What happens when a two legged human decides they want to walk on either of the legs alone, resting the full body’s weight on the one leg? Walking becomes difficult, standing painful, and sitting down becomes unpleasant. What happens when someone decides to exhale with just one nostril? Or listen with one ear? More importantly when a four legged table stands only on one of the legs? Imbalance becomes the inevitable result. That’s exactly what happens when a nation so blessed, so rich, so endowed as ours, with natural and human resources decides to rely on one mineral resource (oil) as her major revenue earner leaving the others almost unexploited and fallow. Just as the parts of the body/ legs of a table are in pairs/quads for balance and effective overall functioning, so also are the natural and human resources of any nation; to be harnessed for the overall growth and development of the nation.
Diversification, from the root word ‘diverse’ of Latin origin ‘diversificare’ means to make dissimilar. Diversification is the act of changing something so that it has more different kinds of things, to variegate. Diversification implies “movement into new fields and stimulation and expansion of existing traditional products.”(Suberu et al, 2015)
According to the Botswana Economic Diversification Drive Long to Short Term Strategy Document, “Economic diversification means diversifying a country’s sources of economic growth and income in such a way that the country becomes more or less equally dependent on all sectors of the economy. Conversely, an economy is diversified if no sector may be singled out as a major engine of growth”. By the United Nations Framework Convention on Climate, “Economic diversification is generally taken as the process in which a growing range of economic outputs is produced. It can also refer to the diversification of markets for exports or the diversification of income sources away from domestic economic activities i.e income from overseas investment”. Economic diversification is a process of broadening the range of economic activities both in the production and distribution of goods and services. It does not necessarily entail increase in output but it enhances stabilization of economies by diversifying their economic base (Anyaehie & Areji, 2015).
A mono economy will always be predisposed to internal and external vicissitudes while a diversified economy has more chances at thriving and sustainability.
SUSTAINED ECONOMIC RECOVERY AND DEVELOPMENT
Economic recovery and development is a period of economic expansion, typically after a recession. During an economic recovery, the declines slow and then begin to increase, the unemployment rate drops, consumer spending increases and the gross domestic product climbs up again. By Investopedia, economic recovery is a period of increasing business activity signaling the end of a recession. Indicators such as the gross domestic product (GDP), inflation, financial markets and unemployment are used to determine whether a recovery is in progress.
Sustained economic recovery and development however refers to a maintained process of retrieving that which was lost in the economy and consolidating it for an enhanced and continuously improving and expanding economy. That is, making sure the economy does not go back into recession but continues to thrive and improve optimally.
Nigeria is a nation blessed with several mineral resources splattered all over the thirty six states of the country. According to the United Nations Department of Economics and Social Affairs (Population Division) report, Nigeria hit a population of 184,635,279 as of January 1st, 2016; this connotes a vast reservoir of human resources. An effective maximization of these resources is all Nigeria needs to achieve a sustained economic recovery.
HOW DID WE GET HERE?
At independence, Nigeria’s major source of revenue was agriculture and extraction of solid minerals (Anyaehie & Areji, 2015). That was before the discovery of petroleum in the 1960s which ushered Nigeria into a new era of prosperity and abundance resulting from the oil windfall due to the increase in global oil prices precipitated by the Arab Israeli crisis. This eventually culminated in the exchange rate appreciation, import subsidies, and a decline in vital sectors such as agriculture, manufacturing, solid mineral extraction and the service sector. Today, petroleum accounts for over 90% of Nigeria’s export revenue and over 80% of the government’s budget (Jekwe, I, in Anyaehie & Areji, 2015).
Nigeria has dwelled largely if not over relied, on its huge crude oil resources as the major source of revenue, driving a mono economy for years in spite of the enormous developmental challenges it faces. This has resulted in a high unemployment rate considering the capital intensive nature of the oil industry and the relative neglect of other sectors of the economy. It has also resulted in an unfavourable balance of trade and more recently, due to the volatility of the oil market, launched the economy into a downward plunge.
