Diversification of the Economy: A Critical Appraisal of the Gas Industry, By Ayobami Ismail Akanji
The time to repair the roof is when the sun is shining’? John F. Kennedy
Nigeria is on a threshold of history politically and most importantly economically with various dynamic economic variables been ushered into the country’s economy ardently driven by the current administration of President Muhammadu Buhari, whose resolve for a total diversification of the economy can’t be overemphasized. He passionately restated this point when the United States Secretary of Commerce Penny Pritzker led a delegation of ten American business men and women at the prompting of President Barack Obama. “It’s time to diversify our economy from oil. We have always talked about it, but never got round doing it“, Buhari declared during the meeting.
Oil is a wasting asset or resource, and with Western countries involved in research into alternative sources of energy, it is fatal illusion to depend almost entirely on oil to earn national income to finance development efforts. The fading merit of oil in the growth of the Nigerian economy since its discovery in 1956 till date poignantly highlight the imperative of an urgent diversification which is speedily needed, to advance the development of critical subsectors that are co-integrated into the economy.
For economic interest and due to the sharp decline of the mainstay of the economy (crude oil) which accounts for about 35% of GDP, 75% of government revenue and 90% of export earnings makes Nigeria a mono-economy, government is in a dire strait and needs to muster the political will to nail home the diversification of the economy which is imperative.
Nigeria is a natural resource abundant country, and the most populous OPEC member nation. Over the past fifty years, the oil subsector has grown expontially. Both production and exports increased tremendously since commercial production in 1958. For example, crude production increased from 395.7 million barrels in 1970 to 776.01 million barrels in 1998. The figure increased to 919.3 million barrels in 2006, in the same vein, crude oil exports increased from 139.5 million barrels in 1996 to 807.7 million barrels in 1979. Oil revenue increased from N166.6 million in 1970 to N1 591,675.00 million and N6, 530,430.00 million in 2000 and 2008 respectively.
The huge revenues from oil is expected to have been a game changer in terms of massive infrastructural development, poverty reduction, employment generation for millions of Nigerians, alas the reverse is the case apart from complicating macroeconomics with a mix of pervasive corruption which dominated the oil dependent economy at the expense of agriculture which was once the mainstay of the economy.
In hard times, ( the current situation) economic diversification is the right policy to embrace given the fact that its mostly a process in which a growing range of output is produced, majorly by diversifying activities risen from the fact that the market is relied heavily on production of primary commodities that are to price vulnerability. Nigeria currently witness a sharp decline in the price of oil the 75% plunge in crude prices to around $33 per barrel paints a clear outlook the country faces over the last 9 months with a knock-on effect on government earnings, and no hope of any recovery in the nearest future.
Moreover, sustaining the political will in implementing a robust gas policy anchored on reduction of gas flaring which historically began with the extraction of oil in the 1960s, can be consolidated by government following through with its decision to have more industries stop gas flaring, a cohesive implementation of policy lapses beyond the joint ventures whose major preference is to extract crude and make their profit.
Consequently the gas associated with crude oil is seen as a nuisance and had to be flared, it is time to religiously follow the government enacted law (Associated Gas Re-injection Act, 1979) which charges a fee of US $3.50 for every 1000 standard cubic feet of gas flared. Another major area to be harnessed in the oil and gas sector which is viable in contributing to development of the economy through provision of intermediate inputs to the rest of the economy. These intermediate inputs include crude oil, gas and liquid feed stocks, as well as oil and gas into the refining, petrochemical and energy intensive industries.
Diversification is the new buzz word in town, the present administration evidently has embarked on an aggressive economic policy geared towards revamping a battered economy with an unprecedented boldness and conviction which looks both impressive and revolutionary.
A whooping sum of N1.8 trillion has been voted for capital expenditure with 30% voted for capital project, a Social Protection Investment wherein one million artisans’ market women will be given loans, of N60, 000 each and 500,000 teaching jobs for graduates including N5000 conditional for the poorest of the poor, these are all nouvel policies in the anal of Nigeria’s socio-political and economic evolution.
President Buhari’s commitment to diversify the economy in the face of rapidly changing realities is a clarion call to a country that appears detached from these ugly realities. He is reawakening the country not to take other untapped potential resources for national wealth for granted. Driven by a clear vision and passion to arouse Nigeria out this slumber of overdependence on oil, President Buhari deserves the support of all Nigerians in this regard.
Ayobami Ismail Akanji a Political Strategist writes from Abuja.