Nigeria today operates a mono commodity economy with total dependence on petroleum resources. The country is greatly endowed with many natural resources across different states within the federation.
At independence in 1960, the main sources of its revenue were agriculture and solid minerals. The regions then derived their revenue from the resources within their regions. The then Eastern region derived her revenue from palm oil, Western region depended on cocoa until the creation of the Midwestern region in 1963 and the Northern region relied on groundnut.
The discovery of crude oil in commercial quantity in Oloibiri in present day Bayesla State and Ebubu Eleme in Rivers State and its first export in 1957 was to change the nature of the nation’s economy.
The military coup d’etat and counter coup of 1966 put the country under a unitary system with the abolition of the regions. Subsequently, various extant laws were enacted to regulate the economy under a monolithic petroleum based economy. The boom of petroleum in the global market led to the nation’s over dependence on petroleum and gradual but consistent neglect of agriculture and other sectors of the economy.
Today, petroleum accounts for over 90 percent of the country’s export revenue and over 80 percent of Federal Government’s budget. The generated revenue is not effectively invested on diversification of the nation’s economy to develop a robust and stable economy.
According to Dr Peter Medee, Senior Lecturer, Department of Economics, University of Port Harcourt, most of this petroleum revenue has been mismanaged through corruption, dis-oriented, myopic and short term economic programmes and total neglect of the oil bearing communities.
He said that it is unfortunate that the different tiers of government cannot pay their workers, talk less of embarking on any meaningful project without reliance on petroleum revenue.
Speaking to The Tide also, Obi Chukwuemeka, Associate Professor of Economics, University of Abuja said that the failure of the country to diversify her economy has led to a situation where the nation’s is at mercy of the vagaries of petroleum market.
Obi explained that the neglect of other sectors of the economy has left majority of her work force unengaged or under-engaged thereby creating a large pool of the unemployed.
He stressed that there is urgent need for the country to diversify her economy since the oil sector cannot engage significant members of the unemployed work force.
He added that diversification of the nation’s economy will create employment opportunities; stabilise the economy for sustainable national development and industrialisation of other key sectors.
The University teacher emphasised that since the fall of global oil prices by almost 70 percent in mid-2014, oil exporting countries have felt the impact of the lower prices on growth rates, trade figures and public finances and Nigeria not an exception. He said other oil exporting countries such as United Arab Emirate (UAE) have overcome such challenges of low oil prices and have remained positive about their economic outlook through diversification policies which have helped neutralise the impact of the decline in oil price.
However, a recent study by the International Monetary Fund (IMF) in 2017 had shown that there is a strong association between economic diversification and the achievement of sustainable economic growth. The report indicates that a diversified economy, based on several sources of income is more resilient and able to recover faster from different shocks as any deficiency in a particular sector can be alleviated through the positive performance of other sectors.
Against the backdrop of low oil price, dwindling oil revenue, there have been strident calls for the nation to diversity her economy from the monolithic economy and absolute dependence on oil into other areas to sustain the nation in terms of revenue generation.
Since the return of democratic governance, successive administrations have formulated economic polices on how to diversity the nation’s economy.
In 2015, President Muhammadu Buhari said that his government would enact new policies to diversity the nation’s economy from oil to other sectors such as agriculture, mining and manufacturing.
According to the President, the diversification was to be captured in the 2016 national budget as he told a delegation of French Investors under the aegis of Movement of the Enterprises of France (MEDEF) that visited him in December 2015.
The President said: “we are doing our utmost best to encourage diversification into non-oil-sectors, which can employ a lot of people and ultimately reducing unemployment which will also help to improve security because unemployment and insecurity are inseparable”.
The current administration of the Federal Government had launched early this year, 2017, the Economic Recovery and Growth Plan (EGUP) to sustain economic growth out of recession. As at May 29,2015, the economy stood at a single digit inflation before it crumbled high to a double digit, thereby taking the nation into economic recession.
According to the Minister of Budget and National Planning, Senator Udoma Udo Udoma, the two major objectives of ERGP were to get the economy out of recession and then put it on the path of sustained inclusive and diversified growth.
