Nigeria’s Economy Should Be Diversified Beyond Oil
By Matthew Atungwu
Because Nigeria has been reliant on a single commodity for so long, oil has been its main source of income and foreign cash over the years, both before and after independence.
The agricultural sector, which had previously served as the backbone of the economy in pre-colonial Nigeria, was demoted to a supporting role, and the handling of oil earnings failed to propel the economy to the required level of development due to systemic corruption.
Given that many Nigerians still live in extreme poverty, even after more than 60 years of oil exploration efforts in Nigeria, this scenario has grave detrimental effects on the country’s development strategy. Today’s unemployment rate is double digits and can reach 33%, while productivity is at an all-time low.
Given this situation, it is vital to look into potential strategies for weaning Nigeria’s economy off of its reliance on oil. Analysts have noted that due to Nigeria’s unique circumstances and in light of the successes achieved prior to the discovery of oil, diversification was necessary for Nigeria to overcome the challenges posed by a monotype economy, particularly one that is heavily dependent on oil, which is subject to depletion, international price shocks, and unfavorable quota arrangements.
The three industries of agriculture, tourism, and technology and innovations are potential areas for economic diversification in Nigeria. According to the findings of a recent study, the development of hybrid species, including both plants and animals, the provision of complementary inputs, and direct government involvement in agriculture, as well as the scaling up of funds designated for tourism, the relaxing of the strict conditions associated with obtaining a tourist visa, and the use of cutting-edge facilities at all tourism sites, will go a long way toward promoting tourism and funding technological development.
With a Gross Domestic Product (GDP) of over 478 billion dollars and an average annual growth rate of 7.7%, Nigeria is without a doubt the greatest economy in Africa. Nigeria, the largest market in Africa and the seventh most populated nation in the world, with a population of around 200 million people and, if properly developed, has the potential to become the largest commercial hub on Earth.
Due to the surplus production, low demand, or crises in major oil producing nations, such as the one currently affecting Russia and Ukraine, oil prices have been changing since the middle of 2014, which has resulted in uncertain revenue for the nation. Since Nigeria has inherent potential in industries other than oil, it is imperative to address the issue of diversifying the economy as soon as possible. For instance, there are enormous potentials for economic growth in the technology and digital industry. Therefore, it should come as no surprise that the Buhari Administration in Nigeria established the ministry of Communication and Digital Economy to capitalize on the profits generated by that industry.
Similar to the previous vital industry, agriculture would not only strengthen the economy but also provide food security and create work for the vast majority of young people who are unemployed in the nation. If properly developed, Nigeria’s agricultural sector will not only provide much-needed foreign cash and feed the country, but it will also create jobs.
Backward integration with input supply sectors as well as forward integration with agroprocessing and other services like logistics could boost farm earnings, create more jobs, and promote domestic food security. By 2030, Nigeria’s exports of agricultural products might grow at a rate comparable to Brazil’s, bringing in 59 billion dollars. By implementing diversification within the sector, it is vitally necessary to increase the value added to oil and gas output.
To develop petrochemicals, fertilizers, methanol, and refining, investments are needed in the downstream sector. The tourism sub-sector is one that is severely underdeveloped because there aren’t any intentional initiatives to draw tourists and there are some security issues at some of the tourist destinations. All that is required to utilize Nigeria’s tourist potential as an additional source of foreign exchange revenue is to tap into it.
Above all, the economic and regulatory climate must be made more business-friendly by streamlining cumbersome regulations and procedures and removing barriers to greater and more productive private sector growth and investment in Nigeria.
