The effort of the federal government to achieve economic growth through diversification may not be getting all the necessary support it requires as core sectors identified to achieve economic diversification are not getting funds from banks, reports Bamidele Famoofo
There is no doubt that petroleum (crude oil) has contributed substantially to Nigerian revenue since its discovery in 1956 and more especially, since 1970, when its price was on the upward trend. However, it is a known fact across the globe that for a country to attain growth and development, its economy has to be diversified.
“Diversification does not occur in a vacuum. Mono-economy needs to give way to the productive development of various sectors of the economy”, Economics Lecturer, Chinecherem Uzonwanne, at Nnamdi Azikiwe University, Awka, disclosed in a recent report on diversification of Nigeria’s economy.
Uzonwanne, who argued that there was an urgent need for the Nigerian government to begin looking into diversification of various sectors of the economy so as to attain solid economic growth, cited instability in oil price, especially since June 2014 when price of oil fell by more than 40 percent from $115 a barrel, to about $70 per barrel till date. “It is a well-known fact that Nigeria’s continuous large earnings or revenue from this sector will be impossible.”
It would be recalled that the Nigerian economy slipped into recession in 2016, a development triggered by dwindled government revenue occasioned by the fall in oil prices in the international market and unrest in the oil-rich Niger Delta region. The country, however, emerged from recession in the second quarter of 2017 after oil prices improved and relative peace was restored in the Niger Delta. But even as official figures show that the nation has exited recession, many Nigerians still complain that the effect of the exit is not felt in the economy.
The administration of President Muhammadu Buhari, like other administrations before it, indicated interest to diversify the economy when the prices of crude dropped below $40 per barrel, before climbing to about $70 per barrel at the moment.
To achieve its economic diversification agenda, the Buhari government formulated a growth plan contained in its Economic Recovery Growth Plan (ERGP), being directly supervised by the Vice President Yemi Osinbajo. ERGP, according to government’s economic management team, is aimed at increasing national productivity and achieving sustainable diversification of production, to significantly grow the economy and achieve maximum welfare for the citizens, beginning with food and energy security.
Director General, Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf, acknowledged that the ERGP was both a recovery and growth plan. “The government recognises the economic challenges that Nigeria faces and the need for urgent action. This plan is a blueprint for recovery in the short term and a strategy for sustained growth and development in the long term”.
According to Yusuf, the policy objectives of the ERGP included targeted support to non-oil exports through specific incentives; removal of barriers to the local production of goods that are currently imported and support economic diversification. It also intends to improve the capital account balance by attracting foreign capital into the economy, particularly foreign direct investment (FDI), as well as increase accretion to the country’s external reserves.
According to the Ministry of Budget & National Planning, ERGP focuses on six core sectors to grow the economy. Minister in charge of the ministry, Senator Udoma Udo Udoma, identified agriculture and transportation, power and gas and manufacturing and processing (including solid minerals) as the key sectors that will be developed to diversify the economy.
Though government has openly talked about the commitment to achieve the economic diversification agenda as contained in the ERGP, there are concerns that the avowed seriousness on the part of government does not yet extend to funding.
For instance, statistics on how the banking sector in Nigeria distributed credit to the economy as at end of second quarter in 2018 showed that the banking industry seems not to be on the same page with government to achieve the diversification plan as commercial banks still prefer to give more money to operators in the oil and gas sector to the detriment of sectors already identified to stabilise the economy.