Since the discovery of oil in Oloibiri on Sunday, January 15, 1956 by Shell Darcy, the commodity has unleashed shocks and volatility of revenues on the Nigerian economy, fuelled corruption and has remained one of the factors responsible for the perennial civil strife and unrests in the country.
Today, Nigeria’s developmental strides do not measure up with her age and the country is lagging behind its peers in terms of all human developmental indicators as inequality gap in the country continues to widen. The high rate of income inequality has skewed wealth and resources in the country away from the masses to the pockets of the top 20 per cent in the country, according to a recent report by the Financial Derivatives Company Limited (FDC). Given Nigeria’s level of development, such level of inequality raises a cause for alarm.
As measured by the Gini Coefficient, Nigeria ranks second out of 16 West African countries, ninth out of 54 African countries and 26th out of over 190 countries in the world.
Those at the bottom of the income pyramid in the country, who number over 100 million, brawl over a measly portion of the national income pie.
In a related development, Nigeria only managed to move up two notches to improve its ranking on the World Economic Forum’s (WEF) Global Competitiveness Index (GCI) for 2017-2018, released last week, to 125th position, out of the 137 countries ranked.
The country was ranked 127th on the 2016-2017 index released last year.
Regrettably, Nigeria only managed to perform better on the GCI than war-torn or economically depressed countries such as Congo Democratic Republic (126), Venezuela (127), Haiti (128), Burundi (129), Sierra Leone (130), Lesotho (131), Malawi (132), Mauritania (133), Liberia (134), Chad (135), Mozambique (136), and Yemen (137). Also, Nigeria was not among the top 10 ranked countries in Africa.
Of course, Nigeria entered its worst economic contraction in 29 years when it slipped into a recession due to the collapse in crude oil earnings, which also reflects the country’s over-dependence on oil revenue.
This discovery of oil no doubt, systematically sub-merged agricultural sector which used to provide the bulk of the country’s revenue. This sector has been neglected for oil sector.
A recent study by the International Monetary Fund (IMF) showed that the significant and prolonged drop in oil prices since mid-2014 has changed the fortunes of Nigeria and many other energy-exporting nations around the world.
This, finding from the report that budgets in oil exporting nations have generally turned from surpluses to large deficits, growth has slowed, and financial stability risks have increased.
The report stressed that in such a challenging environment, a policy of “business as usual” will not suffice—policymakers will need to adopt significant measures to put public budgets on a sounder footing, address risks to liquidity and the quality of assets in the financial sector, and improve growth prospects.
However, the report pointed out that in the coming years, oil revenues will no longer be sufficient for governments to act as the main employer of their fast-growing young populations.
Therefore, it urged policymakers to find new ways to promote private sector development and help their economies diversify away from oil.
Although there have been efforts to promote agriculture as a way of diversifying the country’s revenue base through schemes such as the Anchor Borrowers’ Programme, the Commercial Agriculture Credit Scheme, among others, experts have stressed the need for more intervention in this regard.
An analyst at FXTM, Lukman Otunuga noted the rough path the Nigerian economy has gone through over the year.
According to him, Nigeria’s sickness may be diagnosed as the prolonged periods of low oil prices that have not only heavily eroded government earning but also diminished confidence towards the health of its domestic economy.
He pointed out that the nation’s oil sector provides 70 per cent of government revenues and a mammoth 95 per cent of export revenues, which is a big chunk of overall GDP.
“Nigeria’s current woes remain oil reliance and the cure is diversification, which could not only steer the nation from being heavily impacted by external shocks but also spur economic growth.
“Diversification is a topic that continues to reverberate across the corners of the nation with effort heavily taken to reinvigorating agriculture, reinforcing infrastructure and expanding taxation to bolster government revenues which in turn could uplift economic growth.
“For diversification to be truly successful in Nigeria, much focus must be placed on core areas such as infrastructure, manufacturing, technology, and healthcare to break away from the curse of heavy oil reliance,” he said.
According to Otunuga, the nation is already blessed with a youthful population while the land is fertile for agriculture.
He argued that once internal food security is achieved through an improvement in agriculture development, the surplus produce could be exported which may not only save costs on forex but create government revenue.
He added: “In the manufacturing sector most factories are currently running below capacity but once the infrastructure is reinforced then manufacturing could create additional income for the nation.
“Self-sufficiency in power generation is another key area which will be critical in bolstering technology and even healthcare.”
Also, an expert in Entrepreneurship and Business Innovation Economics, Department of Economics, University of Lagos, Dr. Ayodele Ibrahim Shittu, said recently that commitment, consistency, and sincerity of purpose on the part of the business and political leaders and followers is required to transform Nigeria’s business environment for greatness and prosperity.
According to him, Nigeria’s business environment is yearning for innovation in order to fulfil its potential of stimulating economic prosperity, noting that if the educational system is not prioritised, there would be a reduction in future human capital.
“The available evidence, in this regard shows that the score of the skills of the future workforce sub-pillar is lower than the score of the current workforce by 10 per cent or more.”
He said the task of creating an enabling business environment for the purpose of promoting national prosperity in Nigeria remains a mirage, adding that there is a glooming perception of the country’s business confidence index among leading firms in selected sectors of the economy.
The Director General, Federal Institute of Industrial Research, Oshodi, (FIIRO), Prof. Gloria Elemo, said for innovation to be effective, it has to be simple and it has to be focused.
She said innovation that creates new users and new markets should be directed toward a specific, clear, and carefully designed application. “Effective innovations start small. They are not grandiose,” she said.
“It may be to enable a moving vehicle to draw electric power while it runs along rails, the innovation that made possible the electric street car, or it may be an elementary idea of putting the same number of matches into a matchbox from the erstwhile 50 match sticks.”
This simple notion made possible the automatic filing of match boxes, and gave the Swedes a world monopoly on matches for half a century.
The Director General of the West African Institute for Financial and Economic Management (WAIFEM), Prof. Akpan Ekpo said, there was need for the government to continue to push for structural reforms.
Specifically, the WAIFEM boss urged the government to ensure that the challenge of epileptic power supply is addressed, take steps to improve the quality of education in the country, continue with the drive to promote made-in-Nigeria goods and services as well to improve the quality of infrastructure in the country.
Also, the Chief Executive Officer, Cowry Assets Management Limited, Mr. Johnson Chukwu, urged the government to ensure the implementation of the Economic Recovery and Growth Plan (ERGP).
“Also, our approach to infrastructure financing should be reviewed such that public-private partnership is adopted because government does not have the wherewithal to fund infrastructure,” he added.
On his part, the Chairman, Polar-Afrique Consulting Limited, Dr. Chris Itsede, believes the government is getting into indebtedness and an ambitious spending plan which obviously outstrips its expected revenue stream.
Itsede, who is the founding Director General of the West African Institute for Financial and Economic Management, said what he expected was for the government to scale back expenditure and tighten spending efficiency, so that for example, if you spend N1, it would be sure of getting at least 85 per cent of the real value of that N1.