The diversification slogan continues to sound the loudest whenever the oil market is on the decline, but with increasing oil prices, the diversification noise becomes a whisper. However, many believe with the continuous fall in oil revenue, it is time the government took diversification of the economy seriously; BENJAMIN UMUTEME writes.
From the administration of President Goodluck Jonathan, the calls to diversify the Nigerian economy away from oil had been on the lips of various experts. And most times it becomes loudest whenever there is an economic crisis. However, when the situation abates, the authorities start singing another tone.
However, since 2019, the world has been facing severe shocks, propelled by the Covid-19 pandemic and the Russian-Ukraine war that have continued to threaten global growth and overall macroeconomic stability. As the world was gradually exiting the devastating negative shocks and impact of Covid-19 pandemic, the economic sanctions against Russia have further worsened the subsisting supply-chain disruptions across the globe, especially in Europe and Africa.
Thus, the accompanying trade dislocations have aggravated supply shocks across regions, triggered unprecedented increases in commodities, energy and food prices as inflationary pressures persist to all-time high across regions.
For instance, oil prices have been hovering above $100 per barrel over the past few months and have become a major drag to many industrialised economies of the world. More so, the blockage of shipments (predominantly grains and other food items) along the Black Sea have caused significant pressures on food prices, thus, underscoring the need to diversify the economy to ensure unanticipated negative shocks does not undermine Nigeria’s food security and self-sufficiency.
Meanwhile, experts are of the opinion that the authorities have been paying lip service to the diversification of the economy. According to them, with the abundant mineral resources, over dependence on the oil revenue to fulfill its obligation to citizens was self afflicting.
Aligning policies
Experts have repeatedly said the inability of the fiscal authorities to align its policies with monetary authorities constituted a drawback to the resolve to move away from oil revenue dependency.
An economist, Friday Efih, in a chat with Blueprint Weekend, said most of the time, the fiscal authorities fail to understand that working in sync with monetary authorities will go a long way to boost the drive to extricate itself from dependence on oil revenue.
“With what the CBN is doing, Nigeria should have gone past this talk about diversification of the economy but what have we got, the fiscal authorities rather than complement the efforts of the Apex Bank still come out with policies that are contrary to what the CBN is doing. The diversification we crave for as a country cannot be achieved that way,” Efih said.
The president of the Manufacturers Association of Nigeria, Engr. Mansur Ahmed, was blunter when he said the weakness of the fiscal sector has been a hindrance to economic diversification.
He noted that the various interventions of the CBN did not yield the desired result because of inadequate fiscal interventions.
According to him, “if the federal government had intervened and aligned effectively, there would have been better results. We have not seen that in the current administration.”
Soldering on
It is a no brainer that diversification of the economy has gone beyond slogan to putting boots on ground to get it done if Nigeria is to really develop as a nation.
Addressing finance correspondents and business editors at the 33rd Seminar for Finance Correspondents and Business Editors in Abuja, the governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, stressed that it is imperative that the economy is built on non-oil sector considering that the impact of the oil sector in the past couple of years on the economy continues to wane.
“Therefore, the quest for building a more sophisticated economy anchored on agriculture, MSMEs, industrial and manufacturing concerns have become the major component of our monetary policy. Nigeria has largely depended on the oil sector for revenue generation over the past four decades and the sustained decline in crude oil production has continued to negatively undermine the performance of the economy. Thus, there is the urgent need for a conscientious effort to diversify to other non-oil sectors.
“Nigeria has largely depended on the oil sector for revenue generation over the past four decades and the sustained decline in crude oil production has continued to negatively undermine the performance of the economy.
“As I have often said, it is important that we work to create an economy that will enable us to feed ourselves, create jobs for our teeming youths and improve the standard of living of our people. With our population growing by over three per cent per annum over the past seven years, against a less than steady growth in output since 2019, expanding the production and industrial capacity of the economy must be given special attention to ensure overall macroeconomic stability,” he said.
The Apex Bank Governor said the Bank’s interventions in various sectors of the economy did not only conserve foreign exchange, it also helped to generate jobs and keep companies from going under.
Data by the CBN revealed that over N500 billion is spent by Nigeria annually to procure Medicare outside the shores of the country.
As of July this year, the bank disbursed N4.44 billion to three healthcare projects under the Health care Sector Intervention Facility (HSIF), bringing the cumulative disbursements to N133.42 billion for 129 projects, comprising 76 hospitals, 32 pharmaceuticals and 21 other healthcare services.
“Thus, there is the urgent need for a conscientious effort to diversify to other non-oil sectors. As I have often said, it is important that we work to create an economy that will enable us to feed ourselves, create jobs for our teeming youths and improve the standard of living of our people.
“With our population growing by over three per cent per annum over the past seven years, against a less than steady growth in output since 2019, expanding the production and industrial capacity of the economy must be given special attention to ensure overall macroeconomic stability.
“We have supported non-oil sectors such as agriculture, manufacturing, health care, education, power and aviation and other allied economic value chains. You may recall that our flagship Anchor Borrowers’ Programme (ABP) that heralded the recent rice revolution in Nigeria has changed the long-standing dependence on imported rice as the country is not only dependent on domestic production, but we have now become a rice exporting country. The Commercial Agriculture Credit Scheme (CACS) is a major special purpose vehicle to support commercial farmers in the country in different value chains including oil palm, cotton, and cocoa, among others.
“Ladies and gentlemen, our continued support to the manufacturing sector and MSMEs has been yielding great results as the implementation of 44 items not valid for FX for imports has been revealed. Let me take this medium to inform you once again that our intervention in the health sector, for example, has begun to reduce the health care tourism being sought outside the country which is helping to conserve our foreign exchange and improve our well-being.
“Furthermore, the new 100 for 100 Policy on Production and Productivity (PPP), which is targeted at harnessing our local raw materials to increase our domestic production, as well as exports through our deliberate credit and other supports, will soon begin to yield quality results. More so, the RT200 FX initiative designed to take advantage of our large domestic production to other regional markets is targeted to increase foreign exchange inflows to the economy and support exchange rate stability. In addition, the on-going work at the Dangote Refinery, when fully completed, will stop fuel importation just as we witnessed in the cement, sugar and fertiliser market,” he said.
Options before fiscal authorities
To liberate itself from oil dependence, experts say, the country’s fiscal authorities must reform its fiscal operations and focus on industrialisation if it is to diversify the economy.
Speaking to business editors and finance correspondents recently, the chief executive officer, B. Adedipe Associates Limited, Dr. Biodun Adedipe, said the diversification of the economy “will reduce the vulnerabilities the country faces anytime there are shocks in international price of crude oil.”
According to him, “With solid minerals, Nigeria can make more money rather than continue in the ‘risky mindset’ of oil is everything.”
He insisted that to diversify the economy, it would need the government to be deliberate in its actions.
He suggested that professionalisation of both civil service and public service; reform and rationalisation of governance will contribute to the development of the economy without depending on oil production.
He said other options the country needed to consider while diversifying the economy include shifting focus to industrial operation, adopting PPP for infrastructure delivery, reform and rationalising education and Medicare.
