Diversification Still Option For Nigeria’s Economy
With more than half its revenue derived from oil exports, Nigeria’s economic fortunes are tied to the boom and burst cycles of the oil market. Those fortunes have waned way below expectations this year and, with more than one-quarter of its labor force jobless, it is time to question our country’s economic pathway.
For decades, the mantra of ‘economic diversification’ characterized attempts to reverse Nigeria’s dependence on oil with little real progress. Despite numerous reforms, international loans and restructuring programmes, 85 million Nigerians live in deteriorating conditions of poverty. The current coronavirus pandemic combined with mounting debt obligations and declining GDP gives new urgency to this issue.
Nigerian-born Dr. Philip Emeagwali; according BrainyQuote, once said, “Nigeria is a West African nation of over 100 million energetic people. It is endowed with lots of natural resources, but lacks human resources”.
Indeed, the observed lack of human resources is not about certificates, degrees and exposure, but may well include the obvious death of self and political will and ingenuity, needed to transcend any seeming impossibility.
With the long history of military regimes, Nigeria experienced only devastation in the development of non-oil economy. This has resulted (and Keeps resulting today) in law standard of living, a huge division between rural and urban areas, and excess economical imbalance.
The country has a big issue with developing the multi-sector economy. Nigeria is rich in natural resources that can make it happen.
Unfortunately, we’ve not seen government with a strong will power to invest part of the revenue brought by the oil sector into solving the problem of poverty, growing agriculture, and other sectors.
After independence in 1960, Nigeria had agriculture as its main source of income. With the exportation of cocoa, cotton, rubber, palm oil and groundnut to other counties of the world, the nation’s economy was “self-sufficient” and balanced. No one heard about negative payment balance, the economy was rising, factories here working, different regions were developing and unemployment level was drastically low.
The oil boom changed everything. The economy’s trajectory quickly switched to selling crude oil and spending all the revenue instead of investing proceeds into growing different economic spheres.
As a matter of priority, Nigeria government must encourage the diversification of Nigeria’s economy. It is the only viable way to survive the current environment of global economic uncertainty with the volatility of oil price. It is crucial that government do not believe that oil provides an endless source of revenue.
The fall in international oil prices, which led government to slash its oil benchmark price from $57 to $30 a barrel and cut 20% of the capital budget, worsens these problems, but it is far from the only factor. Biomass, which drives household pollution and contributed to the death of 114,000 people in Nigeria in 2017, is the most dominant source of energy in Nigeria, amounting to more than 80% of the total energy mix, followed by fossil fuels (18%), and a negligible amount of renewable energy.
Although a diversified energy sector with a strong emphasis on renewables is known to reduce health and economic risks of combustion, there has been little emphasis on the role a diversified energy mix could play in ensuring sustainable development – even though the estimated potential of 427,000MW of solar power and photovoltaic generation means Nigeria has enormous renewable energy opportunities.
The global economy is also undergoing tectonic structural changes that will affect demand for Nigeria’s oil, leaving a fossil fuel-dependent economy more vulnerable. Improvements in global fuel efficiency, the ascent of electricity as a substitute for oil in the transport sector, and the falling prices of renewables and storage technologies all lead to a reduction in demand for fossil fuel products.
This is not a ‘get out of oil’ prescription, and energy transition is complex. But it is inevitable. There are no universal strategies applicable to all countries; local contexts and political realities inform what is possible. Nigeria can take advantage of its abundant natural gas deposit as a ‘transition fuel’ to buy it time for putting the appropriate transition structures in place. The country has made progress in reducing the amount of gas flared, but much remains to be done for Nigeria to meet the 2030 global deadline to end flaring, after failing to meet its 2020 national target.
The first step to proper transition is to align Nigeria’s international obligations with its domestic policies and legislations – the distance between words and action must be bridged and the institutional capacity to implement raised. And, while they contain symbolic green gestures, the economic recovery and growth plan developed in response to the 2016 recession, and the post-COVID-19 economic sustainability plan, do not espouse green growth as a fundamental objective.
To be continued