He said that the second quarter Gross Domestic Product (GDP) presented by the National Bureau of Statistics (NBS) on September 5, 2017 showed that Nigeria had exited recession.
According to him, the major focus of government is to reflect the economy through spending in strategic sectors like infrastructure, agriculture, solid minerals to galvanise economic activities and improve the people.
He said that the growth recorded was broad-based as the non-oil sectors showed improvements in the last two quarters. He added that the agriculture sector continued to grow in 2017, recording a 3.01 percent growth in the second quarter, while industry recorded positive growth of .45 percent and manufacturing recorded positive growth.
But speaking to The Tide, a lecturer in the Department of Banking and Finance at the Rivers State University, Port Harcourt, Prof. Ayodele Momodu cautioned Nigerians not to be excited by the recent report of NBS that the country was out of recession.
Momodu said that the indices to show that the country is out of recession is too minor, stressing that: “If we are below zero level and now above zero that means we are going into recession, but we should wait for the third quarter statistical report by NBS before we can say we are on the move”.
The university teacher explained that “Macro-economic indicators such as unemployment is still high, if you look at it consecutively, unemployment, GDP or total output including sectoral performances are still below performance”.
Also speaking to The Tide, an economist working with a new generation bank in Port Harcourt, Mr Emmanuel Olukoya said that the President should ensure that its administration’s policies are geared towards the nation’s economic diversification initiative to increase the revenue generation base of the country.
Olukoya advised the government to tap into other areas of the nation’s natural resources as a means of getting out of the over-dependence on oil revenue.
The Journey So Far By This Present Administration
The present administration through its “Zero Oil Agenda Policy” laid out in the ERGP for economic diversification has maintained that the government is indeed committed to the nation’s economic diversification.
According to the Executive Director, Nigerian Export Promotion Council (NEPC), Mr Olusegun Awolowo, the nation’s economic slowdown which began in 2014 was mainly as a result of shortfall in export, which fell by more than eight trillion Naira a year, due to the fall in oil price, but that the recent released report of the National Bureau of Statistics (NBS) has put the country’s total export value at N3.1 trillion in the second quarter of 2017.
Awolowo said that “it represented an increase of 3.2 percent over first quarter of 2017 and a very significant 73.48 percent over second quarter of 2016.
He said that in 2016 corresponding period, Nigeria’s trade balance stood at a deficit of N572.12 trillion but the NBS statistics showed a positive trade balance of N506.5 trillion in the second quarter of 2017.
The NEPC boss further explained that the country has diversified from over dependence on oil to other key sectors for its revenue generation base such that today, the nation earns huge resources from agricultural products such as cashew nut N13.5 billion, sesame N7.02 billion, frozen shrimps and prawns N2.83 billion, flour and meals of soya bean N2.31 billion, ginger N633 million.
He added that “although oil continues to dominate the nation’s exports with crude oil accounting for 42.57 percent and other non-oil products 21.86 percent, the future of Nigeria’s economy is beyond oil”.
Furthermore, the National Coordinator/Chief Executive Officer, New Partnership for Africa’s Development (NEPAD), Princess Gloria Akobundu said in line with the Federal Government, diversification drive, the NEPAD has facilitated six investment opportunities for foreign investors to invest in such areas as agriculture, infrastructure, mining, resources development, raw materials, manufacturing, oil and gas sectors.
Akobundu said that foreign investors have agreed to invest in such areas for sustainable economic development of the nation and create employment opportunities.
However, diversification has its challenges, hindrances and obstacles in some of the countries that had to diversify the economy.
The report by IMF clearly stated that diversification strategies implemented in many countries have not been able to successfully diversify away from oil due mainly to the economy’s volatility that characterises reliance on oil revenues, the corroding effect of oil revenue on governance and institutions and the risks that oil revenues lead to overvalued real exchange rates.
The report further added that many oil exporting countries, such as Algeria, Congo, Ecuador, Gabon, Nigeria and Venezuela have had limited successes in diversification while Malaysia, Indonesia and Mexico offer the best examples of countries that have been able to diversify away from oil revenue.
Many Nigerians pray earnestly for the country to successfully diversify its economy from the monolithic oil based economy to other areas for its revenue generation and sustainable development.