MOVING AWAY FROM OIL ECONOMY

MOVING AWAY FROM OIL ECONOMY

Government should be serious about diversifying the economy

The prevailing economic downturn has worsted the capacity of Nigerians so much so that basic necessities of life, including food and healthcare are becoming luxuries. Available statistics paint a dire situation of millions of idle youths condemned to the street corner and economically inactive. A combination of sustained negative economic growth and an uncontrolled demographic bulge has put the country in a very difficult and potentially explosive situation. Unfortunately, the response from the government to these challenges remains incoherent. Even with all the noise about diversification of the economy from oil to agriculture, there is nothing on ground to suggest seriousness.

At the eighth edition of the European Union-Nigeria Business Forum last month, the EU ambassador to Nigeria and Economic Community of West African States (ECOWAS), Ms Samuela Isopi, spoke to the current challenge. “In the first quarter of 2022 the Nigerian economy grew by 3.1 per cent and this was driven by the non-oil sector. However, the economic situation remains difficult,” Isopi admitted. “Countries that are still struggling to recover from the COVID-19 pandemic now face further challenges caused by the Russian-Ukraine war. In Nigeria, the shockwaves are already being felt on fuel, fertilisers and food prices.” She said Nigeria’s new economy should be focused on finding a path through difficult terrain, identifying opportunities and adopting a sustainable business approach.

Unfortunately, even in these moments, there is no real commitment to the much-talked-about agriculture sector which nonetheless still contributes the bulk of the Gross Domestic Product (GDP) in the country today. We are particularly worried that Nigeria continues to neglect cash crops like cocoa, oil palm and groundnuts, which for years constituted the mainstay of the country’s economy. In the early 1960s, Nigeria’s palm oil production accounted for 43 per cent of the world production, but now accounts for less than seven per cent of global output, with most of the production coming from dispersed smallholders. Meanwhile, Malaysia, which sourced its first oil-palm seed from Nigeria, is the world’s second largest producer.

The case of cocoa is lamentable because Nigeria used to rank among the first five largest producers before the neglect. Nigeria’s coca production which peaked at around 400,000 tonnes a year in the 1970s now accounts for far less. This is despite the best efforts of the National Cocoa Development Committee (NCDC) to rehabilitate old firms, supply heavily-subsidised agro-chemicals, start new plantations or replant aged ones with high-yield trees, and promote the local consumption of cocoa-based products to boost prices.

Also, the famous groundnut pyramids, which hallmarked the groundnut boom in the 1970s started disappearing with the discovery of oil. Not even the establishment of the African Groundnut Council under the aegis of the African Union to promote the production, consumption and exportation of groundnut oil in six countries of Africa including Nigeria, has helped matters. Like the case of oil palm, groundnut production is done today mostly by small holders. Worse, the largely subsistence agricultural sector has not kept up with rapid population growth, and Nigeria, once a large net exporter of food, now imports most of its food products. Even with all the arable land, Nigeria is now a nation that cannot feed its people.

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As a consequence of this neglect, the economy is sadly over-dependent on the oil sector, which provides less than 25 per cent of GDP, despite accounting for more than 90 per cent of foreign exchange earnings, and about 65 per cent of government revenues. Oil has also created a culture of fast money through government patronage and corruption. We therefore urge government to demonstrate more seriousness in diversifying the economy from oil to others sectors capable of putting millions of our young people to work.

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