The petroleum sector has a disproportionate influence on the Nigerian economy although it accounts for a relatively small proportion of gross domestic product: around 9% in 2020. But, during the same period, crude oil sales accounted for a third of the gross domestic product. government budget revenue and about 90 percent of the West African nation’s export earnings.
“It’s bad because it makes Nigeria a very volatile country,” said Tokunbo Afikuyomi, a UK-based economist who writes for the Nigerian financial publication. Business stars.
When the price of crude oil is lower than the government forecast, gaping holes appear in the federal budget.
Although this has been a problem in Nigeria for at least a decade, the coronavirus pandemic has made it worse. The drop in global oil prices at the start of the pandemic meant Nigeria’s oil revenues were about 65% lower than forecast in the first half of 2020, causing a massive budget deficit.
Additionally, lower oil sales mean less money flowing through the country, making it difficult for Nigerian manufacturers to import the raw materials or components they need.
Finished fossil fuels
There are other reasons why the nation of 206 million people should reduce its dependence on oil and gas, said Taiwo Oyaniran, associate director of global consulting firm PwC in Nigeria. DW.
âWhat is happening globally is that many countries are moving away from fossil fuels like crude oil as an energy source and are turning to clean energy,â Oyaniran said. “So it is quite important for us to consider other sources of income generation as a country,” he added.
In addition, Oyaniran said, Nigeria’s oil resources will eventually run out, making it “absolutely essential” to develop other areas of its economy. Nigeria seeks to advance agriculture, information and communication technologies (ICT), and creative industries, such as the thriving Nollywood music and film industries, as potential alternatives to the industry. ‘export.
Largely unproductive agriculture
Before the discovery of oil in Nigeria in the 1950s, agriculture was the backbone of its economy.
Half of the Nigerian workforce currently works in agriculture, Afikuyomi said, so “there is a school of thought that it is almost impossible to grow the economy or export or produce without agriculture. “. Palm oil, cocoa beans, sesame seeds and cashews are among the crops identified as potential export sources.
Nigeria was once the world’s largest exporter of palm oil, a vital global ingredient in many processed foods. The government is investing heavily in the palm oil industry, for example providing an agricultural credit program that helps operators buy quality and up-to-date seedlings and set up new plantations and mills.
But the question is whether the agricultural sector can increase exports, analysts say, as it mainly involves small farmers who are relatively unproductive, even compared to other African countries. Nigerian farmers can produce around 7,000 kilograms (15,400 pounds) of tomatoes per hectare (2.47 acres). In contrast, Kenya can produce 20,000 kilograms of tomatoes on similar land, according to Nigerian economist Afikuyomi.
Oyaniran also used tomatoes to illustrate the challenges of the Nigerian agricultural sector.
âAlmost 50% of tomatoes are destroyed from farm to market,â he said, due to logistical problems related to âpoor road networks, poor packaging systems and cooling and refrigeration systems. insufficient â. Until Nigeria can resolve these issues, he said, “we are unlikely to see huge investments entering the agro-industrial space.”
A look at the ICT industry
Nigeria has long been home to one of the continent’s most dynamic technology hubs.
The coronavirus pandemic has given the ICT industry a further boost. Businesses were desperate for remote working solutions for their employees, and people trapped at home turned to digital communications, online banking and shopping.
Jumia, Nigeria’s largest online trader, reported revenue growth of around 30% in the first quarter of 2020. As a result, the ICT sector contributed nearly 18% of GDP in the second quarter. 2020, up from 10% in 2018. Much of that increase has come from financial technology (fintech) as the need for cashless payments, mobile transactions and easy loans has exploded during the pandemic.
Nigeria attracted just over $ 134 million in fintech venture capital in 2020, capturing more fintech finance than anywhere else in Africa. It is estimated that two in five Nigerians are financially excluded. This, combined with the country’s young population and growing smartphone penetration, “creates the perfect recipe for a thriving fintech industry,” according to KPMG, an international consulting firm.
“We’re seeing more and more unicorn businesses, businesses valued at over $ 1 billion [â¬ 860 million], appearing in Nigeria’s technological innovation ecosystem, so it will only grow and grow, âAfikuyomi said.
The ICT sector, including fintech, still faces a myriad of obstacles, such as Nigeria’s uneven and erratic electricity supply, a fragmented fiber-optic internet network, and a shortage of skilled software engineers.
Infrastructure is not enough
The country’s crumbling infrastructure is a major obstacle to Nigeria’s push to turn away from oil.
In 2020, President Muhammadu Buhari’s administration announced a new infrastructure campaign, with multibillion-dollar plans to upgrade roads, railways, bridges, airports and power supply. Oyaniran said growing insecurity in Nigeria was one of the biggest threats to economic diversification efforts.
Boko Haram insurgents are still hitting northeast Nigeria. The north-west is ravaged by banditry and kidnappings, while the center-north is plagued by violent conflicts between farmers and nomadic herders. The south of the country has also seen its share of attacks and kidnappings. âUnless we are able to effectively reduce the security problem, the expected outcome of all infrastructure investments may not be achieved,â Oyaniran said.