed farm. This is done by means of loans through native treasuries, some of which in turn obtain funds from the Regional Production Development Board, but so far only some 10,000 mixed farms have been established in the Northern Region. MAI' 7 rN. I.-' DISTRIBUTIONBETTSFWE OF TSETSE SPECIES 02 06 0W1010IE AFT,ER W ff P07.., CHI,-F NTOA.OLOGIS. EAST AFRICAN TSETSE a TRYPANOSOMIASIS RESEARCH a RECLAMATION ORGANIZATION DECEMBER, 1953 DOMESTIC CROPS, LIVESTOCK AND FISHERIES 265 Role of Technical Services The central and regional veterinary services have full responsibility for animal health and the control of disease in livestock. Animal breeding and nutrition concern both the agricultural and the vet- erinary departments; no hard and fast division is made or is desirable. The whole problem of animal production involves so many different factors that any suggestion for division of responsibility beyond that already established would be unwise. Nigeria is fortunate in having, in the Northern Region, the West African Institute for Trypanosomiasis Research (WAITR), which has done outstanding research on the factors governing the distribu- tion and possible control of the tsetse fly. Its future work deserves full support by Nigeria. Needs for research vary with different projects: research on the control of tsetse, bovine pleuro-pneumonia, tuberculosis and certain diseases of the smaller animals is sufficiently advanced to proceed to the project stage. Further research is required on problems such as pasture improvement and rinderpest control before a final solution will come in sight. Pasture improvement involves research on numerous interrelated factors: soil; climate; and species, strains and mixtures of herbage plants, their physical and nutritional requirements, their management and their value for animal production. Basic research should be car- ried out under the auspices of the proposed agricultural research institute, with regional departments of agriculture and development authorities taking primary responsibility for the application of find- ings. Each regional department of agriculture should include a strong pasture improvement section. B ANIMAL HEALTH Trypanosomiasis Map 7 shows the general distribution of the three main species of tsetse-Glossina morsitans, G. tachinoides and G. palpalis-all of which transmit both the Trypanosoma congolense and T. vivax. One of the key problems in Nigeria appears to be to control G. morsitans. 266 THE TECHNICAL REI'ORTS The mission recommends an entomological survey to define its present limits. Near the coast, under the conditions of high forest, the tsetse infestation is light; in the "orchard bush" savannahs of the Middle Belt, it is heavy; and under the progressively dlrier conditions to the north, the tsetse virtually disappears. Much of the scientific knowledge now available concerning tsetse and trypanosomiasis in Nigeria has resulted from the work of Dr. T. A. M. Nash of WAITR. It was found that game harboring the fly retreats as bush clearance removes its shelter and settlement advances; the movement and settlement of people from overcrowded areas to tsetse belts is therefore advocated. The mission believes that such settlement, organized under proper conditions with the fullest technical advice, can have substantial value for tsetse control in the Middle Belt. The mission supports the concept of cleared farm areas with a minimum size of 10,000 acres and with clear-cut peripheries to separate game and fly on the one hand from man and domestic animals on the other. Experience has shown that a buffer zone created by further clearing outside the farmed area and, in some cases, the erection of stock-proof and game-proof fences is necessary to keep the settle- ments free from infestation. The use of trypanosome-resistant breeds of cattle such as Ndama and Muturu and provision for prophylactic drug treatment w here necessary are essential features of settlement in tsetse-liable country. Carefully controlled trials of aerial spraying with certain insecticides already used with success in South Africa and in Southern Rhodesia are also recommended. Rinderpest The policy in the Northern Region has been to foster immunity in the herds rather than to try to eradicate rinderpest by compulsory measures. As yet, no satisfactory immunizing procedure has been found for hyper-susceptible breeds of cattle, such as the Ndama and Muturu of the Eastern and Western Regions. Research at the Veter- inary Research Laboratories in Vom is limited by lack of quarantine accommodation required to test vaccine production and immunity. The matter is urgent; it would be a national calamity if rinderpest were DOMESTIC CROPS, LIVESTOCK AND FISHERIES 267 to gain a hold in the valuable Ndama and Muturu herds now being built up at various points. Wild fauna such as buffalo, antelope, pig, etc., which are suscep- tible to rinderpest and which may act as carriers of the disease, ap- pear to be widely dispersed and so far have not proved a significant factor in control. Eradication of the disease in West Africa