Volume 3, Number 2 (2016) pp 75-81 doi 10.20448/802.3.2.75.81 | Research Articles
The paper examines the diversification of Nigerian Economy for sustainable development: issues and challenges. The main objective of this paper is to explain how the Nigerian economy engulfed in the problem of Dutch disease and how it can be diversified and sustained through plerotha of several resources endowed rather than over depending on oil and gas. This paper uses time series data obtained from CBN Statistical Bulletin, to provide a thorough assessment of the sectoral contribution to GDP based on economic sector of the Nigerian economy from 1960-2010.the paper explained that Nigerian economy is faced with the symptom of the Dutch disease syndrome looking at it’s over reliance on oil revenue and real sectors have not been accorded much concern and their contributions are low towards GDP. the paper also pointed out some of the challenges facing the diversification of the Nigerian economy, and give measures that will help in diversifying the economy which include: exploring other mineral resources, transforming and boosting the Agricultural sector, and strengthening the manufacturing sector among others.
Keywords: Diversification, Dutch disease, Sustainable economic development.
Citation | Muhammad Zayyanu Bello; Chika Umar Aliyu (2016). Diversification of the Nigerian Economy for Sustainable Development: Issues and Challenges. International Journal of Economics, Business and Management Studies, 3(2): 75-81.
Copyright: This work is licensed under a Creative Commons Attribution 3.0 License
Funding : The authors declare that they have no competing interests.
Competing Interests: The authors declare that they have no competing interests.
History : Received: 28 May 2016/ Revised: 29 June 2016/ Accepted: 6 July 2016/ Published: 12 July 2016
Publisher: Online Science Publishing
Despite the fact that Nigerian economy has been witnessing a relatively impressive growth rate over the years and which is averagely put at 6 %, the growth is non-inclusive and fails to translate into employment generation. The problem is not far-fetched as it is largely due to the dominance of oil and gas sector which account for less than 5 % of the total employment. The reason for this low intake of labor is capital – intensive nature of the sector requiring more capital as opposed to labour – intensive nature of other sectors such as agriculture and manufacturing.
The nation throughout last year witnessed dwindling output due to volatility of the oil and gas sector as well as other factors. For instance “in the first quarter production stood at 2.2 mbpd (million barrels per day) valued at N2, 612,066.21 million. In the second quarter it decreased to 2.21 mpdp, valued at N2, 633,328.61. The third quarter had a swift decline as 2.15 mbpd valued at N2, 328,257.79 million was produced. A sharp rise was witnessed in the fourth quarter i.e. 2.08 m caused mainly by some repairs to pipelines (Okeke, 2015).
The aim of this paper is to explain how the Nigerian economy engulfed in the problem of Dutch disease can be diversified and sustained through plerotha of several resources endowed rather than over depending on oil and gas. The rest of the paper is structured thus; section two clarifies concept of diversification, sustainable development and Dutch disease; section three presents highlights on Nigerian economy and challenges of diversifying the economy; section four deals with ways of diversifying Nigerian economy and finally section five concludes the paper.
The concept of diversification refers to the process of developing alternative sources of revenue of an economy. The term refers to channeling the resources of a nation to the best alternative uses (Ayeni, 1987). According to Chugozie, Anthony and Chukwudi (2015) economic diversification refers to broadening the range of economic activities both in the production and distribution of goods and services. It is a process that helps and immunes a country from the volatility of a single commodity. Diversification in other words means to save from the booming sector and reinvest in the lagging sector. Therefore, the term can be operationalised to connote enhancing the efficiency of existing resources as well as discovering or exploring new resources that are untapped (Aliyu, 2012).
According to Report of World Commission on Environment and Development, the concept of sustainable economic development entails effective implementation of long term economic policies and programmes that will consistently benefit all generations of people in an economy. Similarly, also the concept refers to a set of development programmes that meet the target of human needs satisfaction without violating long term natural resources capacities and standard of environmental quality and social equity.
