Sunday, 4th June 2023

Of Nigeria and diversified economy

By Chris Eyinnaya
17 May 2016   |   3:25 am
This write-up is prompted by The Guardian’s excellent editorial comment of May 11, 2016 titled “Saudi Arabia’s plans, lesson for Nigeria.” That editorial comment ...


This write-up is prompted by The Guardian’s excellent editorial comment of May 11, 2016 titled “Saudi Arabia’s plans, lesson for Nigeria.” That editorial comment really conquered my heart because it was an excellent piece of research on global attempts by serious minded oil producing countries on economic diversification away from oil in the face of volatile swing in price of crude oil that engendered uncertainty in revenue accruing therefrom.

With regard to Nigeria, one would be led to believe that the body language of APC-led government does not in any way suggest that it is serious about economic diversification away from oil because it seems the foundation has not been properly laid ab initio. APC, like previous governments from 1975 onwards, will end up not achieving much in that direction. Why do I say so?

A few weeks ago, the Minister of State for Petroleum, Dr. Emmanuel Ibe Kachikwu was quoted as saying that the Federal Government would soon begin to exploit oil from Lake Chad basin. The passion with which previous governments and now APC Government pumping millions of U.S. dollars in oil exploration in the Lake Chad basin in search of oil does not seem to suggest a government whose mindset is thinking less of oil as principal export revenue earner.

The irony of searching for oil in Lake Chad basin, if I am permitted to digress a little, is that the South-East geo political zone has proven oil reserves in Anambra and Imo river basins but no effort is being made by successive Federal Government to resume production there. Why?

According to The Guardian editorial under reference, “the manifesto of All Progressives Congress (APC) is wooly-worded on the matter at hand” (sic) economic diversification of Nigeria.

The truth of the matter is that the Nigerian economy is already diversified. What is not diversified is the export revenue base. Revenue from non-oil export is nothing to write home about. According to available records, non-oil exports accounted for 7.4% of total exports, manufacturing exports accounted for 3.4% and agricultural exports 3% in 2013 and 2014.

The reason is simple. Most agricultural activities are at subsistence level , lack of infrastructure especially electricity power negatively affect manufacturing due to high operating costs and harsh business climate occasioned by slack demand. In the area of solid minerals mining the incentive for state governments to participate and expand revenue base is paltry at 13% derivation allowed them by Nigerian constitution is low for discerning state investors.

Worse still, the same constitution states that all mineral resources belong to Federal l Government. Pray which private investor, foreign or local, will want to invest in solid mineral fields that belong to Federal Government? True mining leases are being granted but the confidence is not simply there for foreign investors to put down their money if the experience of joint venture partners in crude oil mining with Federal Government is anything to go by.

As far as this writer is concerned, APC is still campaigning with diversification of the Nigerian real economy as long as President Muhammadu Buhari will have nothing to do with diversification of the political economy of Nigeria or devolution of power among the federating units. This is because political economy has become a factor of production in modern times.

Nigeria is a poor country in spite of abundance of human and material resources buried by Almighty God below the earth in her domain because of the political structure called unitary federalism, whatever that means to Nigerians because it only exists in their dictionary.

Interestingly, each head of state that came to power since 1999 soon discovered that the problem of Nigeria is her constitution that ushered in unitary federalism. President Olusegun Obasanjo attempted to amend it but reports have it that it was his third term bid through amended constitution that angered the Senate led by Ken Nnamani and the entire document was jettisoned.

President Umaru Yar’Adua , unfortunately, did not live long enough to express himself on the 1999 Constitution but his successor in office President Goodluck Johnathan conducted a largely successful National Conference in 2014 (it need not be 100% successful) which among other things fully addressed unitary federalism and the vexed issue of some items in the exclusive legislative list that have hampered economic progress in Nigeria.

With Treasury Single Account(TSA) firmly in operation, APC is fully committed to unitary federalism which funding of the account for monthly disbursement to states and local governments is a clog in the wheel of true federalism. How can Buhari diversify the economy when states are weak and incapable of generating income of their own through productive economic engagements but rather depend on monthly income from an over bearing Federal Government? Fiscal federalism is the answer.

President Buhari should learn from the wise saying that it is only a mad man that will be doing the same thing over and over and expects a different result. Previous governments were hooked to unitary federalism and failed to diversify the economy. Nigerians voted massively for him and in spite of challenges are praying for him to succeed. But he must not only do things right, he must do the right things. That is the only way he can succeed in his change agenda with regard to diversification of the export revenue base of Nigerian economy.
Chris Eyinnaya, author of Practical Banking Operations and Fellow of Chartered Institute of Bankers, is based in Lagos.