Using Nigeria’s oil to diversify the national economy
More attention than the usual is being given to the Nigerian economy in the wake of April’s GDP rebasing which saw the nation pip South Africa to claim top spot in Africa. Analysts, stakeholders and investors are among the many who are keenly watching to see what Nigeria will do with its newfound status; the IMF has pitched the country’s annual growth at 7 percent – will Nigeria be able to outstrip that estimate?
Nigeria’s oil industry is the economy’s uncontested heavyweight, accounting for 80 percent of revenue and 95 percent of exports earnings. The problem with this is that while it generates great wealth it also leaves the country vulnerable to global price fluctuations. The call now is for Nigeria to firstly diversify its economy so that it is more stable, and secondly build up its manufacturing capabilities so that value can be added to the raw materials within the country and not after export.
Diversifying the economy
While it is important that oil not continue to carry the Nigerian economy, the revenue it generates is crucial to changing the status quo in that it can be used by government to invest in downstream activities, manufacturing, and other sectors that will help to diversify the economy.
It is important that Nigerians start building up and capitalising on more than just the country’s mineral resources; its other strengths include a massive population base of 150 million, which equates to a large workforce as well as a large consumer base, and an ever-expanding service sector.
The most crucial area of diversification however is manufacturing…
Developing the manufacturing sector
At the last World Economic Forum on Africa in Abuja Nigeria’s Minister of Industry, Trade and Investment Olusegun Aganga said it is imperative that Nigeria – and indeed, all of Africa – focus on manufacturing products from its raw materials that it can then export at a higher price. Aganga contends that no country has ever pulled itself out of poverty without embracing industry.
President Goodluck Jonathan, also speaking at the forum, stressed the importance of developing national manufacturing capabilities by arguing that this sector has the potential to create more jobs than the service sector. The path to developing Nigeria’s manufacturing sector involves investment, innovation, enhanced technology, talent development, and public-private sector dialogue.