The process of shifting an economy away from a single income source toward multiple sources from a growing range of sectors and markets is known has economic diversification. A sustainable cycle of economic activity is created in a diversified economy where businesses continually feed off of one another and grow larger as the economy grows. Due to this investment in new businesses open more opportunities, leading to the expansion of supporting sectors.
In terms of diversified economies, Germany, the United States, and South Korea are examples of three economies with high levels of complexity and large and diversified product portfolios. Chile is an example of a diversified economy, exporting more than 2,800 distinct products to more than 120 different countries. Zambia, a country similarly endowed with copper resources, exports just over 700 products – one-fourth of Chile’s export basket – and these go to just 80 countries.
The former managing director of the International Monetary Fund (IMF), Christine Lagarde, said “We know that economic diversification is good for growth. Diversification is also tremendously important for resilience.” Unfortunately, this goal continues to elude many African countries. In fact, the continent is home to eight of the world’s fifteen least economically diversified countries. This reality weakens the foundation of their economic transformation and slows their pace of progress. It also makes these countries particularly vulnerable to sudden external shocks, as the pandemic-induced disruption of tourism and oil-dependent economies has illustrated.
Economic Strength Before Global Health Crisis
Before the global health crisis despite numerous reforms, international loans and restructuring programmes, 85 million Nigerians are poor. From the 2014 oil price impact the Nigerian government had been grappling with weak recovery. In 2019 the country’s GDP growth tapering around 2.3 percent. Though, the structure of Nigeria’s economy has changed significantly. Its economy has transformed from one mainly based on agriculture to manufacturing and services.
Three years ago, Vice President of Nigeria, H.E. Yemi Osinbajo said, “With a population and gross domestic product projected at 399 million people and $3.3 trillion by 2050, the gulf between the reality of Africa’s largest economy and its undisputed potential remains wide – but achievable. Indeed, our major task has been to systematically implement strategies that will deliver the future we wish to see. This daunting responsibility has not been lost on the Buhari administration, and serves as the impetus for its sustained “Change” agenda.”
Policy And Governance During Covid-19 Crisis
The COVID-19 crisis drove the economic slowdown; the external context was marked by capital outflows, intensified risk aversion, low oil prices, and shrinking foreign remittances in Nigeria. Last year, Nigeria’s economy entered a recession, reversing three years of recovery, due to fall in crude oil prices on account of falling global demand and containment measures to fight the spread of COVID-19. The containment measures mainly affected aviation, tourism, hospitality, restaurants, manufacturing, and trade. Contraction in these sectors offset demand-driven expansion in financial and information and communications technology sectors.
The Nigerian Minister of Finance, Budget & National Planning, Mrs. Zainab Shamsuna Ahmed at the the IMF-World Bank Annual Meetings that held from October 11th to 17th, 2021, said, “Nigeria’s commitment towards increasing revenue generation while ensuring Sustainable Deficit and Debt Levels. She restated that Nigeria does not have a debt problem as all countries borrow to meet growing needs for building economies and the Strategic Revenue Growth Initiative (#SRGI) was launched in Nigeria to widen the revenue base in the medium term. Nigeria has demonstrated deep resilience amid the COVID-19 pandemic and commitment to sound policy & improving governance, positioning the continent’s largest economy and most populous nation at the forefront of the post-pandemic recovery with key structural reforms rolled out that include steps towards cost-reflective tariffs in the power sector, and the recently enacted Petroleum Industry Act.
“Nigeria has a broad and diversified economy across sectors contributing to macroeconomic resilience, with oil & gas contributing only 8.34% to real GDP in 1H 2021.” Indicating that “Post Covid-19 recovery has been aided by the pick up in non-oil activity in information & communications, mining and quarrying, accommodation and food services, transportation and storage, education and trade. “Nigeria continues to diversify and grow the non-oil-and-gas sectors of the economy through continued economic reform policies under the Buhari administration” she said.
Governance Performance Rationale
Meanwhile, experts indicate that the main determinants of economic growth in Nigeria are population growth, inflation, foreign direct investment (FDI), interest rates, exports as well as private & public investment. However, corruption, red tape in public sector, insecurity, increase importation, infrastructural decadence, high interest rate on loans from commercial banks, high rate of unemployment, frustration, and high cost of imported consumer goods, inability to process raw materials into finished products, weak government regulations and law enforcement are still a challenge to the Nigerian economy.
Meanwhile, electricity is important in improving the manufacturing and industrial sector, fixing electricity will be a win for the Nigerian economy. Patronizing Nigerian made products in terms of purchase and promotion by citizens and government functionaries will help to improve its local economies.Nigerians should embrace innovations with the use of modern technology at all sectors. Openness in government ministries, departments and parastatals’ expenditures via publication will help reduce the level of corruption in the system thus, boost the economy.
In reality, the value attached to human life in Nigeria diminishes by the day, people die daily due to the lever of insecurity in the country; securing Nigeria is the responsibility of all including parents, teachers, local, national and international communities. Making quality education accessible and affordable for all with new curriculum based on knowledge economy will reduce the rate of unemployment and poverty among Nigerian, and development of this nature does boost economy in long and short term.