Mr. Mudiaga Emmanuel Ibini is a public and policy affairs analyst. He sheds more light on the dwindling fortunes of the Nigerian economy in this interview with PAUL OMO OBADAN.
How can Nigeria revamp its economy?
While some economic watchers are of the view that diversifying the economy is a major panacea to jumpstarting the economy, but other thought otherwise. Oil declining price It is noteworthy that crude oil is not just the principal export commodity of the country, but indeed, all aspects of the nation’s economy rely on the commodity as the major source of revenue. The annual budget, which defines the direction that the country charts, is based on crude oil price benchmarks. Crude oil accounts for about 95 per cent of Nigeria’s foreign exchange receipts. The reality of possible crippling budget shortfalls also stares many oil exporting countries in the face as the priced commodity has hit its lowest price level in four years. Diversifying the economy may just be the antidote needed to revamp the economy.
Nigerian economy is addicted to the oil sector and revenue from the industry. The Federal Government was dependent on the oil sector for most of its revenue, but that the economy was dominated by non-oil activities. He said, “Oil is just about N10 trillion, while non-oil is about N70 trillion out of the N80tn GDP. So, it is not a question of the non-oil sector becoming a driver, because it is already the driver of economic activities. It accounts for the bulk of production, employment and private spending. But the puzzle is why the government will be getting more revenue from N10 trillion (oil sector) than it is getting from N70 trillion (non-oil sector). “Government generates about N3 trillion out of the N70 trillion non-oil activity and generates about N7 trillion out of the N10 trillion oil activity.
So, they get the revenue from where it is cheap and easy to get. Because of the easy money from oil, the government has neglected useful trends for revenue collection from the non-oil sector. Prior to independence, all the government revenue came from the non-oil sector. But since the oil price shot up in the 1970s, government revenue has become dependent on oil income. So, the decline in oil price is a wakeup call to get revenue from non-oil sources. Also, government needs to transform its revenue. The government is already in a buoyant non-oil economy that it does not taxed. The Federal Government should just wake up and tax the non-oil sector. The global oil glut and slump in oil prices has strained Nigeria’s oil dependent economy. The government should look into different ways to diversify.
With the global food prices on the rise and Nigeria being a net importer of food, the country will be better served by reviving its agriculture sector, which was also Nigeria’s chief export earner before the discovery of oil. The expansion of the country’s agricultural sector is capable of revamping the nation’s economy. The Agricultural Industry has a lot of potential to increase the country’s earnings and provide jobs for the citizenry. With the current low prices in oil, agriculture is inevitably the way forward for development. Electricity access and machinery needed to improve efficiency, still remains unattainable for many farmers in Nigeria.
But with just a little goodwill from the government, many here believe their production can sustain the West African region. Agriculture used to be the mainstay of the nation’s economy in the early years of the nation’s independence and the country was economically stable before it was relegated to the background when oil was discovered with its increasing revenue. However, events following the unpopular neglect have shown that it was misplaced because oil can not sustain the economy for long. In fact, from the global perspective, agriculture remains the best option through which the government of a nation can push for early economic recovery.
The future of Nigeria lies in agriculture when viewed against the myriad socio-economic challenges facing the nation. Agriculture is an industry that has a large pool of people with abundance of basic skills. Also, it is probably the biggest employer of labor that can adequately take care of the unemployment problem facing the nation. In addition, agriculture satisfies more than 70 per cent of the nation’s food programme, offers employment to most of the rural and semi-urban population, serves as market for products from industries and in turn, provides raw materials for that sector. The other problem is that of funding.
Because of the fact that agriculture is strategic to our national survival, no degree of official support by way of funding can be considered excessive. In fact, the problem has been that of inadequate funding and government investment. In industrialized countries, agriculture receives tremendous backing from government but it is unfortunate that in Nigeria, funding is the major hurdle faced by farmers. Funding does not mean giving money to applicants. A more viable way is through availability of inputs such as seedlings, fertilizer and extension services among others. This, in my view, is the most effective means to sustain agricultural productivity and economic expansion. The next important area is storage and preservation. The government should think along this line because most of our products are seasonal. Lack of storage is a great impediment to the availability of food items throughout the year. With all these in place, the future of the country will be assured.
How can President Muhammadu Buhari turn around the economy of Nigeria?
In turning the economy around, Buhari needs a long time plan. Restriction on foreign exchange alone is not enough. There are some certain areas he can concentrate on which are as follows; The first sector I would like to talk about is power. This is a sector that is long overdue. I hope the new minister can break the jinx that has been in existence in that sector. Though it is going to be a long time project before it can be accomplished. A lot of manufacturing companies have folded up because of the cost running on diesel. SMEs cannot thrive either because a large chunk of their supposed profit has gone into generating electricity themselves. We need honest and genuine drive to revive that sector because it will go a long way to improve our economy.
Next in line is on export. Nigeria as we know today is an import dependent economy. Our balance of trade is not in any way balanced, the amount of dollars we spend is way more than we earn. Our over dependence on oil export is really affecting us with the global price of crude oil dropping and our foreign reserve also been depleted, the need to focus on export cannot be overemphasized. We have the agricultural sector, mining/solid minerals. We need to really develop these sectors so that we can earn more FX. I have also noticed that why we don’t earn much even with what we do with these sectors is because we do not add value. Value adding is another area we must look into when it comes to export.
It will help us earn more. What I mean is that for instance, rather than just plucking off cashew seeds and selling at the raw stage and then they bring it back to us as finished goods and sell at a higher rate, we can also process them, sell to ourselves and also export to some other countries and earn more FX. Government should do more in this area of value adding, get equipment that can process some of these minerals to get more from them before exporting, by doing this, we would earn more when we export. Nigeria is richly blessed with so many natural resources and agricultural produce. Diversification of the nation’s monocultural economy is a way to arrest the depreciation of the Naira against other major currencies. Apart from diversification of the economy, fiscal discipline and proper economic planning are essential in strengthening the value of the Naira. As the government of the day has promised, it will be to our advantage if they can keep to their promise.
What can the government do to revamp the naira?
What the government can do to revamp the naira still boils down to ensuring that local production of goods and service is encouraged. Nigeria depends too much on imported goods; we import everything that is not good for our naira and our economy. The CBN tried out a policy by taking out some products and services not valid for forex in the Nigerian forex market, but what they failed to address is the other leg of it which is putting the basic infrastructures in place to encourage local production, until this is done the stability and strength of the naira against the dollar will still be in doubt.
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