By Chris Uba
Against the backdrop of the ongoing measures by the major oil consuming and industrialized countries of the world to develop alternative energy sources which includes the development of electronic vehicles, it has become imperative for Nigeria to reinvigorate its economic diversification efforts. This will help to put the country on a strong footing if oil ceases to be relevant in the global economy. Nigeria needs a resilient economy to be able to withstand the shocks likely to arise because of vagaries in the international market.
In many of the advanced economies of the world, efforts are geared towards developing machines that will not have anything to do with fissile oil. For instance, major car manufacturers in North America, Europe and Japan as well as South Korea are intensifying effort to come out with car designs that will no longer use petroleum products. They have targeted between 2030 and 2050, when the new cars would be made available to the world. The same efforts are directed to other machines which currently use petroleum products. Thus, it will not be long before there is an influx of long-range electric cars hitting the market as most major automakers, including General Motors and Volkswagen, have vowed to roll out more than 1,000 fully electric cars by 2020.
What this, inevitably, will translate to, is a drastic drop in the consumption of oil, which consequently, will produce a glut and slump in the oil prices in the international market. This will portend serious danger for Nigeria, whose mainstay is oil. For more than four decades, Nigeria has remained a mono-economy that relies on oil and gas exports for between 75 and 80 percent of its foreign exchange. The danger of having a mono-economy is that internal adjustments by oil consuming nations to reduce their consumption induces catastrophic consequences on the economies of exporting countries whose major revenues come from the commodity as exemplified by the economic crisis that engulfed Nigeria in the late 1970s and 1980s.
In fact, the country has yet to recover from the devastating effects of the Structural Adjustment Programme (SAP) imposed on the country by the Bretton Wood system, which insisted it was the panacea for Nigeria’s economic crisis. Because of the intensity of the crisis, Nigeria had no choice but to implement the programme and since then, it has continued to have tolls on the nation’s economy and the currency-Naira.
Therefore, the most creative way to insulate Nigeria’s economy from the looming danger which is most likely to result from the ongoing measures in the advanced societies is aggressive pursuit of economic diversification. While oil and gas remain, concerted effort should be made to upgrade the non-oil sector followed by aggressive marketing. The current emphasis on oil and gas should be reduced.
Dr. Adedoyin Salami, Chairman of Nigeria Economic Summit Group (NESG) Board Committee, identified this last two years, in Abuja, at the opening ceremony of the 22nd edition of the Nigeria Economic Summit (NES 22). He advised Nigeria to begin to move away from oil dependence. This effort should of necessity involve the expansion of agricultural production (which should involve modernization) and allied-agric industry as well as full industrialization of the country.
This, thus, underscores the overarching importance of doubling the efforts on foreign investment campaign. Huge inflow of foreign investment contributed immensely to the economic Eldorado of the countries of Southeast Asia and others like Taiwan and South Korea.
At independence in 1960, Nigeria was in many respects ahead of these countries, but today, these countries have taken the front seat by transforming their economies such that they, now, compete on equal terms with the advanced countries in global economy. Today, these countries are heaven for Foreign Direct Investment (FDI) just as their income per capita and standard of living compare favorably with those of the advanced economies.
As Mr. John Thorold Masefield, a former British High Commissioner to Nigeria, once advised, “Nigeria should take a cue from the countries of Southeast Asia if she wants to accelerate her pace of economic development,” adding that FDI inflow should be encouraged.
Mr. Lee Kaun Yew, late Singaporean Prime Minister, confirmed this when he said that almost all the multinational corporations in North American, Europe and Japan are operating in Singapore where they manufacture for exports.
Nigeria is more endowed than the Asian Tigers and has what it takes to attract huge inflow of foreign capitals to the country. For instance, Nigeria is blessed with large expanse of land on which foreign companies can be invited to engage on mechanized commercial agriculture and allied industries. The country is also blessed with huge oil deposits and, aside from establishing oil refineries, foreigners can also be encouraged to go into petrochemicals for exports. In fact, there are many areas that foreigners should be encouraged to invest alone or as joint venture with local investors.
Unfortunately, foreign capital inflow is still regrettably low in Nigeria as the country trails South Africa and Egypt. The recent report of National Bureau of Statistics (NBS) says the inflow of investment into the country declined to $11.68billion (N2.3 trillion) from $51.7billion (10.18trillion) in 2016.
Thus, as part of the diversification efforts, the challenge before Nigeria is how to attract foreign capital with emphasis on non-oil sector that is, encouraging foreigners to engage in manufacturing for exports. The general view from the private sector is that government should reappraise the nation’s economic environment with a view to overhauling it.
The Organized Private Sector (OPS), has on various occasions, blamed week infrastructure, (especially electricity), poor enabling environment, insecurity, corruption among others as the factors impeding inflow of investments to the country. The OPS said unless these issues were adequately addressed, the quest for FDI into the country would remain an idle fancy and a barren exercise.
Dr. Nike Akande, President of the Lagos Chamber of Commerce and Industry (LCCI), at a dialogue session in Lagos, recently urged the government to as a matter of urgency prioritize developmental efforts in addressing the security situation in the country.
Mr. Chidi Izuwah, acting Director-General of Infrastructure Concession Regulatory Commission (ICRC), said recently in a seminar that Nigeria loses two per cent of its Gross Domestic Product (GDP) yearly due to inadequate infrastructure. The country’s 2016 nominal GDP is N101.59 trillion and two per cent of that figure gives N2.03 trillion.
Government should strengthen regulatory agencies like the Standard Organization of Nigeria (SON) to ensure consistent quality products, processes and services in the country.