By Udeme AKPAN and Michael EBOH
WITH the groundnut pyramid in the North, palm oil and kennel in the East and South East and cocoa in the South-West before the discovery of petroleum in Nigeria, there were indications that the nation was heading towards becoming a great economic giant in Africa for some reasons. First, the nation was and is still richly endowed with many oil and non-oil resources. Second, the major stakeholders, especially indigenes and trading companies were committed. Third, the regional administrations also provided the enabling environment for operations.
Consequently, economic activities recorded great signs of growth. In his publication; Nigerian National Accounts, 1950-7, obtained by Sweetcrude, the late Pius Okigbo, a prominent economist who was then the Economic Adviser to the Government of Eastern Nigeria, stated: “We found that the Regional Ministries of Agriculture kept records of crop and weather prospects prepared every quarter in respect of each agricultural province by field agricultural officers. Since food crop production dominates the accounts, it would be clear that in the national accounts for 1951-6, one of the softest series refers to the most important branch of activity.”
But the expected non-oil sector driven growth was not to be as a result of the making of commercial oil finds and export in 1956 and 1958 respectively by Shell D’Arcy, the forerunner of the present Shell. Sweetcrude learnt that there was increased shift to oil and gas following the making of commercial finds by other International Oil Companies, IOCs, including Mobil, Total and Chevron between 1960 and 1980.
As Future Energy puts it: “A series of world oil price increases from 1973 produced rapid economic growth in transportation, construction, manufacturing, and government services. Because this led to a great influx of rural people into the larger urban centres, agricultural production stagnated to such an extent that cash crops such as palm oil, peanuts (groundnuts), and cotton were no longer significant export commodities.
“In addition, from about 1975 Nigeria was forced to import such basic commodities as rice and cassava for domestic consumption. This system worked well as long as revenues from petroleum remained constant, but since the late 1970s, the agricultural sector has been in continuing crisis because of the fluctuating world oil market and the country’s rapid population growth.”
Future Energy stated that: “Although much of the population remained engaged in farming, too little food was produced, requiring increasingly costly imports. The various governments (mostly military-run) have dealt with this problem by banning agricultural imports and by focusing, albeit briefly, on various agricultural and indigenisation plans.”
It stated that for successive administrations, these actions seem normal in times of relatively high oil price, adding that they only call for economic diversification whenever it dropped below expectation, threatening their ability to generate funds for development.
The President Muhammadu Buhari – led administration indicated interest to diversify the economy when the price of oil dropped below $40, before leaping to $60 and the current $74 per barrel.
In his 2018 budget speech, Buhari who reviewed the performance of 2017 Budget of Recovery and Growth, based on benchmark oil price of $44.5 per barrel, oil production of 2.2 million barrels per day, said: “On revenue performance, collections were 14 percent below target as of September 2017, mainly due to the shortfall in non-oil revenues.
“Based on the above fiscal assumptions and parameters, total federally-collectible revenue is estimated at N11.983 trillion in 2018. Thus, the three tiers of government shall receive about 12 percent more revenues in 2018 than the 2017 estimate. Of the amount, the sum of N6.387 trillion is expected to be realised from oil and gas sources. Total receipts from the non-oil sector are projected at N5.597 trillion.
“The Federal Government’s estimated total revenue is N6.607 trillion in 2018, which is about 30 per cent more than the 2017 target. As we pursue our goal of revenue diversification, non-oil revenues will become a larger share of total revenues. In 2018, we project oil revenues of N2.442 trillion, and non-oil as well as other revenues of N4.165 trillion.”
The Director General, Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf, said in a telephone interview with Sweetcrude that the government has made progress in some sectors. He said: “We have made progress in areas such as Information and Communication Technology, ICT and entertainment. We have also made progress in others, especially financial services, as our banks have gone global and continental, setting the pace for others to follow in many countries. But we don’t appear to have made much progress in areas such as manufacturing, agriculture, solid minerals extraction because of many issues.”
He said the situation would not likely improve soon as the problems have impacted negatively on the nation’s ability to implement its Economic Recovery and Growth Plan (ERGP), which also aimed at diversifying the economy.
The ERGP obtained by Sweetcrude indicated that it aimed at increasing national productivity and achieving sustainable diversification of production, to significantly grow the economy and achieve maximum welfare for the citizens, beginning with food and energy security.
It stated: “The ERGP is both a recovery and a growth plan. The government recognises the economic challenges that Nigeria faces and the need for urgent action. This plan is a blueprint for recovery in the short term and a strategy for sustained growth and development in the long term.
“The vision of ERGP is one of sustained inclusive growth. There is an urgent need as a nation to drive a structural economic transformation with an emphasis on improving both public and private sector efficiency. This is aimed at increasing national productivity and achieving sustainable diversification of production, to significantly grow the economy and achieve maximum welfare for the citizens, beginning with food and energy security.
“This plan is a pointer to the type of Nigeria that the people desire in the short to medium-term, and extensively leverages science, technology and innovation to drive growth. It also provides a blueprint for the type of foundation that needs to be laid for future generations, and focuses on building the capabilities of the Nigerian youth to be able to take the country into the future.”
It added: “The policy objectives of the ERGP included targeted support to non-oil exports through specific incentives; removal of barriers to the local production of goods that are currently imported and support economic diversification. It also intends to improve the capital account balance by attracting foreign capital into the economy, particularly Foreign Direct Investment (FDI), and also increase accretion to the country’s external reserves.”
Managing Director, Cowry Asset Management Limited, Mr. Johnson Chukwu, said economic diversification is currently constrained by many factors, including poor and unstable power supply, bad roads and high cost of funds, currently put at between 25 – 30 per cent.
However, many experts who spoke with Sweetcrude, including Chukwu called on the government to tackle all major challenges that stare the economy as well as create an enable environment for local and foreign investors in order to pave the way for rapid diversification of the economy.