Stakeholders at a forum in Abuja recently discussed how Nigeria can develop its non-oil sector, thereby diversifying the nation’s economy.
Nigeria has been a mono-economy for many years, relying solely on crude oil as her major source of revenue. Before now, agriculture and mining were the primary drivers of Nigeria’s economy, but these have been abandoned since the 70’s as a result of the discovery of oil. The resultant effect has been a decline in the nation’s economy leading to a recession that has left so many unemployed and living in abject poverty.
Nigeria’s non-oil exports sector, which comprises mainly of agricultural commodities and solid minerals, constitutes 97 percent of Nigeria’s exports. Crops like cocoa, cotton, palm oil, palm kernel, groundnut, and rubber were major export commodities.
However, between 1970 and 1974, non-oil exports dropped from 43 percent to seven percent due to a rapid increase in the international oil price and Nigeria’s production. The ensuing Dutch disease led to the movement of resources out of the non-oil sector, contributing to its neglect and lack of investments in the erstwhile export sectors, particularly value-added export. It has been observed that Nigeria lost about $10 billion export opportunities in crops like cocoa, oil palm, cotton and groundnut alone.
In spite of the corrective measures over the years, the imbalance in the nation’s export trade has persisted with the non-oil sector now accounting for just about 5%-7% of Nigeria’s exports by value.
As a result of the above, the sector is currently characterized by a systemic decline in the contribution of total exports to GDP. The figures from 2014 to 2017 have been below the global average of exports to GDP of about 30 percent, according to World Bank data.
Other challenges of the sector are few destinations for export, with the dominance of limited number of agro-allied commodities such as cocoa, rubber, leather, shrimps/fish, sesame, cashew, and cotton, which account for over 60 percent of non-oil exports; insignificant contribution of the other agricultural sub-sectors like shea, ginger, cassava, yam, sweet potato, cowpeas and pineapple to export revenues, although Nigeria is one of the highest producers of these commodities, according to data from the Food and Agricultural Organisation (FAO); low export performance of the mining sector, which contributes less than three percent of total non-oil exports and one percent of GDP annually, even though Nigeria has over 34 solid minerals in commercial quantities; inability of Nigeria to develop significant footprint in services export, despite the dominance of services in the GDP.
“Nigeria has run a mono-product economy for too long.” says Mr. Olusegun Awolowo, the ED/CEO of Nigerian Export Promotion Council (NEPC). “We have been left vulnerable to oil price shocks, the latest of which we are seeing now with the outbreak of corona virus. Despite academics and policymakers alike knowing that economic, and in particular export diversification, is crucial to our sustainability, true diversification has eluded us.”
Diversification of Nigeria’s economy is believed to be the only viable way to survive the current environment of global economic uncertainty with the volatility of oil price. It certainly presents the most competitive and strategic option for Nigeria in light of her current developmental challenges.
“We must diversify our economy now! And Non-oil Export is one major way to do so.” Stressed Mr. Awolowo at the Non-Oil Export Conference and Awards (NECA) organized by Policy Development Facility (PDF II) to mark her closing out after 5 years of providing targeted assistance to support Nigeria’s champions of change across the Federal Government to implement economic and social reforms.
Hon. Olufemi Fakeye (Chair, House Committee on Commerce and Investment), who was also at the event, reiterated the importance of diversification by saying, “If our economy is not export-driven, then we are going to be in trouble!”
