429. Before the discovery of oil in 1958, the economy depended on a number of agricultural products, particularly palm oil, cotton, cocoa, rubber and groundnuts. They were the main export commodities and leading sources of income and foreign exchange earnings. When oil and gas exports began in 1958, the contribution of agriculture and other nonoil exports to GDP declined. However, crude oil exports increased progressively from 4.8 per cent in 1966 to 61.2 per cent in 2006, and accounted for approximately 78 per cent of government revenue. 430. The annual real GDP growth rate between 1991 and 1999 was a mere 2.9 per cent. The growth rate was only 0.4 per cent in 1999. The yearon-year inflation rate for the same period (1991–1999) averaged 33.1 per cent. Foreign reserves could only finance six months of imports. There was a fiscally unsustainable domestic and external public debt of US$37.7 billion in 1999. 431. The dominance of crude oil increased vulnerability to volatile commodity prices. Nigeria’s fortunes oscillated like a pendulum as the crude oil prices fluctuated. This, in turn, had far-reaching consequences on macrostability and socioeconomic development. The dependence on oil reduced opportunities to increase employment as the nonoil sectors contracted. Resources were channelled increasingly to the more capital-intensive oil and gas industry – a virtual enclave with few direct linkages to the rest of the economy. 432. The dependence on oil also caused volatility in the key macroeconomic variables. Inflation soared, the trade deficit widened, and foreign reserves were drained because of the poor management of expenditure. Macroinstability, in turn, soured investment prospects and undermined private-sector investment. Unsustainable spending also contributed to the volatility and caused large government deficits. 433. Fiscal federalism was adopted by the 1999 constitution. It challenged fiscal policy further because it granted fiscal autonomy to all three tiers of government without an effective mechanism to coordinate spending across the tiers. This meant that the federal government had limited control over expenditure at state and local levels, especially when there was an oil boom. The result was an incoherent and uncoordinated fiscal policy characterised by high levels of inflation. A mechanism to coordinate fiscal spending across the three tiers of government, in a manner consistent with national macrostability, was lacking. 434. Furthermore, the macro and regulatory environment was not conducive to private-sector development. It was marked by frequent policy reversals and unpredictable government reactions to domestic and international events. The public service, on which government relied to implement policy, was bloated, incompetent, disorientated and weak. Corruption and economic crimes were rife, both inside and outside of government. Thus, just before the return to democratic rule in May 1999, Nigeria faced the risk of becoming both a failed state and a failed economy. This influenced a large number of Nigerians to leave the country. 141