appears possible but it will largely depend on international co-operation, especially with the French authorities in neighboring territories. The assistance of FAO should be sought in this matter. Bovine Pleuro-Pneumonia There were 294 outbreaks of pleuro-pneumonia in 1952-53, indicat- ing an urgent need for special control measures. The disease has spread down the stock routes from the northeast to the south and west. It seems to be endemic in Bornu Province and French Equi- torial Africa. International co-operation is required for its complete eradication. Repeated mass vaccinations at short intervals over a number of years are likely to be necessary and clinical cases should be removed and quarantined. Such measures have been successful in Northern Rhodesia, Tanganyika and Australia but they depend on reasonable control of herds and on efficient vaccines. Tuberculosis Tuberculosis is prevalent in the highland country of Bamenda Province in the Southern Cameroons; recent tuberculin tests estab- lished 100 reactors out of 700 in one herd. The mission recommends a one-year survey, followed by an eradication program involving removal of reactors to quarantine and their slaughter under strict government control. Tick-Borne Diseases Nigeria appears at present to be free from East-Coast fever but it is possible that tick-borne diseases will become more of a problem as the southern, more humid areas suitable for the propagation of ticks, the transmittors of these diseases, are developed for livestock 268 THE TECHNICAL REPORTS production. The danger lies in indiscriminate stock movements from the East and the mission recommends that an epidemiological survey of the problem be carried out with the object of devising effective quarantine measures against the introduction of these diseases. Diseases of Sheep and Goats There is high wastage from disease, thought mainly to be due to parasitic causes. The mission recommends a survey of sheep and goat diseases in each region over a period of three years. Poultry Diseases Newcastle disease, fowl cholera, fowl pox, fowl typhoid, coccidiosis and verminosis occur extensively and epidemics often exterminate the poultry of an entire area. At least one poultry disease specialist should be included on the staff of each regional veterinary department. General Effective control of livestock disease in Nigeria requires strength- ening of the federal and regional veterinary services. Expansion of veterinary, quarantine and other disease control services is recom- mended in Technical Report No. 10. The mission also believes that establishment of a West African veterinary research organization, with headquarters in the Northern Region of Nigeria, would be desirable; it recommends that the governments of the Gold Coast, Sierra Leone and the Gambia be approached for their co-operation and financial assistance. Long-term plans for disease control should be drawn up, and each district should set up a livestock improvement committee which would include representatives of the farming communities as well as officers from the administrative, agricultural and veterinary services. C ANIMAL BREEDING There has been a long history of selective breeding in Nigeria and survival of the fittest has provided a locally adapted basis for future improvement. DOMESTIC CROPS, LIVESTOCK AND FISHERIES 269 Northern Types of Cattle The breeds developed by the Fulani have zebu characteristics, and resemble the Boram and Masai types of East Africa and the Harriana and Sind types of India. They are adapted to dry conditions, can travel long distances and consume fibrous fodder but they mature slowly, a bull reaching 850-900 lbs. in five years. Milk prodluction is poor by European standards. rarely exceeding 200 gallons in a lactation period of seven to eight months, but the content of butter fat is usually above 5%. The Fulani types have some resistance to rinderpest but are suscep- tible to trypanosomiasis. Other Northern types-including the Wlhite Bungai, Red Rahaji, Sokoto Gudale, Shuwa, Biu, and Adamawa-are well defined, although there is considerable intermixture. Together they provide a good foundation stock for improved dairy, beef or draft breeds. The mission endorses the agricultural department's policy of work- ing toward higher milk production from indigenous stock rather thani attempting short cuts by introducing European breeds. It notes, how- ever, the artificial insemination breeding experiment with imported British Holstein sperm being carried out by the Veterinary Department at Vom. This experiment might give valuable evidence regarding the practical use of European breeds in selected environments such as the Jos Plateau. Milk production in Nigeria is estimated at 250,000 tons, averaging only % lb. of milk per day per cow for the whole year, or approxi- mately 1 lb. per day while lactating. At stock farms of the agricultural department yields of 6-10 lbs. have been achieved, demonstrating that a substantial increase of milk production through proper feeding and selection is possible. The development of early maturing