NIGERIA’S over-dependence on oil revenue and the current low price of crude oil in the international market constitute serious risks for the economy. This has led to calls for the diversification of the economy to restore confidence in it and stimulate investment.
Last week, in Lagos, former Director-General of the Securities and Ex- change Commission (SEC) who is now Vice President and Treasurer at the World Bank, Ms. Arunma Oteh, added her voice and insights to the clarion calls in this direction.
Speaking on “The proper role of oil in the context of accelerating growth and development in Nigeria”, at the Philip Asiodu Lecture, the World Bank chief noted that beyond the negative effects of the present fall in oil prices in the global market, Nigeria should immediately begin to make concerted preparations to survive the impact of cheaper renewable energy on oil and gas demand.
In addition, she stressed the need for the government to be strategic in utilising its oil revenues to finance the diversification of the economy, assess- ing areas of comparative advantage and consolidating on them towards launching new industries that would lead to sustainable economic growth.
She identified three critical components of human capital that will make this possible. They are: education, quality of the workforce and specialized training for researchers and
Altogether, Ms. Oteh’s advice is timely. It is consistent with calls made by many other knowledgeable stakeholders in the country. These admonitions should not be ignored, as diversification clearly holds the key to unlocking Nigeria’s economic potentials. It bears repeating that Nigeria’s over-dependence on oil revenue for her economic development and the funding of the national budget has made the country highly vulnerable to oil price volatility.
Without a doubt, countries can only be as strong as their economies. The crash in oil prices and its effects on the nation’s foreign reserves and the value of the Naira against the dollar have proved beyond measure that there is no better alternative to economic diversification with emphasis on agriculture, solid minerals, manufacturing and tourism.
The country’s situation calls for collective action to achieve sustainable economic growth. Government must lead the way with huge investments in the diversification value-chain to industrialise the economy. There should be massive investments in infrastructure to provide a platform through which the private sector can partner with the government in the bid to di- versify the economy.
There has been so much talk on di- versification as an alternative to the dependence on oil revenue. Now is the time to walk the talk through a
concrete action plan. The need for decisive action on diversification of the economy should no longer take a backseat in view of the need to create jobs for the people.
We agree with the World Bank Vice President/Treasurer that “abundant availability of oil is one of Nigeria’s comparative advantages, and diversifying its economy away from oil should not be construed as not taking advantage of efficient linkages between oil and related industries”. The truth is that Nigeria needs a more inclusive economy, not only to successfully navigate the present crude oil price crisis, but to build a solid economy that can withstand future economic challenges.
There are so many things that government can do to revive the economy and put it on the path of steady growth. The relevant authorities should improve the ease of doing business.
Currently, Nigeria is ranked among the worst places in the world to do business. Therefore, without improving Nigeria’s business environment, the much-needed direct foreign in- vestment will remain a mirage.
Since the solid minerals and agriculture sectors remain critical to the revival of the economy, all hindrances to the efforts to make them play a bigger role in the economy should be removed. We suggest an amendment of the National Mining and Solid Mineral statutes to make illegal mining a serious crime.
In the agriculture sector, more incentives should be given to both small holder and big time farmers to boost agricultural production for both local consumption and exports. Only recently, the Minister of Agriculture, Chief Audu Ogbe, raised an alarm over the likelihood of a food crisis in the years ahead if government fails to diversify the economy and place greater emphasis on agriculture.
All in all, government’s diversification efforts should be complemented with the opening up of the rural areas with good access roads. There should also be improvement of access to credit facilities at low interest rates for small, medium and large scale enterprises. State governments should not be left out in these efforts. Let them seek ways of boosting their economies and stop the current dependence on federal allocations for survival.
The plan to diversify the economy should be meticulously designed and executed, to free Nigeria from its cur- rent over-dependence on oil export revenue, strengthen the economy and boost national prosperity.