According to Dr. Yemi Kale, Statistician General of the Federation/Chief Executive Officer, National Bureau of Statistics, in his address titled “Pushing Nigeria’s Economic Diversification Forward : Issues & Options”, at the 7th Stanbic IBTC Bank Investors Conference, “oil prices fell 66.8% from $114/barrel recorded in June 2014, to $38.0 by December 2015. Prices have fallen even further in 2016, to $31.4 as at 22nd February, 2016 as the world sees a global glut in oil supply and slowing demand especially in emerging countries. While the price level itself is a problem, a bigger challenge lies with oil price volatility. As a nation that relies so much on oil for its revenues, the implicit multiplier effects for the entire economy, have been most staggering and pervasive. Although many would have noticed the imbalances and strains that were beginning to appear in the economy stemming from the gradual decline in the price of our country’s main foreign exchange earner, very few could have anticipated the extent and severity of the economic and financial storm that has subsequently enveloped markets. Despite the unprecedented number and scale of the policy intervention measures introduced, systemic pressures have yet to fully abate”. With the recent declaration by the minister of finance at the Nigerian Senate briefing on the 21st July, 2016, that the economy is technically in recession, Nigeria is in dire need of economic recovery.
ACHIEVING SUSTAINED ECONOMIC RECOVERY AND DEVELOPMENT
A productive development of the other sectors of the economy is key to achieving economic recovery. The Nigerian government must as a matter of urgency encourage the diversification of Nigeria’s economy. It is the only feasible way to survive the current environment of global economic uncertainty with the volatility of oil price. The myriads of sectors into which the Nigerian economy can be diversified are as follows:
Agriculture is a wide treasure box inside which several treasures can be unraveled to boost the Nigerian economy. Agriculture involves the cultivation of land and rearing of animals for both subsistence and commercial purposes such as local market sales and export. Agriculture also provides food for animals and raw materials for industries Nigeria boasts of a number of agricultural products such as: Groundnut, Cocoa, Cassava, Rubber, Palm oil, Livestock, Fisheries, Rice, Yam, Wood production, to name a few. All these products are viable sources of internal and external revenue for Nigeria.
Agriculture used to be the mainstay of the Nigerian economy before the discovery of oil. Prior to the political crisis of 1967-1970, agriculture’s positive contributions to the economy were instrumental in sustaining economic growth and stability. The bulk of food demand was satisfied from domestic output, thereby obviating the need to utilize scarce foreign exchange resources on food importation. Stable growth in agricultural exports constituted the backbone of a favorable balance of trade. Sustainable amounts of capital were derived from the agricultural sector through the imposition of several taxes and accumulation of marketing surpluses, which were used to finance many development projects (Suberu O.J et al, 2015). Agriculture has since been relatively relegated to an insignificant revenue earner as opposed to oil. Despite the various agricultural policies and projects since independence, agriculture only contributed 23.11% to the gross domestic product in 2015 according to the data made available by the National Bureau of Statistics. As such, Nigeria needs to:
– Embark on a massive overhaul and reinvestment program in the agricultural sector
– Create an enabling economic environment for large scale agriculture to thrive
– Encourage small scale agricultural practices to cater for the subsistence domestic needs
– Address the land tenure system which is currently a bottleneck in large scale agricultural production by making land easily accessible to honest business men, making for longer term landholding systems
– Provide capital in form of loans and subventions to willing agriculturists especially for the purchase of farm machineries, fertilizers and other farming aids
– Create a domestic market for homegrown agricultural produce thereby reducing importation to the barest minimum. Make a foray a number of foreign markets through increased exportation of agricultural produce. The livestock and fisheries are wealth pools of export income if effectively harnessed.
