Economic diversification beyond rhetoric
The call for the diversification of the Nigerian economy has gradually become a cliché’ with politically parties using it as bargaining chip to sway voters in their favor. However, year in year out the story does not change crude oil being the major revenue earner for the country.
The situation is no different at the state level, as governors all run to Abuja every month for their share from the federation account. Internally Generated Revenue, IGR, are so poor that most states governments have become clerical heads, maintaining a vicious circle of paying salaries and pilling up debts for their successor.
In the twilight of the last administration and the earlier part of the present administration, states like Osun, Benue, Kogi, Cross-River, Abia, River, Delta, Ekiti, Bauchi, Plateau, Jigawa, Katsina, Ondo and Oyo had declared their inability to pay salaries owing to the reduction in allocation to them. Some of the states were also declared bankrupt due to debts through heavy borrowing to fund projects they hitherto have no financial capacity to muster.
The Nigerian Governors Forum in November 2015 had even suggested a reduction in the N18,000 minimum wage or outright downsizing to enable them pay salaries. Chairman of the forum, Governor Abdulaziz Yari of Zamfara state, said funds allocated from the Federation Accounts could no longer sustain state expenses.
About 70percent of Nigeria’s revenue is said to be derived from oil, however due to the fall in oil prices, federation allocation to states had dropped by an average of N2billion monthly . Statistics from the Central Bank of Nigeria shows that foreign exchange inflow had fallen by about $1.1billion, resulting in a sharp decline of foreign exchange reserves from $28.98billion on January 4, 2016 to $27.86billion as at February 11, 2016.
Unfortunately, while these tumbling figures point to an urgent need for oil producing countries to seek alternative means of generating revenues, not much seem to have been done by the Nigerian government to absorb these shocks.
Though the rebasing of the Nigerian economy in 2014 suggests a diversified economy where telecommunication sector alone contributes 8.7percent and the entertainment industry contributes 1.2 percent to the nation’s GDP, some of the contribution to the GDP cannot be placed on concerted effort of government.
For instance, the entertainment industry in Nigeria was developed through the efforts of young Nigerians in the industry to become the second biggest film industry in the world (in terms of output) after Bollywood.
Statistics shows that the creative art industry now grows at 33percent, contributing over $6billion to the GDP which was then put $510billion.
While we appreciate that diversifying an economy such as Nigeria’s requires a number of years to bring to fruition some of its benefits, sectors such as agriculture and solid minerals are readily available to make the immediate impact.
The federal government must take seriously the various offers made by countries like China to help develop the agric sector through mechanization and provision of improved seedlings.
It must also pursue vigorously policies that will encourage investment in mining the abundant mineral resources in most parts of the country.
Nigeria must also begin to emulate the Indian and Brazilian Public Private Partnership, PPP, modules in funding infrastructural projects, as the country can no longer fund huge projects with the lean resources available. Such private participation will not only provide jobs for the teeming youth, but can indirectly serve as avenues to generate revenues through tax or foreign investment.
The recklessness coupled with the lack of foresight by successive governments to seek ways to shore up the nation’s reserve even in the face of an impending gloom in the oil market has left the country in distress.
The onus is therefore on President Buhari to make good his campaign promise of stabilizing the economy. He can start by constituting his economic team and letting the nation in, on the economic thrust of his administration. The country must begin to regain investors’ confidence, as Nigeria at this time, like never before, can no longer afford to pay lip service to the need to diversify the economy.