beef cattle, with a high propor- tion of dressed to live weight, offers substantial possibilities. On good pastures in the Bamenda hill country of the Southern Cameroons, Adamawa Gudale cattle have reached 800 lbs. live weight in four years without supplementary feeding. Continuity of supervision is essential in the breeding and the main- tenance of herds at the government's Shika and Daudawa stock farms. The mission recommends that programs of trypanosomiasis and rin- 270 THE TECHNICAL REPORTS derpest control be undertaken on each farm, that a resident veter- inarian be stationed at each, and that livestock multiplication pro- grams be expanded. Mutura Breed The Muturu, or West African shorthorn, is a dwarf humpless type occurring in the forest and semi-forest areas south of the Niger and Benue rivers. Kept mainly for ceremonial purposes, it is semi-wild and hard to handle. Because of its marked resistance to trypano- somiasis, the breed's potentialities for both meat and milk production should receive scientific study. Breeding experiments to increase size without losing trypanosomiasis resistance are being undertaken at various government stations. Ndama Breed The Ndama, or West African longhorn, is also a humpless breed, originating in French Guinea. It is a light, fertile, strongly trypano- some-resistant, beef-producing strain which does extremely well on rough grazing under humid conditions; its milk production is poor, however. It is regarded as the most likely breed to develop in the tsetse-infested high rainfall belts. The mission suggests that ranches be developed for their multiplication in both the Eastern and Western Regions. These projects should be undertaken by the regional develop- ment corporations, with technical guidance from the agricultural and veterinary services. European Breeds of Cattle The mission believes that a few selected exotic breeds of the Euro- pean type may be needed for dairy production in the South. The experience of Central American countries is relevant in this regard. It is recommended that a limited number of selected Brown Swiss bulls be imported for experimental crossing with selected Ndama cattle in both the Eastern and Western Regions. Breeding programs, conducted under expert technical guidance and with careful attention to feeding, should be associated with com- mercial dairy projects, proposed in Technical Report No. 10. DOMESTIC CROPS, LIVESTOCK AND FISHERIES 271 Montbeliard Cattle Montbeliard cattle have long been established by the French in the Cameroons highlands. Crossed with the zebu types they produce good dual purpose animals, with the accent more on beef than on milk production. At Jakiri Veterinary Investigation Center a cross breed of one-quarter Montbeliard and three-quarters Adamawa reached 900-1,000 lbs. in three years, and many cows topped the 300-gallon mark in 305 days on pasture alone. Cattle multiplication projects in all three regions and the Southern Cameroons should be undertaken by the respective development cor- porations; advice should be sought from the departments of agriculture and the veterinary departments. The mission believes that these projects offer considerable possibilities, and has suggested financial provision for them in Technical Report No. 10. Sheep Sheep breeding has been given little attention in Nigeria. A desert type bred by the Fulani is tall, tough and well adapted to travel on the hoof over long distances. Mutton and wool production may be improved by selection and better feeding. The "dwarf forest" types of the South are remarkably resistant to parasites under humid tropi- cal conditions; studies of these types undertaken at University College, Ibadan, should be intensified. Coats Goats are important in both North and South. The Red Sokoto breed of the North provides a world-famed pelt. In order to keep the stock pure, the government's policy, wvhich the mission endorses, is to protect it from intermixture. The dwarf types of the South should be studied with a view to improving the area's milk supply. Experimental crossing with milch types imported from India is recommended. If consumer resistance to goat's milk is encountered, we suggest the milk be distributed free to primary school pupils. Close attention should be paid to feeding, and courses in goat husbandry should be developed in schools, par- 272 THE TECHNICAL REPORTS ticularly with a view to encouraging the keeping of livestock by people unversed in any form of animal husbandry. Equines Northern Nigeria has a long tradition of horse breeding. Both Hausa and Fulani value horses for transport and sport. The mission recommends establishment of a government-controlled stud in Katsina Province for breed improvement and to demonstrate the value of mules and donkeys for transport. Pigs Indigenous pigs feed themselves and survive despite numerous hazards. The imported Large White Yorkshire type has proved highly successful on government farms, and commercially, at Kano. Per- sistent efforts by the agricultural and veterinary services to establish pigkeeping among peasant