The term was originally coined in 1977 during the decline and misfortunes in the manufacturing sector of Netherlands caused by discovery of natural gas deposits in the 1960s. It is nowadays used to refer to detrimental effects of the discovery of any valuable natural resource leading to neglect of the other sectors of an economy. The Dutch Disease affects an economy in two ways first by causing resource movement from some sectors of the economy to the other and second; by inducing a spending effect that boost the real exchange rate of the currency thus making importation cheap and exportation expensive hence kills the domestic industries (Harrison, 1993).
Nigeria popularly referred to as the giant of Africa is located in West Africa. It has a total landmass of 923,768 square kilometers. It is positioned between longitude 30 and 150 east; and latitude 40 and 140 north. It neighbors are Benin Republic by the west,, Cameroon by the east, Niger and Chad by the north and is bounded by Atlantic Ocean by the south.
The nation is bestowed with diverse landscape consisting a lowland, plains highlands and plateau. Two major rivers Niger and Benin flow in the country making a ‘Y’ shape, converging at Lokoja and draining into the Atlantic Ocean.
The nation lies completely within the tropics and has two main vegetation zones. There are two major seasons – the wet and dry season. Based on the 2006 census, the total population of Nigeria stood at 140 million with a growth rate of 3.2 % and average life expectancy of 54 years.
The nation got its independence from Britain in 1960. Prior to the discovery of oil, the main economic activity was agriculture and other occupations were secondary. The other occupations are distributed across crafts, arts and other manufacturing activities as dictated by local skills and resources. With the discovery of oil, the composition of GNP and GDP changed drastically implying shift from agriculture to mining and financial services sectors.
From Table 1 it can be observed that from 1971 – 1976 during the regime of General Yakubu Gowon the nation acquired lot of resources to the extent that the problem of the country then was not money but how to spend it. Subsequently, the shocks in the oil prices led to decline in the economic growth leading to introduction of Structural Adjustment Programme in 1986 during the regime of General Ibrahim Badamasi Babangida.
The nation is endowed with abundant mineral human and natural resources. It has over 37.2 billion barrels of proven oil reserves and 187 trillion cubic feet of natural gas reserves. The country is the fifth largest oil exporting country within organization of Petroleum Exporting Countries (OPEC) and produces 2.46 million barrels per day. It is evidently clear that the country is mono-cultural largely relying oil export which is put at 95 % of total exports and which also contributed over 80 % of government revenue. Ironically, despite its crude oil, the country imports petroleum products for its domestic consumption which amounts to subsidy payment of over US $4 billion annually.
There are many factors that pose challenges to the efforts of diversification of the Nigerian economy. The challenges are as follows:
Budgeting has over the years been considered simply as a routine and estimates on paper which in most cases are not strictly followed. Funds meant for developmental projects in various sectors of the economy are mismanaged and wasted sometimes in political campaigns or awards of dubious contracts.
Rather than over reliance on petroleum, the economy can be diversified for sustainable development. The strategies for diversifying the economy include the following:
Therefore to diversify the economy and set it on the path towards sustainable development the sector has to be transformed. Agricultural loans as well as subsidies should be provided to farmers to boost their morale. There is need to commercialise agriculture and bring private sector to play key role so as to stimulate private sector- led growth for job and wealth creation. Mechanized farming should replace the use of crude implements and traditional methods that are still found in different parts of the country. Similarly, commodity marketing boards should be re-introduced to strengthen exportation of agricultural products such as cocoa, rubber, palm produce, cotton, groundnuts, etc.
Nigeria is blessed with many voluntary and self-help organizations cooperate societies, etc. most of them are too informal and unregistered. Therefore if government assists these sectors by extending finance to them they can be more productive and innovative and promote growth of the economy.
So far in this paper we have highlighted the Nigerian economy and explained that it is caught in the Dutch disease syndrome looking at it’s over reliance on oil revenue. The paper reviewed some concepts such as diversification, sustainable development and Dutch disease. Issues and challenges of diversification in the Nigerian context are also discussed as well as ways of mitigating them. At this juncture, we can conclude that presently the country is facing symptoms of Dutch disease where real sectors have not been accorded much concern and their contributions are low towards GDP. We can conclude that though the Dutch disease appears to be rooted in Nigeria, it is still curable at least in the long run if appropriate policies are sincerely and honestly implemented and government demonstrates political will to overcome the syndrome.
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