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Can Nigeria diversify from oil-based economy?

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By Abraham Adekunle

Possibility of higher non-oil revenues still remains doubtful to economists.

The crisis-induced alterations in the pricing of crude oil in the global market have always placed Nigeria and other oil producing countries on the edge of economic uncertainties. It prompted economists to advocate for the diversification of nations’ economies that are solely reliant on oil. So, the current efforts at developing the Nigerian non-oil sector did not just start; it came about after what is globally referred to as the oil crisis of the 1970s.

This crisis was caused by two events — the Yom-Kippur War of 1973 between Israel and its Arab neighbours, and the Iranian Revolution of 1979 which disrupted global supplies of crude oil. These two events created economic difficulties for countries with heavy reliance on energy exports for their economic prosperity. As a response to the consequences caused by the economy plunging into a crippling and frightening bottom of uncertainty, the Nigerian government established the Nigerian Export Promotion Council (NEPC) in 1976 to drive the nation’s dream of diversifying its economic potentials beyond the oil sector.

Sabotage in the N’Delta region has affected Nigeria oil revenues.

Since then, the government has been determined to raise its non-oil revenues. For the first time since 1973, the Nigerian government in 2021 earned more in non-oil revenues than what it generated from oil exports. By this achievement, the country’s economy became reflective of the determination to be diversified from oil revenues that have sustained the Nigerian economy for over four decades. Though the country earned N1.6 trillion in revenues from the non-oil sector, it was insufficient compared to the N12.56 trillion budgeted by the Nigerian government. The bulk of income from non-oil sources totaled 62.5 percent in the 11 months of 2021, thus brightening the prospects of the non-oil sector in turning the tables against oil revenues.

In the last couple of years, Nigeria has suffered heavy blows in oil extraction and export especially due to the activities of non-state actors in the oil-rich Niger Delta region. The country’s oil production on average dwindled in the last decade, reaching an all-time low record of less than one million barrels per day. Since the historic event, the production has been unstable. A corresponding proportion of the news from the region covered exposes of illegal refineries, oil bunkering and pipeline sabotage. These have affected the earnings of the government as it cannot fulfill the quota given to it by the Organization of the Petroleum Exporting Countries (OPEC).

A study recommends focus on agriculture among other sectors of the economy.

Of course, Nigeria has long discovered that reliance on oil exports does damage to its economy. Not only has Nigeria incapacity to rise above being merely an exporter of raw materials dwarfed efforts at making the country competitive in the global market, lack of synergies for inter-agency collaborations has cobwebbed efforts in fashioning policies in creating a harmonious working relationship towards pursuing increased productivity in the non-oil sector. More than our capacity in developing the manufacturing sector to add value for our raw materials products, Nigeria must increase the awareness of its youths to become Africa’s export champions through various programs and mentorship in ensuring Nigerian diversification dream.

More importantly, a 2021 study on the non-oil sector and economic growth of Nigeria has recommended diversification of the Nigerian economy by focusing more
attention on agriculture, solid minerals, and service sectors as they tend to influence economic growth in the long run. It urged the monetary authorities such as CBN to intensify action to grant interest-free loans in conjunction with commercial banks to small and medium business enterprises that are into agro and allied production.

Establishing the non-oil aspect of the economy can be daunting.

In line with this objective, the Yakusak-led Council is also presently engaged in supporting youths to actualize their export development programs through organizing a football talent hunt. The Export Competency Development Programme of the Centre for the Promotion of Imports from Developing Countries (CBI), in partnership with the Council, has tremendously led to reduction of Technical Barriers to Trade (TBT) and increased the contribution of volume and value of export of goods and services. There is no doubt that enthroning non-oil revenues as Nigeria leading foreign exchange earner are still fraught with daunting curves, but the highpoints attained in this tortuous journey remain a watershed in the diversification of the economy. If the past year is anything to go by, Nigerian non-oil sector has the prospect of outperforming the oil sector.

Related Links

ECSD: Website  OPEC: Website

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