farmers have, however, had little success; with few exceptions husbandry has deteriorated on withdrawal of assistance and supervision. In view of the demonstrated possibilities and value of pig production, the mission recommends that a pig husbandry adviser be appointed in both the Eastern and Western Regions and that programs of demonstration and extension be de- veloped through co-operative societies and in schools. Poultry The indigenous breeds of poultry are small and of low productivity. Epidemics frequently eliminate or greatly reduce both native and European flocks but the Rhode Island Red and Leghorn types do well under good husbandry. Until disease control is more satisfactory, however, little progress in village poultry raising may be expected. Nevertheless, the mission recommends that the Western development corporation, assisted by the regional veterinary department, start poultry battery projects at Lagos and Ibadan. Ducks of a Muscovy type seem more resistant to disease in Nigeria than other forms of poultry and it is suggested that more attention be given to them. Projects should be started by the regional departments of agriculture, in consultation with the veterinary services. DOMESTIC CROPS, LIVESTOCK AND FISHERIES 273 D PASTURE IMPROVEMENT There are no:-estimates of the area grazed in Nigeria. At least 200,000 square miles of grassland could be used for pasture but a high percentage is ungrazed. Tall grass of low feeding value provides little but soil cover and a sanctuary for wild game. Lack of water, prevalence of tsetse or incapacity to feed livestock adequately for most of the year render vast tracts unusable at present. The area actually used for grazing probably does not exceed 150 million acres and little of the land maintains livestock tlhroughout the year. Types of Pasture The kinds of pasture vary widely with altitude, rainfall, amplitude of temperature changes in the course of the day, local variations in topography, run-off or local accumulation of water and soil fertility. The herbaceous plants, shrubs and trees providing livestock sustenance fit the general pattern of the vegetation types shown on Map 6. Northern Region Herbage legumes and grasses may be grown to advantage in many parts of the North. Research on pastures, begun recently at Samaru, is sound but more attention to problems of soil fertility and herbage plant nutrition is needed. While pasture work has been based on Samaru up to now, the mission believes that key centers should also be established in the Kano-Katsina area, where pasture research should form an important part of the applied research program recommended for the groundnut- producing areas. Reclamation of depleted land, now growing useless bush, is already being attempted by fencing in 600 acres and applying superphosphate. Fencing is important to safeguard and control land with greatly improved pasture. Durable borassus palm fence posts can be secured cheaply in some areas, while increased supplies of fencing wire from Europe will permit fencing costs to remain low enough to make it profitable. 274 THE TECHNICAL REPORTS Plateau On the Plateau a program of intensive research on soil deficiencies should be combined with tests of a wide range of pasture legumes and grasses. Middle Belt In the Middle Belt field crop production has preempted the areas of highest fertility and it is clear that fertile land should not be turned over to pasture. Efforts in this area should aim at building up naturally unproductive or depleted soils through livestock production. Tsetse control and provision of permanent watering points are essen- tial complements of pasture improvement. Fundamental research is required on the lighter sandy types of soil in the area. Western and Eastern Regions In the northern part of the Western Region a productive sward grows where soil fertility is sufficiently high. Throughout the Western and Eastern Regions there is urgent need for developing herbage legumes; research should concentrate on their nutritional requirements. Southern Cameroons In the montane environment of the Southern Cameroons, pastures of Kikuyu grass and true clovers are capable of high productivity. A pasture research program at Bamenda should be a major activity of the department of agriculture, collaborating with the proposed agri- cultural research institute and the Southern Cameroons veterinary department. Forage Crops Production of cultivated forages-including guinea corn and millet cut early for silage or hay, legumes such as groundnuts, cowpeas and pigeon peas now cultivated for their seeds, and legume forages grown specifically for hay-can be considerably increased. The mission recommends extending research and tests on forage production directed toward determining the most productive types, DOMESTIC CROPS, LIVESTOCK AND FISHERIES 275 their fertilizer requirements and their place in crop rotations and mixed farming systems. We also recommend extensive demonstration of legume forage crop conservation, to supplement the harvesting of young natural grass that would otherwise