By Chinwendu Obienyi
Nigeria is endowed with abundant natural and human resources needed to place her amongst the top emerging economies of the world.
As Africa’s largest crude oil producer, Nigeria should also be among the most buoyant and developed economies of the world due to the nature of the huge natural and human resources the country has at its disposal.
But despite these abundant natural and human resources, the country is currently embrioled in a debt crisis. The nation’s economic woes according to experts began with the discovery of crude oil at Oloibiri on January 15, 1956 after a long period of exploration.
At the time of independent on October 1, 1960, agriculture was the dominant sector of the economy, contributing about 70 per cent of the Gross Domestic product (GDP), employing about the same percentage of the working population, and accounting for about 90 per cent foreign exchange earnings and Federal Government revenue. But with the passing of time, the role of agriculture declined drastically with its contribution to the GDP, following its neglect with the discovery of crude oil as well as the deteriorating performance of the sector itself.
With this development Nigeria now an oil producing country concentrated its resources on the exploitation of the black gold. Other sectors that once created wealth, employment and a good standard of living for the average Nigerian were abandoned.
Thus, Nigeria’s became mono-cultured when oil was seen as the mainstay of the economy. However, there have been efforts by the Federal Government to diversify the economy.
Dangers of mono-product economy
A mono-product economy refers to an economy mainly dependent on a single product or resource for economic growth and development whereas economic diversification is a process of broadening the range of economic activities both in the production and distribution of goods and services.
While diversification is seen as a means to checkmate recurring external shocks resulting from decline in oil prices in the global markets, it also has the capacity to fundamentally strengthen an economy’s adaptive capacity and safeguard its long-term prospects in the face of depleting natural resources and the vagaries of economic fluctuations under the pressure of competition in globalisation.
For instance, Nigeria’s quest to increase its export earnings received a significant boost in the first quarter of 2022 with a 137.88 per cent jump in the total exports, amounting to N7.1 trillion as against N2.98 trillion reported in the corresponding period of last year.
Also, the nation’s major traded agricultural products in the same period include, superior quality cocoa beans, sesamum seeds, cashew nuts, ginger, desiccated coconuts amongst others. Looking at the performance in Q1 2022, one would say the country is on the right track on the diversification agenda. This is because there is a need for more sources of export products to reduce importation of goods and services that can be produced locally.
However in order to insulate the Nigerian economy from shocks and FX shortages, there is a need to develop new strategies aimed at earning more stable and sustainable inflows of FX through diversification of the non-oil exports sector. Although challenges like ineffective supply chain, absence of a well-developed commodity exchange, inadequate fiscal support, ongoing impact of insecurity still remain, the Central Bank of Nigeria (CBN) has over the years rolled out various initiatives and interventions to boost the non-oil export sector.
Some of the measures already taken by the Central Bank of Nigeria to achieve economic diversification include; the N500 billion non-oil export stimulation facility (NESF), N300 billion real sector support facility using differentiated cash reserve ratio, 100 for 100 policy on production and productivity, RT200 FX programme, Creative industry financing initiative (CIFI) among others.
Meanwhile some analysts have applauded the CBN for rolling out these initiatives aimed at growing the productivity sector of the economy but have urged other stakeholders in the industry to partner with the FG as well as the CBN to bring about an inter-sectoral dependence and balance in the economy.
Delivering a paper titled; Navigating the Mono-Product Economy at the 33rd Seminar for Finance Correspondent and Business Editors which held in Lagos and Abuja simultaneously Dr Ozoemena Nnaji, said the CBN has indicated its commitment to trade facilitation in terms of directives, guidelines and development of appropriate policies for achievement of improved turnaround time and general promotion of transparency and efficiency in the business environment. She however noted commitment is required on part of all stakeholders to achieve the desired goals.
“The ability of the country to effectively manage its foreign exchange resources is largely influenced by the level of productivity of the country and availability of the robust external reserve levels. Hence, it is imperative that all stakeholders must join efforts in bringing about a high rate of economic growth and development as we cannot depend on oil forever”, Nnaji said.
For his part, the Chief Executive Officer, Cowry Assets Management Limited, Johnson Chukwu, who spoke to Daily Sun via telephone, lauded the efforts of the CBN but stressed the need for appropriate policies that would attract more FDIs into the country for infrastructure development.
“The FDI is an important source of capital funding for a country like Nigeria. Nigeria needs to come out with appropriate policies that will attract FDI, especially on foreign exchange. This is because as it stands today, a country may not have the wherewithal to fund most infrastructure like the telecommunications sector, specifically Nitel. Looking at the size of the economy, what we get as capital inflow is nothing compared to the size of the economy,” Chukwu said.