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Re-inventing the economy for sustainability

economy

By Arize Nwobu

NIGERIA is an emerging market, middle income and mixed economy, and is ranked the 27th largest economy in the world. It has the largest natural gas economy in Africa and is also the largest oil and gas producer in the continent.

The country had a good head start with a well-defined First National Development Plan (1962 -1968) and a strong focus on Import Substitution Industrialisation, ISI, policy which promoted and boosted manufacturing. The rate of development rose to over 10 percent of national income or net national product and with substantial development of manufacturing sectors with high rate of growth.

But the economy contracted the “Dutch disease” which stunted and truncated the trajectory. “Dutch disease” has been defined as “the wind fall of income that leads to damages or destructive consequences in the economy”.

The wind fall for Nigeria was from oil. The discovery and increase in oil exports led to the loss of interest and decline in other export commodities. As a result the economy became mono-product without a diversified base.

The importance of economic diversification in the prosperity of nations cannot be over-emphasized. It engenders stability, sustainability and prosperity through favourable trade balances. The prosperity of advanced economies hinges on diversification, exports, manufacturing, innovations and well established financial markets.

Germany, the fifth largest economy in the world exports vehicles, machinery, chemical goods, electronic products, computers and electrical equipment.

Others include pharmaceuticals, transport equipment, basic metals, food products, rubber and plastics and many others. The share of industry in gross value added is 22 percent, the highest among G7 countries. According to IMF, Germany contributed 28 percent of the Euro areas economy in 2017.

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USA, the largest economy in the world exports soybean, corn, beef, pork, poultry, gems and precious stone, computers, vehicle parts and integrated circuits. Others include planes, helicopter, aircraft parts, spacecraft, crude and refined petroleum and a vast array of others.

South Africa, the second largest economy in Africa exports corn, fruits, nuts, sugar, wool, gold, diamond, metal and minerals, gems and precious metals.

Others include iron, steel, vehicles, machinery including computers, ores, slag, ash, transportation equipment and others. South Africa is a manufacturing hub and technologically advanced with advanced infrastructure and well established financial market. It has the largest stock exchange in Africa which is strategic.

Nigeria, the largest economy in Africa, exports crude petroleum, refined petroleum, petroleum gas, cocoa beans, vegetable products, tobacco, beverages, processed food, spirits, cashew nut, processed leather and others. It is the fourth leading exporter of cocoa in the world.

Regardless, oil has continued to be the main stay, representing 90 percent of exports and 86 percent of the total export revenue. The development readily exposes the economy to global shocks and crisis. For stability, sustainability and prosperity, the economy needs to be re-invented through effective diversification and “the big push”. This may be an uphill task going by the extent of damage exerted by the “Dutch disease”, but it is achievable. All hands needs to be on deck.

Central Bank of Nigeria has been on the forefront in the drive to re-invent the economy through diversification and self-sufficiency. The apex bank has been aggressive in the evolution of policies aimed at releasing growth forces virtually in all section of the economy. It has established several and enormous intervention funds aimed at fast-tracking the development of the manufacturing sector.

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The objectives of the funds are to provide access to credit to manufacturers, diversify the revenue base, increase foreign exchange earnings, provide inputs for the industrial sector on a sustainable basis, increase output and generate employment.

The importance of manufacturing cannot be overemphasized. It expands trade and commerce and brings in the much needed foreign exchange.  Next to agriculture, manufacturing also have the ability to create significant amount of jobs and generate incomes.

Manufacturing feeds aggregate demand and is linked to the standard of the living of the people. Problems of manufacturing in Nigeria include power, irregular taxes, inadequate funding and structure.

CBN intervention funds have opened windows of opportunities for manufacturer to access long term loans for acquisition of plants and machinery and working capital. Also to address the infrastructure challenge the apex bank is promoting a world-class infrastructure vehicle known as Infraco, to provide necessary infrastructure required to move agricultural product to processors, raw materials to factories and finished goods to market.

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