go to waste. Research Centers The mission recommends that pasture research stations be located at Samaru, in the Kano-Katsina area, Maiduguri, Shendam, Yandev and Mokwa in the Northern Region. Each of these stations should build up, in time, a series of field stations to cover additional soil types. The proposed agricultural research institute should keep in touch with fundamental pasture research throughout Nigeria. The work at Moor Plantation will be of considerable benefit to the Western Region, which should also be served by pasture research stations at Agege near Lagos, Ado-Ekiti and Benin. In the Eastern Region, stations are suggested at Enugu, Umuahia and Calabar. E ANIMAL NUTRITION The seasonal grazing movements of the Fulani have developed good breeds of livestock and reasonable levels of nutrition. Among other stock owners, the feeding of livestock is frequently haphazard but some conservation of crop residues and hay is practised by the Hausa for dairy cows, horses and donkeys, while the home grinding of guinea corn and maize produces a bran that is fed to livestock. The mission recommends that Northern native authorities develop communal village grazing reserves as a means of bringing livestock into peasant farming. Such reserves must have sufficient permanent wvatering points sited according to expert advice. They should be of adequate size-at least 30 acres per family-dressed with super- phosphate and trace element fertilizer where necessary, properly man- aged, fenced where possible and fully protected by law. Feeding of Concentrates Scientific feeding by private enterprise has proved successful at one large commercial piggery near Kano, where guinea corn, groundnut 276 THE TECHNICAL REPORTS cake, locust bean and blood meal have been fed, together with grain. Many concentrated feeds are available in Nigeria, partly as by-products of the processing of export crops; they include groundnut cake, palm kernel cake, cotton seed and rice polishings. Demand for them has been limited, however, although the fattening of cattle for slaughter with purchased feedstuffs would in our opinion be highly profitable at current prices. It will take active extension work to overcome the reluctance of cattle producers to make use of concentrates. F MARKETING OF LIVESTOCK PRODUCTS Apart from the Fulani, few but town dwellers drink milk. Milk is essential for effective nutrition and it should be produced at low cost not only for consumption in towns, but later also in villages. Production is easiest to develop in the higher areas. Programs for increased dairy production should be undertaken at Jos and Bamenda and the dairy project at Agege should also be maintained with im- proved, fertilized pasture. The mission recommends that pasture research work in the Plateau area be designed primarily to assist dairy production and that the Northern development corporation undertake cheese and butter pro- duction projects following practices developed at the Vom dairy and butter factory. In Bamenda Province in the Cameroons, there are good prospects for dairying on approximately 1,000 sq. mi. where grasslands occur, intersected by wooded valleys at 4,000-6,000 feet. The mission recommends a survey to determine the areas in the Cameroons best suited for dairy production and for the site of a pilot creamery and clarified butter and cheese factory. Town dairies should be established in such population centers as Ibadan, Kano, Jos and Umuahia; the one at Agege, serving Lagos, should be expanded. At most of the locations mentioned, except Bamenda, hay and concentrates will have to be fed at first. It is hoped, however, that the pasture research recommended earlier will permit development of good outside grazing conditions within a fairly short time, wherever sufficient land is available. It is recommended that DOMESTIC CROPS, LIVESTOCK AND FISHERIES 277 the regional development corporations undertake projects along these lines as quickly as possible. Advice on technical aspects should be sought in all cases from the agricultural and veterinary services, and courses of training in dairy technology should be organized by these services. The mission further recommends that both FAO and UNICEF be invited to assist in the development of town dairy projects. Beef Probably some 40,% of the entire cattle trade is located at four centers-Lagos (Apapa), Ibadan, Kano and Umuahia-with produc- tion of dried meat at Nguru. In order to reduce the spread of disease and the wastage of meat following on the movement of livestock on the hoof, movement by rail should be facilitated. Loading points should be improved, the number of cattle wagons should be increased, special trucks should be provided for the transport of sheep, goats and pigs, and the time between loading and delivery by rail reduced to a minimum. In the past, recommendations have been made for the centralization of slaughtering and the establishment of meat canneries in Nigeria. The government has probably wisely adopted a cautious approach to these proposals. However, the mission noted with interest