How To Diversify The Nigerian Economy Successfully For Growth
Nigeria is a country blessed with a vast number of mineral resources. According to a world bank article, the country is estimated to currently be exporting at least 780 different commodities, both oil and non-oil, compared to several other low export countries like Switzerland which exports virtually almost no natural resource, and other actively exporting countries like Malawi which exports around 310 different commodities and Chile, a large volume export country that exports at least 2,800 commodities and counting.
While the prospective number of commodities being exported from a country is not a final determinant to how fast the country can grow, properly managing the existing export base and expanding the local efforts to go a bit further into processing and subsequent diversity, is key to driving and building the wealth of nations.
A perfect example to analyse is Belgium. The country literally produces nothing else apart from coal, which is no longer economically viable for them, but still managed to make it to the top 30 largest economies in the world, because of careful allocation of resources “which are imported”, processed, and then re-exported at competitive prices to international buyers.
Other examples of countries that import very large volumes of their raw materials but are still economic world powers are Japan, South Korea, Italy, Hong Kong, Singapore, Taiwan, and even Switzerland which is not only a landlocked country but virtually has no natural resources, causing them to rely almost completely on imports to aid their manufacturing process.
The success of these nations have shown that careful management even in the face of nothing can create wealthy nations, and for countries like Nigeria who have a lot of natural resources that can be extracted for local production and export, brilliant & disciplined management can cause the nation to virtually become one of the wealthiest in the world.
Why Should Nigeria Effectively Diversify Its Economy?
- First, Nigeria as a nation has failed to show any form of economic success in its management of the primary natural resource it focuses heavily on—petroleum products. Because she is the 6th largest producer of oil in the world and that oil prices, whether high or low, are large sources of revenues for any nation, Nigeria has focused and mismanaged her approach to this industry. By doing so, she has affected every other sector in the country that could benefit financially from a well-managed system that would facilitate their growth and development, thereby causing a positive spike in the nation’s economic output.
- Effective diversification creates a lot of jobs for the populace because when more activities happen in agriculture or the solid minerals and metals industry, more people are employed in the operations, and so, much more jobs are created.
- It reduces heavy dependence on a revenue source which could ruin a country’s finances if the industry were ever to crash. An example was the oil crash of 2015 which rendered many economies broken, with even Dubai implementing a tax initiative for the first time in 2018, after they realised their income from oil had dwindled. Nigeria too was no exception as the falling oil prices combined with a poorly managed economy pushed the country into an economic recession, triggered an inflation, and caused millions of people to lose their jobs, while millions other experienced cuts in their salaries and incomes.
Important Tip: Norway happens to be the only oil-producing nation that was not affected by the fall in oil prices because of proper and well-managed diversification of their economy which they had taken care of years back.
What Industries Should Nigeria Diversify Into?
The Nigerian economy has various sectors ranging from education to healthcare, solid minerals, petroleum, agriculture, and much more. But while there are various sectors running concurrently in the country, it would be unwise to try to achieve complete diversification and full-on development across all the sectors as the country has its strengths and weaknesses.
Education, for instance, is none of Nigeria’s strengths and even desperately needs a complete overhaul as our school systems have performed poorly over the years, causing the country to have lost over £14 billion pounds in education fees that have been paid abroad to foreign institutions, instead of to the local ones, with the estimated amount expected to rise to about £21 billion pounds in the year 2020. As such, the educational sector needs solid development but cannot be seen as a source of international trade for the country, unlike the US and UK whose education sectors contribute greatly to the country’s economy.
Healthcare too has never been Nigeria’s strength, but needs a major revamp so that people would see less of the need to go abroad for specialised healthcare treatments.
In the end, these leaves us with three major sectors that effective diversity through proper management can be achieved, and whose returns can help fuel the growth and development of other sectors of the economy.
These three are the petroleum sector, solid minerals and metals sector, and agricultural sector.
But how then do you help these sectors thrive and bring about positive change in the Nigerian economy?
How To Ensure Effective Diversity In The Nigerian Economy
To effectively manage the various sectors in the Nigerian economy and attain maximum efficiency in the diversification efforts, six things must be considered and taken adequately well of. They are:
1). Introduce Solid Education programs:
Strong education programs in the areas of economics and vocational studies should be of top priority in Nigeria and any country in Africa or around the world. This will ensure we build a generation of individuals who do not only under the core tenets of building a thriving society but also people who have the vocational skills to implement and carry out local production on a vast scale.
2) Access To Capital:
While a widespread clamour for diversification is essential to trigger a movement, verbal support from the government will do little to nothing to go far enough. Access to funding must be available for entrepreneurs who choose to build organisations in these sectors that would have a long-term growth prospect.
The access to funding should go beyond just guaranteeing the presence of funds, but ensuring the cash is easily accessible.
An example is banks refuse to fund export-based businesses who do not have a collateral or track record. This process could be simplified if the exporter can show an issued ICPO from the buyer, a signed contract with the buyer, a track record of successful purchases from the buyer, and evidence that the buyer is going to place a bank guarantee of payment from a top global bank before the shipment happens. With these parameters covered, access to funding should not be a problem in Nigeria.
But still, financial institutions feign ignorance and refuse to support businesses unless they meet their ridiculous terms.
3). Low tax rates for entrepreneurs:
Low tax rates for first-time entrepreneurs or businesses that meet a certain condition should be implemented to facilitate effective growth in various sectors of the economy. People would naturally be motivated to work harder if they know they’re paying lesser to the government than what they used to.
Lower taxes can also motivate investors to invest in the country as long as they can also be guaranteed a security of investment.
4). Reduce Corruption:
Corruption continues to eat away at global economies, including Nigeria’s, and as such, the required resources that could be put into developing various industries in the country continues to go into the pockets of a few.
While corruption cannot be completely eliminated, getting rid of it to a great extent is key to driving effective results from diversification efforts in the country.
5). Introduce Fewer Regulations:
Complex regulations cause the setup of businesses to be a whole lot difficult in many countries. In Nigeria, it is not far from the case as getting licences for some types of businesses are extremely difficult. While the process may seem easy on the paper, the politicking that goes into awarding the final licence is always a problem and a big challenge to anyone trying to secure it.
By simplifying the process and reducing the number of steps/efforts that should go into applying for various business licences in Nigeria, better development can happen in more areas of the economy.
To Sum It Up
A vast abundance of natural resources never equates to a successful economy. But effective management makes the diversification efforts of any country succeed because only then will they experience real economic growth.
About The Article
This is an opinion and analysis posted by Stan Edom, a Nigerian citizen and Editor In Chief of Startuptipsdaily.com.
The Opinion and Analysis section is committed to nation building efforts through empowering expert writers to air their views on the best ways to solve national issues and move nations forward.
Opinions and Analysis will be published every Friday.
What are your thoughts on how to diversify the Nigerian economy successfully and efficiently for growth? Let me know by leaving a comment below.