Finance Psyche

The Nigerian economy has found itself in yet another recession. This recent recession was triggered by the fall in crude oil prices and the COVID-19 pandemic. Following these events, the African Development Bank (AfDB) estimates a 3% shrink in GDP and a 1.4% increase in the inflation rate- following the forex crisis, the cessation of fuel subsidies, and the increment in electricity tariffs.

Currently, Nigeria heavily depends on crude oil sales as a key economic driver and for its forex supply. With the current volatile nature of the crude oil price and a vast reduction in foreign investment (AfDB reports that current foreign investment in Nigeria stands at $7.9 billion-half of 2019’s value of investment), it is essential that Nigeria commence its economic diversification programmes.

On a grand scale, Nigeria has many diversification options. The country is rich in renewable energy, mineral resources, arable land and human resources. However, if we are to propose diversification strategies for immediate recovery, then options with the least financial and structural requirements must be focused on. In this regard, this piece will focus on options for diversifying the economy while fostering sustainable development. These options are agriculture and manufacturing.

Agricultural Diversification

The World Bank notes that 77.7% of Nigeria’s 910.8 thousand square kilometres is arable land. Although the agricultural sector contributes the largest share of the national GDP, it is not the main source of forex earnings. Additionally, the demand for the industry’s produce far outweighs the national demand, and the country’s rural populace languishes in poverty. Yet, there are opportunities for increasing the GDP input of this sector.

Subsidising the adoption of Sustainable Technology for Farming

• Nigerian agriculture relies on rainfall and traditional farming practices and is also dominated by a few stakeholders who lack the capacity and means to increase productivity.
• Studies have estimated that the number of available tractors in Nigeria is about 40,000, with half of them out of function.
• As a result, yearly yields of grains, crops and other agricultural produce are meagre, compared to countries like South Africa, the United States and Indonesia.
• To solve this, the government could establish an initiative to subsidise the procurement of sustainable technology for farmers—thus facilitating advanced farming practices such as irrigation, the use of pesticides and fertilisers, biotech for agriculture and so on.

Promotion of Modern and Advanced Livestock Production Practices

• Like production of crops, animal husbandry in Nigeria relies on traditional methods of feeding and rearing, such as the pastoral system-which translates into open grazing and deforestation.
• With the country’s population increasing at an exponentially fast rate, sustainable livestock production that will increase the amount of produce obtained is required.
• Practices such as vaccination, purchase of quality animal feed, silvopastoral systems, and precision feeding should be promoted in the livestock sub-sector.
• Promoting these modern practices could include the establishment of training programmes and the subsidisation of necessary items needed for modernising livestock production.

Exploration of New Markets for Agricultural Commodities

• While Nigeria’s recent agricultural export may have been worth ₦289.3 billion, according to Nairametrics, a nationwide modernisation of agriculture will result in more yields than ever before.
• To improve export quotas, avenues like the AfCFTA can be utilised in sourcing for new markets within the continent.
• In light of increasing tariffs on agricultural commodities, other markets in developed countries can be identified as potential export destinations.

Manufacturing Diversification

Nigeria is in desperate need of a major industrialization boost, which can be achieved through a major kickstart of the manufacturing sector. However, progress-inhibiting business policies, corruption, and incessant forex challenges have prevented any real growth that could be facilitated by stakeholders in the country. Yet, Nigeria must begin to promote an increase in the manufacture of goods to help the economy recover and grow, in the long run. Here are ways the government can achieve this.

Creating a Conducive Environment for the Manufacturing Sector to Thrive

• It is common knowledge that Nigeria ranks low on ease of business’ indexes. The manifestation of this, comes in the lack of proper infrastructure (such as electricity for operation and good roads for goods transport) and unfavourable policies.
• Yet, a proliferation of organisations in the manufacturing sector can only occur when certain measures are in place to reduce the cost of production and unexpected expenses.
• Therefore, the government should increase its pace of infrastructural development; ensuring that there is equitable development across the nation.
• Moreover, strong policy interventions should be made to support the growth of companies in this sector, particularly in construction and extractive companies.

Governmental Support for the Growth of the Manufacturing Sector

• For the full onboarding of the manufacturing sector as a major national revenue source, governmental contributions are required at all levels.
• On a macro-economic level, the government can ensure that there is currency stability, policy stability, as well as corporate and governmental transparency.
• On human capital, the government can show support through vocational training programmes and increased efforts in improving education.
• Improvement of public access to healthcare and flexible labour regulations are also significant ways to promote growth.

Final thoughts

With the right measures, the Nigerian economy could recover from this current recession and enjoy relative stability. However, Nigerian economic growth, at this point, can only occur via economic diversification. While agriculture and manufacturing are currently the least expensive options, the government must hasten diversification efforts to create options that can cushion any future and unexpected economic shocks.