Over-reliance on oil production have had little impact on the local economy.
Despite the growing economic uncertainty that has ravaged the global scene, Nigeria in the second quarter of the year witnessed an economic improvement of 3.54 percent growth. This. Improved performance measures at 43 basis points (bps) ahead of the data of the previous quarter, as well as a slight upgrade to the 3.4 percent annual growth, projected by the International Monetary Funds (IMF). The outlook of the economy of numerous regions have been stunted by growing global uncertainties, geographical tensions and price surges, which are affecting the growth figures negatively. For instance, the biggest economy in the world was said to have contracted in the Q2 by 0.6 percent after a 1.6 percent slump in Q1. In this same period, China’s growth also depreciated to 0.4 percent from 4.8 percent in the previous quarter, which in turn forced its Central Bank into monetary easing.
Also, Europe’s economic situation is on the edge of the cliff, as they continue to strive to stave off a recession. The United Kingdom’s economy witnessed a consistent 0.1 percent shrink in Quarter 2 and has been regarded as one of the darkest moments of their history. In Africa, growth data is illustrating weak consumer spending and scanty investment, in spite of the cost of living tension that has hugely affected numerous economies. With this, it can be suggested that Nigeria’s data is by as bad as expected. However, the figures show the historical structural imbalance that have reduced the country to a mere consuming economy and has led to a huge unemployment ratio and foreign exchange crisis. Crude oil as Nigeria’s main source of public revenue contributed only 6.33 percent to its GDP, with non-oil resources had 93.67 percent.
Economic structure bad to inclusive growth, requires sustainable options.
The ratio a year ago was at 92.8 percent, favoring non-oil resources by 7.2 percent and 8.2 percent in 2020. However, while the non-oil resources create more jobs and improves output, Nigeria’s economy still relies on crude oil which has had little impact on the local economy, foreign exchange earnings and public budget funding. Economists at the 33rd seminar for finance correspondents and business editors noted that deliberate efforts to address these economic imbalances must be made, so as to ensure that both sectors contribute equally to the FX earnings and public revenue. RT200 FX programme other development roles of the Central Bank were selected as policies that the government can adopt to enhance the contribution of non-oil to FX earnings.
This seminar, tagged “Policy Option for Economic Diversification: Thinking Outside the Crude Oil Box” saw Dr. Abiodun Adedipe, a leading economist assert that the present economic structure is hostile to inclusive growth, adding that a cocktail of options must be implemented to position the economy in a more sustainable ambience. He also noted that Nigeria was the only commodity economy country that has not leveraged its resources to support other sectors and warned that the country’s economy could not continue to be heavily reliant on hydrocarbons, without a deliberate effort to diversify.
Decline in oil production have undermined Nigeria’s economic performance.
The Governor of Nigeria’s Central Bank, Godwin Emefiele also noted that the bank stability policy thrust was designed in the quest to build a sophisticated economy that is anchored by agriculture, micro, small and medium enterprises (MSME), industrial and manufacturing exploits. He further asserted that Nigeria had in the past decades concentrated heavily on crude oil for revenue generation and the recent decline in production have continually undermined the country’s economic performances and this, he stated has necessitated the need to diversify to non-oil sectors.
The President of the Manufacturers Association of Nigeria (MAN), Mansur Ahmed also implored the government to invest in necessary measures for the diversification of the manufacturing sector. He said that though the government were implementing measures for diversification with the proceeds from crude oil, efforts must be made towards focusing on the manufacturing sector to produce needed goods. He asserted the need to further deepen the complexities of the manufacturing industry, where diversification can be accessed from both horizontal or vertical perspectives.
Government must promulgate laws that require purchases of local goods.
Per diversification, Professor Uche Uwaleke of Nasarawa state university also admitted the need for legislation for the effective patronage of locally manufactured goods. He noted that the government must promulgate laws that will require Nigerians to patronize locally made goods Dr Ozoemema Nnaji, Director of Trade and Exchange Department of Apex Bank was critical about the. overbearing impact that the oil sector had over the economy, that has continually exposed Nigeria’s economy to external shock every time the oil prices change. Thus, the need to insulate the economy and implement a more sustainable and stable FX strategy through diversification. She further explained that there was a need for inter-sectoral dependence and economic balance to aid the diversification, adding that more export sources would help reduce the reliance on the oil sector.
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