the success- ful experimental canning venture at Kano and it considers there is justification for encouraging private enterprise to develop meat pro- cessing in the North. Bearing in mind the considerable advantages to be gained by the establishment of a meat canning factory, (not least being the stabiliz- ing effect on the slaughter stock trade and the restriction of tradestock movements) the mission is of the opinion that a pioneering factory should not be restricted in the exportation of canned meat or meat products. Many of the principal abattoirs in Nigeria are in urgent need of modernization and considerable funds for this purpose will be needed for expenditure in the main towns. The feeding of the concentrates to livestock has already been mentioned. The mission emphasizes the possibilities of fattening cattle on a large scale on holding grounds with rich grasslands close 278 THE TECHNICAL REPORTS to rail and in the vicinity of a meat processing plant. Units of approximately 10,000 acres should be sought near Makurdi, Kafan- chan, Minna and possibly later at Mokwa, when it is free from tsetse. Some of the established cattle-trading groups of the North, in addition to the Northern development corporation, should be encouraged to lease such areas and to develop these fattening practices. The ob- servance of stringent disease control in these undertakings is of course essential and would require special attention from the Veterinary Department. Mutton Improvement of pastures and breeds, veterinary supervision and better transport are essential to mutton as well as to beef production. Multiple-deck motor lorries could be used to bring sheep from the more remote areas of the North either to the railway or to slaughtering centers. Pig Products Pig raising is the quickest means of solving the meat shortage problem of the South. Both government and private enterprise have demonstrated that it can be carried on with profit. The mission's earlier recommendation for increased demonstration and extension in the South should be implemented before the development corpora- tions undertake projects in this field; in the meantime private enter- prises, such as that operating successfully near Kano, should be given every encouragement. Poultry The mission feels that poultry battery units offer the best prospects and recommends that a 5,000-bird unit be developed by the Western development corporation as a commercial project to serve the Lagos market; it should have close veterinary supervision for disease control. Wider acceptance of eggs as human food should be fostered by a sound extension campaign. DOMESTIC CROPS, LIVESTOCK AND FISHERIES 279 G VETERINARY MEDICINE The value of animal products, currently estimated at £ 30 million, could be trebled within 20 years. If this is to occur, Nigerians, especially in the South, must learn to value livestock and to appreciate sound methods of husbandry. A large increase in the number of locally trained veterinarians is necessary to meet the needs for re- search, education and control. Plans put forward in the Ellicott Report 7 for the establishment of a professional faculty of veterinary inedicine at University College, Ibadan, should be implemented. The mission agrees with veterinary officers in Nigeria that the resources of the Veterinary School at Vom should be co-ordinated with those of the University. Basic or preclinical instruction coulci be given at University College, clinical and advanced instruction at Vom. It should not be difficult for the University College and Vom to make necessary adjustments according to their respective staffs and fa- cilities. Veterinary Curriculum The mission believes that the veterinary courses should place special emphasis on tropical diseases; and that treatment methods shoulldl stress techniques of flock and herd management, with emphasis on mass inoculations rather than individual treatments. The curriculum should cover four years of study, and include in the first year physics, chemistry, botany and zoology; in the second year anatomy, his- tology, animal physiology and chemistry. Thirdl year courses might be given at Vom and should cover parasitology and pathology, vet- erinary medicine, obstetrics and surgery, pharmacology and materia medica; substantial clinical work should be required at this stage. The fourth year should be devoted to more advanced work in path- ology and veterinary medicine; dairy hygiene and law should also be taught. Much of the time should be taken up by clinical work at Vom. The reasons for proposing that the faculty of veterinary medicine be located at Ibadan include: 1. Availability of staff and facilities for teaching the physical and 7 Command Paper 6655. 