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Growing the economy through diversification

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By Abraham Adekunle

Stakeholders say the authorities should accelerate economic diversification.

As the Federal Government of Nigeria continues to undertake initiatives to overcome the economic challenges caused by various local and global factors (such as the Russia-Ukraine war), stakeholders say that the authorities should accelerate economic diversification initiatives. At a recent forum in Abuja, some stakeholders called for a synergy between monetary and fiscal authorities to diversify the economy and create multiple revenue sources. They complained that heavy dependence on crude oil for foreign reserve earnings has left the country vulnerable to global economic shock and force majeures.

According to the Governor of the Central Bank of Nigeria (CBN), Mr.Godwin Emefiele, the quest for building a diversified economy is a major component of the Federal Government’s Monetary Policy. At the recently held 33rd finance correspondents and editors’ seminars, Emefiele was quoted as saying that the diversified economy will be built around agriculture-micro, small and medium enterprises (MSMEs), and industrial and manufacturing concerns. He said that Nigeria had largely depended on the oil sector for revenue generation over the past four decades, adding that decline in crude oil production had undermined the performance of the economy.

Industrial and manufacturing concerns have become the major components.

The CBN governor said, “There is the urgent need for a conscientious effort to diversify to other non-oil sectors. Our population has been growing by over three per cent per annum over the past seven years, against a less-than-steady growth in output since 2019. It is important that we work to create an economy that will enable us to feed ourselves, create jobs for our teeming youths, and improve the standard of living of our people.”

He said that the economic challenges brought about by the COVID-19 pandemic and the Russia-Ukraine war had also made the idea of economic diversification necessary. He said, “As the world is gradually exiting the devastating negative shocks and impact of COVID-19, the economic sanctions against Russia have further worsened the existing supply-chain disruptions across the globe. Therefore, the quest for building a more sophisticated economy anchored on agriculture, MSMEs, industrial and manufacturing concerns has become the major component of our monetary policy.”

MSMEs can launch Nigeria’s economy to greater heights.

Statistics show that if they are well-harnessed, the MSMEs can indeed become the springboard that will launch the nation’s economy to greater heights. The media recently quoted the Director General of Small and Medium Enterprises Development Agency (SMEDAN), Mr. Olawale Fasanya as saying that MSMEs contribute 43.31 per cent of the nation’s Gross Domestic Product (GDP). He said the figure is an outcome of a 2022 survey, which was conducted by the agency in collaboration with the National Bureau of Statistics.

Fasanya, who spoke ahead of the 2022 World MSMEs Day in Abuja, said that the enterprise employs an estimated 39 Nigerians representing just under 88 percent of Nigeria’s workforce. Also, the Director of Trade and Exchange Department of the CBN, Dr. Ozoemena Nnaji, said that diversification will quicken economic growth. According to Nnaji, the status of Nigeria as a mono-product economy had been detrimental to economic growth. She said that a mono-product economy is unstable, adding that an increase or decrease in the world price of the mono product will affect the budget of the economy.

The oil sector has an overbearing impact on Nigeria’s economy.

Referring to the economy, she said, “It may witness a high percentage of unemployment. It is import-dependent and cannot stand on its own. It weakens the foreign exchange base of the country’s economy. The overbearing impact of the oil sector on the nation’s economy exposed the country to external shocks whenever there is change in price. To insulate the Nigerian economy from the shocks and foreign exchange shortages,” she also stated, “there is need to develop new strategies aimed at earning more stable and sustainable inflows of FX through diversification of the non-oil export sector.”

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