By Babajide Komolafe
With the oil sector contributing 20 percent to the Nigeria’s economy in recent times, the current economic challenges confronting the country can be exploited to facilitate the goal of being one of the 20 biggest economies by 2020.
This however depends on how the citizens respond to the challenges and continued focus on developing the non oil sector especially agriculture. These views were expressed by the Director General of the Debt Management Office (DMO), Dr. Abraham Nwankwo in a recent interaction with finance correspondents where he also explained the rationale for external borrowing to fund the 2016 budget.
The rationale for external borrowing
This is the first time that the budget specified that all borrowed funds will be for capital expenditure. The sharing of internal and international borrowing is almost 50/50. We have been borrowing locally, but we have to take advantage of the relatively low cost of funds externally. We do not want to borrow too much from the domestic economy, so that we do not crowd-out the domestic environment.
Oil and the Nigerian economy
Now, in respect to oil prices let me go straight to an issue to say that the dominant theme since May 2014 which is about two and a half years ago, has been the collapse of oil prices. And for many people, and for many interest groups, it becomes a depressing factor.
But we need to change from that approach, and respond to that development positively for a couple of reasons. First, we have to remind ourselves that in the first instance, our economy was not supposed to be dependent on oil. In the first instance, our economy was not supposed to be dependent on oil.
Yes, historically, oil revenues have dominated our foreign exchange earnings with 90 per cent and above. Oil revenues have dominated our public revenues with 70 per cent and above. But we also have to remind ourselves that at least over the past five or more years, oil has not contributed more than 20 per cent of our gross domestic products. So the pillars that hold our economy in the real sense of it are really not oil because oil revenue has always been less than 20 per cent of our gross domestic product.
And those other sectors that contribute about 80 per cent are still there for us. You are talking about agriculture, you are talking about commerce, you are talking about various services, manufacturing and emerging sectors like entertainment, music, Nollywood and all that. Of course, you are talking about ICT which is open to us to take advantage of particularly given the very strong base that has been established with the privatisation of the communication sector.
Response to current economic challenge
What will make the big difference is the response of all of us individually and collectively and our response to these challenges that are manifesting. The way we respond is the critical factor that would determine what happens next. For every problem, we could respond in the right way or the wrong way.
In our journey to have an economy that is among the topmost in the world by the year 2020, which we started eighteen years ago, and so, let’s take this current development, and current challenges as just one of the things we are seeing on the way to that journey. We should continue with that spirit. I mean, when you are running a race and you are one-quarter of the way and something trips you and you fall, the challenge is to get up and continue so that you reach the touch line in good time. So that is one way to look at it.
How agriculture can boost value of naira
The second way to look at it of course, is to look at the enormous potentials. Even assuming that the oil was rightly or appropriately the base for our economic growth and prosperity which it is not, it was not really the appropriate base, it was the inappropriate base and all we wanted to do is to remove that inappropriate and replace it. But either way, the point is that luckily for us, we still have those other options, all those other alternatives, all those other opportunities in agriculture, you can go and look up the statistics, certainly we have not been able yet to exploit as much as 25 per cent of the opportunities in agriculture. We have not.
And in agriculture, we have the whole world of opportunities not only to ensure internal food security but also for us to have the capacity to export agro-based products particularly in processed form. Now, this is agriculture alone. If you effectively exploit agriculture, which is the simplest story to show that we have no problems. It is agriculture because if and as we are making progress, in agriculture, what are the results.
First, we need to note that the major consumers of our foreign exchange are food items and agro-based raw materials, talking of sugar, wheat, rice, fish, poultry, these are things that make enormous demand on our foreign exchange. And yet these are things we have the capacity to produce in such volumes and values that we do not need to import them at all. Then, more importantly, we have the capacity to export them to other countries.
The bottom line is that we can become self sufficient in food. That means, that in the next five years maximum we will be talking of saving enormous foreign exchange from agricultural produce alone and that means our local currency will be stronger. It means the accretion to reserve will be more robust cumulatively and the reserve will be growing. That is the essence of a strong economy. So we need not be bothering about the symptoms, because they are temporary symptoms and focus on the real issue which will help us to overcome these challenges.
That is the point I am trying to make. Now, we are talking of poultry as I have given you example, remember that apart from the fact that we are saving foreign exchange, we can also export and then earn foreign exchange. So from both sides, agriculture offers us solutions to the current challenges. That is the point I am making in a simple O level economics. You don’t need to go to high level economics because O level economics shows that, we can produce what we need.
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