Nigeria’s Non-Oil Sector: Imperative for increased diversification effort

The communiqué read by Godwin Emefiele, the Governor of Central Bank of Nigeria (CBN) at the close of the apex bank’s Monetary Policy Committee meeting which ended on Tuesday called for increased investment in the non-oil sectors as a source of foreign exchange earnings.

This was even as the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, also announced  on Wednesday  that Nigeria’s non-oil revenue grew to N1.15 trillion, representing 15.7 per cent above target rate in response to Federal Government’s efforts at diversifying the nation’s economy.

Emefiele praised the government’s efforts to diversify the economy but called for further support to increase non-oil exports.

According to him, the Committee appraised the developments in the global economy, international financial environment and the domestic economy, as well as the outlook for the rest of the year and the first quarter of 2022.

He said, “The Committee also commended the gradual diversification of the economy with the increased contribution of the non-oil sector to Government revenues and called for more support to increase non-oil exports as a source of foreign exchange earnings into the economy.”

He said advised government to prioritise investment in public infrastructure to improve the business environment. These include transportation networks, power supply, education and health just as he recommended that such initiatives may be funded by forming equitable partnerships with foreign investors and Nigerians living abroad.

 Mrs Zainab Ahmed, who made her disclosure during a virtual meeting at the Institute of Directors (IoD) 2021 Annual Directors Conferenc  in Abuja   said the development was in line with President Muhammadu Buhari’s administration commitment to further diversifying the Nigerian economy away from oil.

The Minister said the Federal Government alongside the private sector had implemented a wide range of monetary measures to stimulate economic recovery, growth and development, job creation and improved standards of living.

Ahmed said government was also intensifying efforts to further grow and diversify the country’s revenue sources with a variety of fiscal policies.

“Nigeria was quickly able to exit recession and is on her way to path of sustainable growth and we are intensifying efforts to grow and diversify our revenue sources to grow revenue from the current 8 per cent.

“Our non-oil revenues have grown to N1.15 trillion, representing 15.7 per cent above set target. “We are working on the 2021 finance bill and it’s nearing completion.

Ahmed reiterated government’s commitment to addressing infrastructural gaps via Infrastructural Corporation of Nigeria (InfraCo) to reduce cost of production for businesses in the country.

“It would increase investments in the Nigerian infrastructure sector to spur growth in key sectors of the Nigerian economy,” she said.

Nigeria’s non-oil sector grew by 5.44 per cent in real terms during the reference quarter (Q3 2021). The growth recorded in the non-oil sector was mainly driven by trade, Information and Communication (Telecommunication).

Other drivers include Financial and Insurance (Financial Institutions); Manufacturing (Food, Beverage & Tobacco); Agriculture (Crop Production); and Transportation and Storage (Road Transport).

In real terms, the non-oil sector contributed 92.51 per cent to the nation’s GDP in third quarter 2021, higher from the share recorded in the third quarter of 2020 which was 91.27 per cent  and lower than the second quarter of 2021 recorded as 92.58 per cent.

Emefiele is right in calling for further support to increase non-oil exports. While oil remains, the Federal Government should place more emphasis on non-oil sector to save the country’s economy from tremor of the international oil market.  What is required in this is vigorous diversification effort to hedge the Nigeria’s economy from the vagaries of  oil prices in the international market.

In spite of the recent remarkable achievement in the sector, Nigeria’s non-oil sector is still hamstrung by a myriad of problems fostered by inclement environment.  

The manufacturing industry subsector is still prostrate because of harsh business environment. Despite the Ease of Doing Business (EODB) mandate of the Federal Government, the Manufacturers Association of Nigeria (MAN) lamented recently that the operating environment for the business community is still ranked poor.

 The Association stated that factors for the poor ranking include high interest rates, multiple taxation, overbearing bureaucracy, policy somersaults, social unrests and the likes. As a result , the sector contributes less than 10 per cent to the nation’s gross domestic products (GDP).

The Chairman, MAN Apapa Branch, Mr Frank Ike Onyebu, recently said it is a sad fact that many manufacturing companies are folding up while several are relocating to other countries, calling on the Federal Government to develop and implement deliberate policies to improve the ease of doing business in the country.

MAN  pointed out that the poor state of infrastructure in Nigeria is the single most devastating challenge of the sector, adding that dilapidated road networks, unstable electricity supply, decrepit port infrastructure have contributed immensely to the high cost of production which has made Nigerian manufactured products mostly un-competitive.

“These problems, which have been in existence for decades, needs to be addressed urgently to enable the manufacturing sector contribute its quota to national development. The manufacturing sector which has which has the potential of contributing more than 25 per cent to Nigeria’s GDP, is currently doing less than 10 per cent.

The Nigerian economy is currently mono-cultural, depending on a single commodity–oil. Other sectors of the economy have been relegated to the background, while the management of oil revenues has proved inefficacious in driving the economy to bring about the needed level of development.

 This scenario has serious negative implications on the nation’s development calculus, as after five decades of exploration activities, a good percentage of Nigerians live in abject poverty, unemployment is double-digit and productivity is at its lowest ebb.

Considering Nigeria’s peculiar circumstances and the successes recorded before the advent of oil, for the country to break loose from the problems inherent in a monotype-economy, especially one largely dominated by oil, which is subject to depletion, international price shocks and unfavourable quota arrangement, there is need for diversification.

Emefiele was talking of earning increased foreign exchange. What is Nigeria producing? What of export – almost zero but imports how can the naira move from WET to SOFT on to WEAK and hard currency? It is the productivity of the economy that defends the Naira, not moralizing, sermonising or engaging in a game of musical chairs with foreign exchange. Productive should be encouraged. The CBN , through its intervention programme is already doing that just as the Federal Government to improve infrastructure is another good step.

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