Growing Nigeria’s economy through accelerated diversification
As the Federal Government continues undertake initiatives to overcome economic challenges occasioned by varied local and global factors, stakeholders say 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 exchange earning has left the country vulnerable to global economic shocks and force majeurs.
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 Federal Government’s monetary policy.
At the recently held 33rd finance correspondents and editors seminar, Emefiele was quoted as saying that the diversified economy will be built around agriculture, Micro, Small and Medium and Enterprises (MSMEs) 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 undermine the performance of the economy.
“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 feed ourselves, create jobs for our teeming youths and improve the standard of living of our people,” he said.
He said that economic challenges brought about by the advent of Covid-19 pandemic and the Russian-Ukrainian conflict had also made the idea of economic diversification imperative.
“As the world is gradually exiting the devastating negative shocks and impact of Covid-19, the economic sanctions against Russia have further worsened the subsisting 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,” he said.
Statistics show that if 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-Genera of Micro, 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 (GPD).
The figure, he said, is an outcome of a 2022 survey conducted by the agency in collaboration with National Bureau of Statistics.
Fasanya, who spoke ahead of 2022 World MSMEs Day in Abuja, the also said that the enterprises employ an estimated 39.65 Nigerians representing 87.9 per cent of Nigeria’s workforce.
The Director of Trade and Exchange Department of the CBN, Dr Ozoemena Nnaji, said diversification will accelerate economic growth.
According to Nnaji, the status of Nigeria as a mono-product economy had been detrimental to economic growth.
According to her, 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.
“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,” she said.
She said that 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, 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, ” she said.
She also said that diversification would guarantee sectoral dependence and balance in the economy.
She said that the need for more sources of export to reduce importation of goods and services that can be produced locally makes diversification imperative.
“There is the need for promotion of international trade that will lead to balance of payment position.
“There is also need for a dynamic economy capable of absorbing shocks while maintaining full employment; the need for a high rate of economic growth and development,” she said.
An economic expert, Prof. Ken Ife, urged the Federal Government to improve its commitment to the agricultural and manufacturing sectors of the economy to spur diversification.
Ife said in spite of huge intervention in the agricultural sector in recent times, output appeared to be inadequate.
“Public leadership of agricultural development programmes has resulted in the construction of 300 dams, huge strategic grain reserves, and other investments.
“The high number of dams, together with the rains and rivers give Nigeria four times surface water than South Africa.
“But, only a handful of the dams are used for power generation, irrigation for dry-season farming and aqua culture,” said Ife who consults for ECOWAS Commission, World Bank, among others .
He commended the CBN for its various interventions in agriculture and other non-oil sectors.
“As at February, N948 billion in loans have been given to 4.4 million farmers cultivating 5.2 million hectares, creating 12.5 million direct jobs,” he said.
Another economist, Dr Abiodun Adedipe, called for a deliberate alignment of policies across fiscal, monetary, commercial and industrial planks, to stem dependence on crude oil.
Adedipe, a member of Nigeria Economic Society; and American Economic Association, advised the government to reform and rationalise governance as the structure was convoluted and costly.
He said there was also the need to focus on industrialisation by revisiting and updating the National Industrial Revolution plan.
He urged the government to commit to local production of essential goods and target infrastructure development.
As the debate lingers among Nigerians as to the best formant to fast-track economic growth, Nigerians remain expectant for concrete economic diversification and revenue generation initiatives that will have more positive impact on the citizenry.