Diversifying Nigeria’s Economy

For decades, Nigeria has been over relying on oil to drive its economy. Following the massive decline in global oil prices and the damage it has done to the Nigerian economy and the 2015 budget, it is imperative now for handlers of the economy to seriously explore other viable means of saving the economy from total collapse..

In the last six months, global oil prices have been experiencing sharp decline leading to severe fall in revenue. As a result, the country’s budget benchmark price for this year is pegged at $65 per barrel. The continuous fall in the global oil prices forced the federal government to adopt austerity measures, reduce oil benchmark prices severally; from $78 per barrel to $65 while the Central Bank of Nigeria has devalued the naira.

Regrettably, the global benchmark which has greater influence on that of Nigeria’s benchmark fell recently by $ 1.92 to $ 51.18. For the Nigerian economy largely import-driven and oil-dependent, this implies a shortfall in revenue gap, increase in prices of goods and services and inflation, if nothing drastic is done to cushion the effect. Hence, the need to start diversifying the Nigerian economy.

Though the federal government, through the Coordinating Minister of the Economy, Ngozi Okonjo-Iweala, promised to explore this option, this should go beyond mere rhetorics. The promise should be followed through. Globally, there are fears that the oil price might witness further decline in the first quarter of 2015 and might not hit $100 per barrel in the next six months or more. Apparently, the Nigerian government has no control over this and for that, it is quite important for it to consider viable options like agriculture, maritime, tourism and among others to explore as revenue spinners.

It is on record, for instance, that the Nigerian Customs Service generated N1 trillion as revenue in the year 2013. If one government agency in a sector could rake in such an amount in a year, it is an indication that if other agencies follow suit and the potentials in the maritime sector and other potentially viable sectors are fully maximised, Nigeria won’t find it difficult to fund its annual budget which has always been a little over N4 trillion.

Besides, it is time government reduced importation of refined oil and made efforts to encourage and increase local production by fixing the refineries. Further devaluation of the naira without diversification may throw Nigerians into further hardship. To the common man, the devaluation of the naira means he will have to pay more in exchange for a dollar or for any imported good. In that case, while those whose wages/incomes are denominated in dollars wax stronger, the purchasing power of their counterparts whose earnings are valued in naira diminishes.