KEY POINTS
- Nigeria’s non-oil exports fell by 5.65% despite efforts to boost foreign exchange (FX) earnings.
- The country’s reliance on oil exports continues to strain its diversification plans and economic stability.
- Authorities are pushing for reforms to strengthen non-oil sectors like agriculture and manufacturing.
Non-oil export sector of Nigeria is under pressure, and the latest figures reveal that non-oil export earnings have shrunk by 5.65% over the last one year. This dip has come at a time the government has been working hard to diversify the economy to earn more foreign exchange (FX) from the exportation of oil.
The decline is particularly worrying as Nigeria seeks to diversify its FX earnings in order to support the naira and reduce the impact of volatility in the price of oil.
The NBS recently published data that show the decline in non-oil exports, which has led to doubts about the efficiency of current policies to support non-oil sectors.
Dependence on export of oil and gas
Nigeria’s economy has been an oil-based economy where most of the country’s FX comes from the sales of crude oil. In as much as there have been efforts to diversify the economy, the oil sector still dominates and this is very dangerous for the economy.
Disruptions in oil price, fluctuations in demand and global prices, and changes and instabilities in production have come close to toppling Nigeria.
The recent decline in non-oil exports is an indication of the slow progress in the diversification of the economy especially in areas such as agriculture and manufacturing and services sectors that have been earmarked as potential growth sectors. Although these sectors are promising, none of them has generated enough foreign exchange earnings to balance the reliance on oil.
Business Day has reported that while government officials have admitted that the diversification of exports is a difficult task, they are determined to explore the strategies that will help Nigeria to harness the full potential of non-oil export sector.
Nonetheless, several structural factors have made the journey towards the realization of enhanced non-oil exports a thorny affair, including; infrastructure gaps, policy fluctuations, and credit constraints.
Government’s pressure on non-oil sector reforms
To reverse such a trend, the Nigerian government has been concentrating on the restructuring of the major non-oil sectors. And the goal is to provide the conditions that would foster increased production by local companies and exporting more agricultural products, manufactured goods, and technology.
Such sectors are considered to offer the Nigerian economy the much-needed push for FX earnings as well as a less-directional economy.
It has been noteworthy policy action to support these sectors, and agricultural promotion programs, export incentives and infrastructure development has been launched. Nonetheless, there are still some constraints that plague the growth of non-oil exports which include; poor funding, logistics issues, and poor market access.
The government is also trying to encourage more FDI into the non-oil sector with the belief that increased investment will foster the creation of industries that can produce goods for export.
The latest data on non-oil exports point to the fact that these measures will have to be stepped up if Nigeria is to succeed in its diversification agenda.
The economic diversification: the hope for economic diversification
Nevertheless, there is hope that given the situation at present Nigeria is still capable of reversing such polarity and in the process fortify its non-oil segments.
Many analysts have opined that with the right policies, investments and better infrastructure, the country’s non-oil export capacity is fully realizable. This would not only facilitate for a better stability of the naira but equally engross employment opportunity, poverty rate and general economic steadiness.
Currently, the government’s priority is to carry out reforms and development of key sectors such as agriculture, technology and manufacturing. If successful these efforts could open the way to a less oil-dependent economy, more diversified and less sensitive to the fluctuations of the international oil market.
