As Nigeria continues to grapple with economic challenges occasioned by varied local and global factors, stakeholders are pressuring the authorities to accelerate its economic diversification initiatives,
At a recent stakeholders’ forum in Abuja, some stakeholders called for a synergy between monetary and fiscal authorities to diversify the economy and create multiple revenue sources.
According to the Governor of the Central Bank of Nigeria (CBN), Mr Godwin Emefiele, the quest for building a more sophisticated economy is the major component of monetary policy.
Speaking at the 33rd Finance Correspondents and Editors Seminar recently, Emefiele said such an economy would be anchored on agriculture, 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 the sustained decline in crude oil production had continued to negatively undermine the performance of the economy.
“Thus, there is the urgent need for a conscientious effort to diversify to other non-oil sectors.
” 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, with our population growing by over three per cent per annum over the past seven years, against a less than steady growth in output since 2019,” he said.
The CBN governor said that the production and industrial capacity of the economy must be given special attention to ensure overall macroeconomic stability.
He said that economic challenges brought about by the advent of Covid-19 pandemic and Russian-Ukrainian conflict had also made the idea of economic diversification imperative.
“There is no gain saying that since 2019, the world has been facing severe shocks, propelled by the Covid 19 pandemic and the Russian-Ukraine war that have continued to threaten global growth and overall macroeconomic stability.
” As the world was gradually exiting the devastating negative shocks and impact of Covid-19 pandemic, the economic sanctions against Russia have further worsened the subsisting supply-chain disruptions across the globe.
“The accompanying trade dislocations have aggravated supply shocks across regions, triggered unprecedented increases in commodities, energy and food prices as inflationary pressures persist to all-time high across regions,” he said.
Emefiele said that increasing price of crude oil in the international market had also created economic challenges for several countries across the world.
“Oil prices have been hovering above 100 dollars per barrel over the past few months and have become a major drag to many industrialised economies of the world.
“Moreso, the blockage of shipments along the Black Sea have caused significant pressures on food prices, thus, underscoring the need to diversify our economy.
“This will ensure that unanticipated negative shocks such as this does not undermine our food security and self-sufficiency.
“Therefore, the quest for building a more sophisticated economy anchored on agriculture, MSMEs, industrial and manufacturing concerns have become the major component of our monetary policy,” he said.
Emefiele said that CBN had taken major leaps to diversify the economy away from largely oil-based economy through numerous interventions.
“We have supported non-oil sectors such as agriculture, manufacturing, health care, education, power and aviation and other allied economic value chains.
“You may recall that our flagship Anchor Borrowers’ Programme that heralded recent rice revolution in Nigeria has changed the long-standing dependence on imported rice.
“The country is not only depending on domestic production, but we have now become a rice exporting country.
“The Commercial Agriculture Credit Scheme is a major special purpose vehicle to support commercial farmers in the country in different value chains including oil palm, cotton, cocoa, among others,” he said.
He said that the continued support to the manufacturing sector and MSMEs have been yielding great results as the implementation of 44 items not valid for FX for imports has revealed.
According to him, CBN’s intervention in the health sector has begun to reduce the healthcare tourism, which is helping to conserve our foreign exchange and improve our well-being.
“Furthermore, the new 100 for 100 Policy on Production and Productivity (PPP) targeted at harnessing our local raw materials to increase domestic production and exports will soon begin to yield quality results.
“Moreso, the RT200 FX initiative designed to take advantage of our large domestic production to other regional markets is targeted to increase foreign exchange inflows to the economy and support exchange rate stability.
” In addition, the on-going work at the Dangote Refinery, when fully completed, will stop fuel importation just as we witnessed in cement, sugar and fertiliser market,” he said.
The Director of Trade and Exchange Department of the CBN, Dr Ozoemena Nnaji, said there was urgent diversification would spur growth.
According to Nnaji, the status of Nigeria as a mono-product economy had been detrimental to economic growth.
She described a mono-product economy as one that depends on a single product or resource for economic growth and development.
She said that the concept could further be referred to a case where a country depended on a single product for sales or exports for for 70 per cent of its budget funding.
According to her, a mono-product economy is unstable.
“An increase or decrease in the world price of the 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 such an economy weakend local production of goods that were imported into the country.
“In addition to importing finished goods, a country may also import inflation and other economic effects ” she said.
She said that oil and gas accounted for 90 per cent of Nigeria’s export income and 85 per cent of government revenue in the first quarter of 2022.
According to her, that makes Nigeria a mono-product economy, owing to its dependence on oil and gas.
She added that a more committed engagement in agriculture would grow the economy faster.
“Nigeria is a hugely agrarian economy which vast arable land, and with a large portion of the population into subsistence agriculture.
“Only less than 40 per cent of the vast arable land is cultivated, ” 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 FX 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 added that diversification would guarantee sectoral dependence and balance in the economy.
She said that the need for more sources of export products to reduce importation of goods and services that can be produced locally makes diversification imperative.
“Promotion of international trade that will lead to balance of payment position; the 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,” he said.
He commended the CBN for its various intervention in agriculture and other non-oil sectors.
“As at February, N948 billion in loans has been given to 4.4 million farmers cultivating 5.2 million hectares, creating 12.5 million direct jobs.
“Government could not have been able to deliver this order of “targeting” and private-private arrangement and depositors’ monies that need to be repaid, ” he said.
A Consultant, Dr Abiodun Adedipe, called for a deliberate alignment of policies across fiscal, monetary, commercial and industrial planks, to stem dependence on crude oil.
Adedipe 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 amongst Nigerians as to the best formant to accelerate economic diversification and grow the economy, Nigerians remain expectant for concrete economic diversification and revenue generation initiatives.