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Making Nigeria’s Economic Diversification Visible

Making Nigeria’s Economic Diversification Visible

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Nigeria’s economy has, for several decades, remained mono-cultural with crude oil as the main source of revenue. What this means is that other sectors such as agriculture and solid minerals, among others, which were the mainstay of the nation’s economy before the discovery of oil were needlessly sidelined. Previous attempts to change this trend ended with no concrete action to bring the idea to fruition.

Today, federal, state and local governments rely on their monthly shares from oil proceeds to pay salaries and execute various projects. That is why there is the constant fear that any major shock from the oil sector could ground the economy.

Diversification in the present Nigerian economic context simply means creating new avenues for economic growth. It involves using the right strategy to boost revenue generated from other sectors of the economy. This means, facilitating growth of other sectors of the economy and through this, reversing the effects of the economic crisis and returning the economy to a growth path. It, however, will not necessitate a neglect of the oil and gas sector but entails a maximization of the revenue potentials of all the sectors.

The Muhammadu Buhari administration has repeatedly indicated interest in diversifying the economy when the price of oil dropped below $40, before leaping to $60 and the current $75 per barrel.

Before the discovery of crude oil in 1956, Nigeria’s economy was essentially agrarian, which produced such cash crops as oil palm, cocoa, rubber, timber, groundnut, among others, that were exported. This made Nigeria a major exporter of those crops. In the same manner, Nigeria had over 19 million herds of cattle, the largest in Africa. Today, Nigeria is no longer a major producer of groundnuts (peanuts), rubber and palm oil. Cocoa production is now mostly from obsolete varieties and over aged trees, with production hovering between 180,000 tons to 350,000 tons annually.

Though the discovery of crude oil has contributed and assisted Nigeria’s economic prosperity and growth, , the fall of oil prices since June 2014, after five years of windfall, has immensely affected the country’s economy. Consequently, Nigeria’s economy and those of the subnational governments are presently unstable.

There is, therefore, widespread clamour for the urgent need on the part of the federal and all state governments to look towards diversification of the economy to attain sustainable economic growth. Every segment of the Nigerian society, more than ever before, now support the call for diversification of the economy with the pressing need to decentralise the concentration on the mono product, crude oil.

However, we are compelled to point out that economic diversification efforts are currently constrained by many factors, including poor and unstable power supply, bad roads and high cost of funds, currently put at between 25 – 30 per cent. We also call on the government to tackle all major challenges that hamper the growth of the economy in that direction as well as create an enabling environment for local and foreign investors in order to pave the way for an enhanced diversification drive.

Growing non-oil revenue will require policies and structures that can support business growth. These include adequate physical infrastructure, policies, legal and regulatory frameworks that will make the economy business-friendly so as to be able to generate taxable profits.

The current pursuit and clamour for economic diversification is quite germane and necessary given the challenges of a mono-economy, especially with continuously falling price of crude oil at the international market.

Essentially, the main reason why various policies have continued to fail in Nigeria is largely because of lack of discipline and commitment among the Nigerian ruling elite. Discipline commited are key. Economic diversification is achievable if the leaders of government are sincere and have commitment. What government needs is the political will to do the needful in developing a heterogeneous economy. The success of economic diversification is therefore hinged on attitude. When policy makers have the right attitude to do things correctly and sustainably, the process will succeed.

The government at all levels need to set out a workable plan towards that process. It is noteworthy that the federal government has already developed a plan. The plan should guide actions of the government towards a holistic response to the economic crisis, while still channelling scarce resources into decisions that will have as much impact on the economy as the federal government desires.

The plan should, among other things, concentrate on the most important areas. These could include infrastructure, manufacturing, industry, agriculture, solid minerals, technology, finance, banking and health, among others. We, therefore, urge the government to demonstrate some seriousness in the implementation stage of the diversification policy.

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