Is Nigeria’s economy truly not diversified?
There is a new and popular buzz word in town (actually not so new, but definitely popular) that pops up in conversations these days, whether from the corridors of powers, at press conferences and even street conversations. Yes, we all know the word, “Diversification”. This our new favourite word creeps in (sorry, scratch that, charges into) every conversation especially on talk shows/programmes, be it on television or radio, lets also not forget newspaper articles, posts (including ours truly) and almost grants “Sage” status on anyone who can use it in a sentence written or spoken when talking about Nigeria’s economy.
What is diversification? What does it mean to have a diversified economy? And what is the true state of Nigeria’s economy? Starting from the latter question, we can attempt to answer the former questions. Wikipedia (https://en.wikipedia.org/wiki/Economy_of_Nigeria) describes Nigeria’s economy as “a middle income, mixed economy and emerging market, with expanding financial, service, communications, technology and entertainment sectors. It is ranked as the 21st largest economy in the world in terms of nominal GDP, and the 20th largest in terms of Purchasing Power Parity. It is the largest economy in Africa; its re-emergent, though currently underperforming, manufacturing sector is the third-largest on the continent, and produces a large proportion of goods and services for the West African sub region. [Emphasis mine. Spoiler alert – Nigeria’s economy is diversified.” If you didn’t get it reread this paragraph again from the top”]. Nigeria recently changed its economic analysis to account for rapidly growing contributors to its GDP, such as telecommunications, banking, and its film industry”.
An excerpt from an article of mine in early 2016, is paraphrased below (pre-devaluation of the Naira, this was fairly accurate).
“Nigeria represents one of the most developed markets in Africa and currently ranks as the continent’s largest economy. With a GDP in excess of $509 billion and per capita income of $2,689 coupled with a growing population of over 170 million the 7th most populous in the world; Nigeria can reasonably be termed an investor’s delight.
The GDP was rebased in 2014, shifting the base year from 1990 to 2010, with the exercise increasing the GDP by 89% to $509.97 billion. This enabled Nigeria to jump 10 places in Global GDP rankings to 26th position leapfrogging South Africa ($345 billion), Thailand ($401 billion) and Argentina ($485 billion). Unfortunately Nigeria’s per capita income of $2,689 which increased by almost 70% post rebasing, is still lower than that of other economies in the top 50, in fact Nigeria’s per capita income is almost a third of South Africa’s (about $8,000)”. My data were sourced from the Nigerian Bureau of Statistics [NBS] and Oxford Group’s Nigeria 2015 report.
When I get into discussions/arguments about the state of Nigeria’s economy which is almost a daily affair, I get skeptical (or strange) looks when reaffirming that Nigeria’s economy is actually diversified and that it is only the Federal Government (FG) that has not diversified its earnings (popular data usually bandied around, claim over 85% of the FG’S export earnings is from Oil).
Now back to the first question asked (what is diversification?), according to Professor Zagros Madjd –Sadjadi a Professor of Economics, Winston-Salem State University, when answering in Quora (https://www.quora.com)
“Economic diversification can mean different things depending on the context. The predominant way of thinking about it is what is known as economic complexity, which is the idea that countries should not be dependent upon a small number of products for their economic livelihoods. For example, a country that has an economy based predominantly on oil production is neither particularly complex nor economically diverse. On the other hand, a country that has a strong manufacturing base, a vibrant services sector, a burgeoning natural resource sector, and a booming agricultural sector is quite complex and diverse. To get an idea of the relative complexity of various economies, I suggest that you visit the Atlas of Economic Complexity at Harvard University: http://atlas.cid.harvard.edu/”
If we take a look at the description of Nigeria’s manufacturing sector as described in Wikipedia (re-emergent, underperforming though 3rd largest in Africa) and compare it with the example of a country that has a complex and diverse economy as described above (with a strong manufacturing base), we can then begin to understand the reason for the (misinformed) cry for diversification. We should understand that while Nigeria’s economy might not be described as “quite complex and diverse”, Nigeria is by no means a mono-economy, she actually has a multi-product/diversified economy.
So in essence what the FG should really be talking about is not how to diversify the economy (that horse left the barn a long time ago), but how to ensure through a “good road map” (please note this is not rocket science, also see From Third World to First: The Singapore Story – 1965 -2000 by Lee Kuan Yew), that Nigeria of the future (with the will and seriousness, within a [say 10 or 15 year period) is described as a country with a “strong manufacturing base, a vibrant services sector, a burgeoning natural resource sector, and a booming agricultural sector”.
Please can we change our conversations/arguments and start looking for/at new narratives?
Is Nigeria’s economy truly not diversified?