By Abdulsalam Jubril
Over the years, we have heard on several occasions from successive government that our mono-dependent economy will be diversified. Such governments have made promises of diversifying the economy before and after elections or usurping power with sugar-coated tongues. Alas, such promissory statements have turned out to be faux promises. What they are all interested in is the revenue that is derived from crude oil.
Hence, our economy has become mono-cultural, depending on a single commodity. Other sectors of the economy have been relegated to the background, while the management of oil revenues has proven inefficacious in driving the economy to bring about the much needed level of development. The diversification of the economy has been long overdue as continued over-reliance on crude oil exports has always made the economy vulnerable to shocks.
Following the drop in crude prices from a peak of $114 per barrel in July 2014 to as low as $33/barrel in January 2016, the country’s reserves have suffered great pressure from speculative attacks, round tripping and front loading activities by actors in the forex market. This fall in oil prices also implied that the CBN monthly forex earnings has fallen from as high as $3.2 billion to as low as $1billion. Yet, the demand for foreign exchange by mostly domestic importers has remained unabated. The net effect of these combined forces unfortunately is the depletion of the country’s forex reserves and pressure on the naira. No wonder there has been much rage over the unavailability of forex.
As a result of this drop, our economy is being faced with ginormous challenges. Many states within the federation are unable to pay workers’ salaries. The existing infrastructures are swiftly getting dilapidated while new ones are not in place. Power generation has degenerated significantly. The financial system is crumbling and foreign investors are shunning our bonds and stocks. Companies are laying off workers in their hundreds due to inability to pay salaries. Prices of commodities have skyrocketed while the cost of living has doubled if not tripled. Security still remains a major challenge as incessant protests from Niger Delta militants, kidnappers, religious extremists, the Biafran movement, herdsmen among others continue to threaten our economy.
Our failure over the years to adequately utilize the gains made from crude oil sales cannot be disconnected from massive corruption and mismanagement among the political and economic elites. However, what stops us from finding and effectively utilizing other sources of revenues? There have been beautiful and erudite road-map plans and strategies on the diversification of the economy by seasoned professionals and intellectuals. There has also been much talk of agriculture, not forgetting the mineral resources that are said to be abound in many parts of the country. However, hitherto, nothing tangible has come out from them. Revenues derived from the sale of crude oil are what we still depend upon as a country; thus the current quagmire we have found ourselves in.
During the pre-independence and early independence years before oil became the mainstay of our economy, agriculture flourished and provided the much needed revenue that sustained the economy. Fast-forward 56 years later, the famous groundnut pyramids in the North are simply fabled-stories old men tell to our generation. The yam barns that used to be the pride of many an Igbo man are non-existent now. The revenues gotten from cocoa and oil palm in those early years have vanished in the annals of history. Interestingly, cocoa was a major foreign exchange earner for Nigeria in the 1950s and 1960s and in 1970 the country was the second largest producer of cocoa in the world. But following investments in the oil sector in the 1970s and 1980s, our share of world output declined. In 2010, cocoa production accounted for only 0.3% of agricultural GDP.
A question that begs for answers is that why does successive government in our clime depend solely on crude export as a source of revenue? Why have they failed to look elsewhere and ensure our economy is not mono-dependent?
From all indications, the present administration is also towing the line of previous governments, depending on oil revenue and simply paying lip-service to the diversification of the economy. However, the need for diversification of the nation’s economy has never been more imperative than now, especially with the dwindling/fluctuating oil prices in the international market. The dynamics of oil has also changed, especially with the production of shale oil. The cost of producing shale oil imposes a cap on oil prices, with about 72-countries in the world potentially capable of producing shale oil. Nigeria’s key customers, the US and China are already producing shale oil or looking for alternatives to our oil.
We need to begin moving away from oil dependence, particularly looking to the private sector to be the engine of growth and development that would make the country attractive to investors. Agriculture, if given the needed attention is capable of creating about 70% of jobs for our unemployed youth. Agriculture being a sector that requires a large labour force can help create employment for the large unemployed able-bodied men and women in the country. Human capital is also a grey area that governments have consistently failed to explore. The less we depend on oil, the better for us as a nation. A situation where about 90% of the country’s revenue comes from oil portends great danger for the economy with today’s realities. The diversification option offers a way out if done urgently and capably.
Written by Abdulsalam Jubril is a Public Affairs Analyst.