280 THE TECHNICAL REPORTS biological subject matter on which agricultural, medical and veterinary sciences are based; 2. University associations and atmosphere, required for develop- ing the necessary personal and professional standards; 3. The advantage of providing a realistic and useful link between University College and the national needs for future livestock development; and 4. The opportunity for students of nutrition and health to take courses, and later undertake postgraduate research, in veterinary medicine. It is recommended that the faculty of veterinary medicine be ad- ministratively separate from the faculty of agriculture. There should, however, be the fullest co-operation in use of facilities and staff. Officers of the Veterinary Department who teach at Vom should hold staff appointments on the faculty of veterinary medicine of University College. Facilities The first need is for a building to house classrooms and laboratories for preclinical subjects, administration and staff offices, a reading room, lounge, and an assembly hall. It should be located near the site now under development by the faculty of agriculture, with sufficient contiguous land for expansion of veterinary facilities later. A difference of opinion exists within Nigeria on the advisability of offering both the veterinary assistants' courseand the full professional course at Vom. The mission believes that when circumstances permit, veterinary courses should be available to students of agriculture at the northern and western units of the Nigerian College and at the agricultural school at Umuahia in the East. This assumes that ad- ministration of agricultural training in the northern and western departmental schools of agriculture will be transferred to the respec- tive branches of the Nigerian College. In addition to general veterinary courses given to all agricultural students, advanced work in veterinary science should be provided for students wvishing to become veterinary assistants. The final year of the advanced course should be an internship at Vom. DOMESTIC CROPS, LIVESTOCK AND FISHERIES 281 It is suggested that veterinary assistants continue to be trained as at present until the full program can be put into effect. It may be desirable to offer basic veterinary science to all agricultural students at each unit of the Nigerian College but to limit veterinary assistants' training to one or two such institutions, depending on the demand by students and the needs of government. Brief apprenticeships at Vom might also be provided for agricultural graduates who wish to qualify as inoculators grades 1 and 2, or third class veterinary assistants. Veterinary Research The mission considers that veterinary research should be inten- sified both at Vom and within the faculty of veterinary medicine recommended at University College, Ibadan. The plan of the Colonial Office for developing Vom into a West African veterinary research organization is also endorsed. This would permit a concentrated at- tack on common problems of vaccine production and animal phy- siology, the recruitment of first-class veterinary research officers and the provision of up-to-date laboratories and library facilities. The mission also recommends that Nigeria continue and increase its sup- port of the West African Institute for Trypanosomiasis Research. v FISHERIES Importance Fish have traditionally been important in the Nigerian diet as a source of animal protein. In view of the rapid growth of population and the protein deficiency in the diet noted earlier, the production and consumption of fish needs to be substantially increased. Fishing is carried on with traps, cast nets and other implements by the populations living near lagoons, creeks and rivers. In less popu- lated districts the rivers are fished by itinerant bands, who take as much fish as possible in a short time, often by highly destructive means, and immediately cure the catch for sale in nearby markets. Until recently sea fishing was negligible, except for bonga and shrimp fishing near the estuaries of the big rivers. 282 THE TECHNICAL REPORTS Exact data on fisheries production are not available. The natural income study roughly estimated a catch of 42,000 tons of fresh fish in 1952-53 valued at £ 6.3 million; this corresponds to nearly 1% of gross national product. Of the total, an estimated 18,000 tons of fish came from creeks and coastal waters, 16,000 from the rivers and 8,000 from Lake Chad. A substantial part of the fish production is consumed in dried or smoked form. Present Resources and Practices Nigeria's thousands of miles of rivers and streams, and many iso- lated swamps and ponds, contain some 150 different varieties of fish. The catfish (Synodontis) and various mud-fish varieties (Clarias, Bagrus, Chrysichtys, Heterobranchlus) constitute 75% of the catch where fishing is done with traps or lines rather than nets. Mud-fish are able to survive in pools during the dry season, and sometimes even leave the water and travel over land for 100-200 yards to reach deeper waters. During the rainy season, floods, although disturbing the environ- ment, bring abundant food for the fish which then feed heavily. This is also the spawning time for most of the species and they migrate from the lower reaches upstream into the tributaries and swamps. During the dry season, the streams break up into pools or lagoons of still water, where fish may be stranded. It is believed