Economic Diversification In Nigeria

Undoubtedly, petroleum (crude oil) has played a significant role in contributing to Nigeria’s revenue since its discovery in 1956, especially during the period of rising oil prices, notably from 1970 onwards. However, it is widely acknowledged worldwide that for a country to achieve sustainable growth and development, it is imperative to diversify its economy. Economic diversification is not a spontaneous occurrence; rather, it necessitates a deliberate shift away from a mono-economy towards the productive development of various sectors. The recent decline in oil prices, by over 40% since June 2014 when it stood at $115 per barrel, subsequently falling below $70, due to constraints in supply and demand from major importers, underscores the impermanence of Nigeria’s substantial earnings from the petroleum sector. Consequently, it is evident that Nigeria must urgently address the imperative for economic diversification to foster robust economic growth.

In addition to the continuous decline in the agricultural sector, the management of human resources in Nigeria has also suffered from years of neglect, primarily attributed to the prevailing oil boom in the country. As Todaro and Stephen (2006) succinctly point out, in the context of a nation’s human resources and economic growth, not only are the sheer numbers of people and their skill levels crucial, but also cultural attitudes, work ethics, access to information, innovative tendencies, and the desire for self-improvement play pivotal roles. Unfortunately, Nigeria has witnessed a distressing deterioration in the management of its human resources, which has, in turn, contributed to a significant brain drain phenomenon. This exodus involves the emigration of highly educated and skilled professionals, resulting in a high dependency ratio among Nigerian youth, particularly university graduates who seek better opportunities in developed countries in Europe and America. According to Emeagwali (1997), a substantial number of well-qualified Nigerian teaching staff, unable to secure employment within Nigeria due to unattractive welfare packages for educators, have made significant contributions to the United States’ economy.

Samuelson (1968) describes economic diversification as the act of investing in a variety of assets, highlighting its advantages in reducing risk, especially during periods of economic recession, inflation, deflation, and other adverse conditions. Economic diversification aims to mitigate unsystematic risk events within a portfolio, where positive performance in some investments can counterbalance the negative performance in others. Adebayo (1999) underscores this point by emphasizing that the neglect of agriculture and rural economies, coupled with the concentration of economic activities in the oil sector, has led to the current scarcity of raw materials. This scarcity, in turn, has necessitated heavy imports of raw materials and food items. Researchers like Young (1995) have applied a similar framework and found that the higher growth of output in newly industrialized East Asian countries, compared to the rest of the world, is primarily attributed to economic diversification. This diversification enhances labor force participation and promotes improvements in labor quality through knowledge accumulation, rather than relying solely on rapid technological progress.

Uzonwanne (2015) conducted an examination of Nigeria’s oil dependency on economic growth and observed that despite Nigeria’s substantial natural and human resource endowments, the nation has squandered many opportunities to break away from underdevelopment. This is primarily due to the heavy reliance on its abundant but mismanaged crude oil resources as the main source of revenue. As early as 2001, Onucheyo foresaw the decline in oil prices and the emergence of alternative energy sources such as nuclear, solar, and geothermal power in the 21st century. He pointed out that this transition raised concerns about Nigeria’s oil-dependent mono-cultural economy. Onucheyo maintained that Nigeria’s position in the 21st century would not hinge on its oil but rather on the development of its agricultural sector and the associated human resources. Furthermore, Egunjobi (2014) assessed the impact of urban unemployment on economic growth, utilizing co-integration and error correction mechanisms. The research findings indicated that income, government expenditure, and investment in human resources had direct impacts on economic growth, while the urban unemployment rate exerted an indirect impact. Consequently, the study recommended a significant emphasis on investment in human resources as a means to spur economic growth.Top of Form

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RECOMMENDATIONS

After examining the significant issues arising from the neglect of agriculture and poor human resource management in Nigeria, which have led to the decline of the country’s economy, it becomes imperative to propose recommendations that can serve as crucial catalysts for changing the current situation. The Nigerian government, at all levels, should promptly create a conducive environment that fosters economic diversification, thereby reducing reliance on a mono-economy system and placing greater emphasis on a heterogeneous economy. First and foremost, there is an urgent need to establish a functional and effective agricultural bank or microfinance bank exclusively dedicated to providing farmers with easy access to soft loans. This initiative would facilitate financial support for farmers and contribute to the growth of the agricultural sector. Additionally, the government should institute a specialized grant program designed solely for genuine farmers, further bolstering their efforts.

Many farmers in Nigeria still rely on archaic and non-mechanized farming methods, resulting in low productivity. Hence, there is an urgent requirement to introduce mechanized agriculture at all levels. This shift towards mechanization would not only enhance productivity but also alleviate the physical strain associated with manual labor. The government should prioritize the provision of periodic courses, capacity-building programs, training, and retraining opportunities in agriculture to facilitate professional development among individuals involved in the sector. Continuous skill enhancement is vital to improving agricultural practices and promoting sustainable growth. Furthermore, it is crucial to promote Public-Private Partnerships (PPP) to develop programs aimed at boosting human capital development in the country. In essence, the call for diversification should not rest solely on the government’s shoulders. All stakeholders, including private enterprises and organizations, must collaborate and cooperate with the government to transform this vision into a reality. Collective efforts will be essential in achieving the goal of a diversified and prosperous Nigerian economy.

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REERENCES

Adebayo, O. (1999). “Nigeria external debt crisis: Its management.” Lagos: Malt house Press         Limited.

Akpan, E. (2009). “Oil price shocks and Nigeria’s macro economy.” Retrieved August 20^th, 2023,  from http://www.csae.ox.ac.uk/conferences/2009-EDiA/papers/252-Akpan.pdf

Egunjobi, T. (2014). Poverty and Unemployment Paradox in Nigeria. IOSR Journal of Humanities  and Social Science, 19(5), 106-110.

Olomola, P. (2006). “Oil price shock and aggregate economic activity in Nigeria” African     Economic and Business Review, 4(2).

Onucheyo (2001). Agriculture and the economic future of Nigeria. Retrieved August 20^th, 2023,  from http://www.wazobia.biafranigeria.com/

Samuelson, P. (1967). “General Proof that diversification pays,” Journal of Financial and        Quantitative Analysis, 2, 1-13.

Uzonwanne, M. (2015). Economic Diversification in Nigeria in the Face of Dwindling Oil            Revenue. Journal of Economics and Sustainable Development, 6(4), 61-67.

Young, A. (1995). The tyranny of numbers: Confronting the statistical reality of the East Asian         growth experience. Quarterly Journal of Economics, 110, 641-680.