THE BLOG

Here's What Nigeria Needs To Do To Avoid Another Recession

A revival is underway and the return of diversification could be the making of Nigeria's next economic development.

03/10/2017 03:58 SAST | Updated 03/10/2017 03:58 SAST
agafapaperiapunta/ Getty Images
Local fruit market in the street, where people sell local fresh fruit in a village at Ondo state in Nigeria, on September 30, 2012.

The size of the oil market in Nigeria has given rise to a reputation that the country's economy runs on a single source. But this wasn't always the case. Before Nigeria emerged as one of the great global petrostates, it was the garden of West Africa: an agricultural giant accounting for as much as 1 percent of global farming exports for much of the 20th century.

The size of the oil market now eclipses much of the country's cottage industries, but a revival is underway and the return of diversification could be the making of Nigeria's next economic development. Nigeria is emerging from a bruising period of recession, the flames of which have been fanned by the global oil price instability. But history will show that this downturn will have been beneficial because, for the first time, many Nigerian entrepreneurs are being forced truly to adapt.

Unable to rely on the oil market, entrepreneurs have had to refocus towards a more diverse, more sustainable class of businesses, based on the true range of Nigeria's domestic resources, rather than a narrow and unpredictable export stream. We've learned the hard way that survival isn't about strength, it's about adaptation.

And the results of that adaptation have been overwhelmingly positive so far! Where once the overreliance on oil and gas stifled much-needed progress and investment in our other domestic industries, Nigeria now stands on the brink of realising a workable diversified economy. Nigeria's National Bureau of Statistics announced that Nigeria recorded an overall export rise of 73.5 percent in the second quarter of 2017 compared to the same quarter last year.

The increase would ordinarily be news by itself considering the fragility of Nigeria's economy, but it is the sheer range of products leaving our borders that is cause for optimism. Contrasting the solitary flow of oil that has defined our export economy in recent decades, Nigeria has rediscovered its plurality and returned to its roots.

There has never been a more critical time for regional African economies to work together.

Cashew nuts, sesame, flour, ginger and cocoa beans have opened up new markets in Vietnam, India and Kazakhstan, whilst Japan, India and Turkey's appetite for Nigerian shrimps and prawns gives a whole new meaning to offshore reserves. There has never been a more critical time for regional African economies to work together, and it is encouraging to see the blossoming bilateral trade relationships of Nigeria with Ghana, Senegal, Sudan, Ivory Coast, Chad, Niger and Morocco.

This is nothing short of an agricultural revolution, but the job is only half done. What can we do to truly revive the agricultural powerhouse that first put Nigeria's economic potential on the map? We must embrace diversification and fully invest in our agrarian economy. There is a tendency across our incredibly resource-rich continent to be swayed by whichever economic wind is blowing strongest.

Sudan's development of the Gezira scheme saw it become the cotton centre of Africa; South Africa had a similar relationship with gold mining. With Nigeria it was oil. And instead of the wealth trickling down to other emerging sectors much in need of development, it can saturate economic development and sink economic innovation. Now that Nigeria has rediscovered its diversity, we have to make sure it doesn't disappear the minute the oil price recovers.

Instead, the oil market, which still accounts for the largest share of Nigerian exports, must become the feedstock for economic development outside the petroleum sector. If we can take what we've learnt from our oil business and apply it to underdeveloped industries, the economic transformation will surely follow. One of the most progressive pieces of legislation passed in Nigeria in recent years was the 2010 'Local Content Act', an astute piece of oil law-making that accorded local, independent oil service providers preferential treatment in the award of contracts and tenders.

It transformed the competitiveness of indigenous players and unleashed a new wave of entrepreneurship in the domestic oil sector. Imagine applying that sort of thinking to agriculture; imagine it coupled with investment, training and development schemes for smallholders and small-scale farmers. We know the difference it can make. I ran a trial at my rice business, Joseph Agro Industries, recently and we supported the upscaling of a mill's capacity from 18,000 metric tonnes to an initial 100,000 metric tonnes alongside the development of 14,000 hectares of land into irrigated paddy fields.

Whilst we still have the oil sector, we must make it work harder for the emerging sectors that will eventually sit alongside it in a healthy, multifaceted economy.

The results have been fascinating. The quality of our product, which is a perennial issue in the competitiveness of Nigeria's rice business, was transformed by improved capacity and equipment. In a small way, we are making a meaningful contribution to overcoming Nigeria's reliance on rice imports.

Whilst we still have the oil sector, we must make it work harder for the emerging sectors that will eventually sit alongside it in a healthy, multifaceted economy. Nigeria's entrepreneurs can take great encouragement from our latest general export results and realise the opportunity that exists to redefine Nigeria's economic profile over the years ahead.

Doing so will not only create extra protection for Nigeria's delicate economic recovery, but will demonstrate a new kind of economic model: one that builds breadth as well as depth, and helps forge a more stable future. If done well, Nigeria's economic system will present a model from which other single-product-focused markets can learn.