that the resulting heavy loss of fish could be substantially reduced by maintaining an adequate area and depth of water by means of weirs placed at the lower end of the pools. This would provide space and feeding facilities for the fry and small fish, whose rate of growth would be rapid in these tropical waters. But in view of the fact that the carrier of onchoceriasis (river blindness) breeds in highly aerated water, con- struction of weirs should be undertaken only after consultation with health authorities. Local fishing practices are often very destructive. The government should prohibit or limit destructive fishing methods and regulate the types of nets and other devices. So far, specific regulations have been issued only against the use of poison. Native authorities have prohibited certain practices but the rules are often not enforced. There seems little immediate prospect of increasing the output of DOMESTIC CROPS, LIVESTOCK AND FISHERIES 283 fish from the lower reaches of rivers and creeks. There is danger that the fish population may be depleted. It is difficult to enforce conservation measures over the wide and often inaccessible areas involved. Native authorities in some districts have introduced fishing rules, however, and their operations should be closely watched with a view to adopting them elsewhere if they succeed. Until recently, fishermen living near the sea have preferred to fish in the lagoons, going to sea only at the season when fish were abun- dant. The output of sea fish is now being increased by use of more and better-designed canoes and motor boats, and by large-meshed encircling nets for bonga and hemp set nets for sharks and sawfish. Two trawlers are also operating. Fish Culture Establishment of fish ponds is of recent origin and no satisfactory controlled experiments have yet been carried out. In southern Ni- geria, there are many suitable sites for small and medium-sized ponds. In recent years village communities, schools and leper colonies have constructed several ponds at a reported cost of about £ 100 per acre and dams and reservoirs have been stocked. The results seem in general to be satisfactory, with annual yields per acre ranging from one-half to one ton of fish. Near the coast, the Fisheries Administration is experimenting with construction of brackish water ponds, locally called tambaks, and stocking them with bonga fry. Fish production is also being com- bined with paddy cultivation. Some experiments of stocking with fish waters impounded by dams are being made near Funtua and are planned in Sokoto Province. Most of this work in northern Nigeria is concentrated on the Plateau, where a good market for fish exists. There are good possibilities for ponds in that area if suitable sites are selected and the ponds are pro- tected from floods. The Northern Regional Development Board has recently started commercial fish farming in Panyam under expert supervision. The project will cover 600 acres, of which 100 acres are already stocked with Tilapia and anotlher 250 acres will be soon under water. Its 284 THE TECHNICAL REPORTS results, which will be known in a year or two, should indicate the practical possibilities of fish farming on the Plateau. Curing of Fish The greater part of the annual catch, including sea fish when the catch is heavy, is dried in the sun or smoke-cured by the fishermen and sold at local markets to middlemen or consumers. The chief inland centers of the industry are the rivers of the Northern Region and Lake Chad. Fisheries Development The need and demand for fish is fast increasing, while stocks are being progressively depleted. High priority should be given by the government to measures for a sustained increase of fisheries produc- tion. The mission recommends enactment and effective enforcement of more adequate conservation rules, the ban on the use of poison in particular; expansion of staff for development and regulation of fish- eries-the present staff of eight for the entire country being inadequate to carry out the necessary investigations and pilot operations and to produce early improvement in existing fisheries; establishment of a central research and demonstration unit, to be responsible for research work for all of Nigeria; s continuation and acceleration of the stock- ing of pools, dams and reservoirs; introduction of better methods for sea fishing with small motor boats and trawlers; and finally improve- ment of curing methods. Estimates of the cost of implementing these recommendations are given in Technical Report No. 10. s This would make unnecessary Nigeria's continued participation in and financial support of the West African Fisheries Research Institute in Sierra Leone. £§961 '83eVY303o sinN v-o0 .*" OZI 001 0 09 Ob oz 0 CD HSIA 0318 / S3lI1W Ni 31VOS la SNOINO / o f~~~~iv + ) * 9 9Sz *zlvw* 3 + 9 VA 0 13551W z z ' y X NbO9 V3Nin9 . q V V ,, s V\ 1~~~~~~~~~~ 9~~~~~~~~~ s(ioo4 sn-ld8ns . .+v :T )/ +S' U + + * - + + V V V I)~~~~~~~~~~~~~~~~~~~ + V - a ~~~ + S ± o A ~+ A U~~~~~~A 0onS t a0 + 0 ,@n - n @ v @ S @ v O -@ @ @ r\ - v * v - ° °, = 0 1 _