These will result in:
** Increase in economic productivity.
** Self sufficiency in food production.
** Self-sustained growth in the agricultural sector.
** Overall structural transformation of the sector and the economy at large.
** Reduction in unemployment and underemployment rates.
** Reduction in Nigeria’s import bill
** Favourable balance of trade
SOLID MINERAL EXTRACTION AND PRODUCTION
Nigeria’s solid mineral extraction industry is one of the relatively neglected but viable income earner the state possesses, despite the over reliance on crude oil, there are a host of other minerals in all the thirty six states of the federationas can be obtained here http://www.youthdevelopment.gov.ng/index.php/nigeria/2013-12-19-03-40-31/natural-resources
Nigeria no doubt, has been exploring and producing some of these minerals but the fact that the industries sector under which mining and quarrying are activities only contributed 23.71% to the GDP in 2015 leaves much to be done. Nigeria needs to embark on a much more aggressive extraction and production of other mineral resources asides oil in commercial quantities. These will serve as alternative income earners and as well absorb a good percentage of the unemployed labour market.
Nigeria could also explore the option of state based production of mineral resources to generate income for governments at the state level and reduce the reliance of states on the federal government for bailout funds and subventions.
Tourism is also an important sector into which the economy can diversify. Economies of the world such as Barbados, Dominica and Jamaica to name a few thrive greatly on earnings from the tourism industry with as high as an 85.9% contribution to the GDP in the case of British Virgin Island. Blessed with rain forests, savannahs, waterfalls, national parks, ranches and resorts such as the Yankari Games Reserve, Gashaka-Gumti National Park, Obudu Ranch; and tourist attracting festivals and events as the Osun Osogbo festival, Argungu festival et al, the tourism industry is a promising income earner.
– The 1990 tourism policy should be fully implemented.
– Private sector participation should be fully encouraged via land concessions, fiscal incentives and so on.
–There’s yet an extra income earner for the economy
–Jobs are created for the labour market; and Nigeria is exposed to the world for other investment opportunities.
The manufacturing sector in Nigeria is still up and coming. Despite manufacturing activities such as oil refining, food and beverage productions, cement production, wood and wood products, chemical and pharmaceutical production, importation remains a bane to the economy. In the words of (Emefiele G, 2016) Nigeria’s import related demand for foreign exchange rose to an all time high of 102 billion naira monthly average in 2016, in contrast to the monthly average import bill of 12.4 billion naira in 2005, 65.6 billion naira in 2013 and 73.2 billion naira in 2014.
– An enslarged market for locally manufactured goods also ought to be pushed with a persistent advocacy for the sale and purchase of locally manufactured goods.
– Quality control should be stricter to meet international standards for exportation of locally manufactured goods.
– As such domestic savings will be increased and the import bill average reduced.
–This will also create more employment opportunities for the labour market and encourage a favourable balance of trade by stemming unjustifiable importation of basic things as toothpicks as pointed out by the CBN governor in his lecture.
As a state, Nigeria has enough tax laws which are all pervasive in nature but with appallingly low compliance levels. Tax evasion and avoidance especially by the higher income earners is one evil that has continued to perpetrate itself in the nation. Every day and every other day, anti corruption agencies continue to discover large amounts of money siphoned and stowed away in tax havens. Recently, the Federal Inland Revenue Service bemoaned the low level of tax compliance in the country, declaring a total income of N410.9million naira in 2015. Effective and equitable taxation is a veritable income earner that can also be explored by the Nigerian economy by ensuring that the existing legislations transform into reality.
CONCLUSION AND RECOMMENDATION
A diversified economy will always thrive ceteris paribus as it will have a bulwark against every form of domestic and international shocks. Currently, these other sectors though not totally neglected have received little attention in relation to the oil and gas sector. By paying attention to the other sectors as explained earlier, the export index can increase and as such earnings increase while expenditure decreases. This results in a favourable balance of trade.
Also the unemployment rate decreases as some of these sectors are labour intensive as opposed to the capital intensive oil industry that has remained the highlight of Nigeria’s economy in past years. If Nigeria is to achieve a sustained economic recovery however, it is highly recommended that the culture of discontinuity in governance and the resultant policy somersault be done away with. It is also recommended that a diversification strategy policy be drafted and effectively pursued. Diversification is the only way to get out and stay out of the current “technical recession”.
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