By Akeem Ogunlade
The current economic downturn, triggered by falling global oil prices, is yet another eye-opener for Nigeria to re-examine its economic bearing and possibly execute a shift from a mono-economy to lay a solid foundation for sustainable growth and development.
One route that has consistently resonated at various fora is diversification, with agriculture as its pivot. Agriculture, experts say, represents an opportunity sector whose huge economic potential remains largely untapped.Nigeria earns over 80 percent of her revenue from the petroleum industry, according to several reports, but the sector actually accounts for less than 14 percent of the Gross Domestic Product (GDP), whereas agriculture commands about 22 percent of GDP and generates two-thirds of employment nationwide.
About 90 percent of Nigeria’s food requirement is produced by small-scale farmers, who, ironically, constitute the majority of the nation’s poor. A myriad of factors have been blamed for this miserly condition, both natural and man-made. Key is the lack of access to finance and the resultant inability to invest in basic farming inputs, such as seedlings, fertilizers, implements and irrigation. As a result, their yields have remained largely stagnant, and their economic expectations and aspirations unmet. Similarly, little or no commercial financing is available to those aspiring to build businesses that could enhance food production and enable farmers to earn sustainable profit.
Other sectors of the Nigerian economy have lately come under the spotlight in a concerted clamour to truly diversify the economy. It is believed that Nigeria’s vast natural resources and huge consumer market will drive strong growth and attract investments to other critical sectors of the economy, including energy, mining and solid minerals, infrastructure and tourism.
Stanbic IBTC Outlines Pathway
Minister of Solid Minerals Development, Dr. Kayode Fayemi is convinced that the solid minerals industry is the country’s next frontier of opportunity for development, a position supported by the Medium Term Expenditure Framework (MTEF) and the Fiscal Strategy Paper (FSP). At the recent executive business session organized by Stanbic IBTC, tagged “Iron and Steel in Nigeria…Prospects, Partnerships and Progression” the minister reiterated the Federal Government’s determination to utilize Nigeria’s industrial mineral endowment to drive industrialisation.
With natural resource portfolio of at least 44 known mineral assets that include precious minerals, base metals, bulk minerals and rare earth minerals, Fayemi identified the country’s most promising mineral assets to include gold, iron ore, barite, bitumen, lead, zinc, tin and coal. “We have good reason to believe that the available data of our reserves understates what our country has been blessed with by providence in many instances. For one thing, some of the geosciences data collected 50 years ago or earlier have not been updated. So we are cautiously optimistic that our mineral endowments actually exceed what is currently stated,” he said.
Nigeria’s solid minerals sector has pointlessly been operating well below capacity, with many mining operations manned by small scale artisanal miners, as opposed to the large scale actors, the minister noted, adding that Nigeria can “generate at least N5 trillion annually from mining and exporting of its vast solid mineral deposits, with several multiplier effects on job creation, state development and social infrastructure that could position the solid minerals sector as the main catalyst for national development.”
Interestingly, solid minerals account for about nine percent of South Africa’s GDP, while mineral revenues are projected to account for 34.4% of Botswana’s total revenue in 2015/2016, and about 30% of GDP, Fayemi noted.
It was in recognition of this huge potential that Stanbic IBTC said it organized the session, in order to jumpstart sustained interface between the private sector and government with a view to developing a robust mining sector through the public private partnership model, Chief Executive, Stanbic IBTC Holdings PLC, Sola David-Borha stated. In so doing, the economic diversification agenda of the current administration would receive the desired impetus and create a win-win situation for all stakeholders.
“The 2016 Stanbic IBTC Iron and Steel Business conference was conceived to tap into the economic diversification drive of government by bringing together stakeholders from both the public and private sectors to share deep insights into the opportunities in the solid minerals sector, which has the potential to rival the petroleum sector in revenue generation,” David-Borha said. “As a developmental partner,” she added, “Stanbic IBTC will continue to take the lead in identifying opportunities that could be tapped into for growth through public private partnerships.”
Echoing a similar conviction was the Head of Mining at Standard Bank, Anders Alfredson, who highlighted some of the reasons to invest in the iron and steel industry.These include import substitution opportunity, potential to develop domestic iron ore and other steel raw material resources, and abundance of attractively-priced energy sources available locally, among others. Future demand growth, Alfredson added, has created an opportunity to develop the domestic industry, a window that Standard Bank, with its strong mining franchise, is ready to, through Stanbic IBTC, partner with local players to develop as well as use its global network to attract investment into the country.
“Standard Bank, through Stanbic IBTC, is open to work with its existing in-country client base on potential opportunities to develop an integrated iron ore to steel player,” Alfredson said, adding, “Standard Bank would be able to leverage its global network to identify potential candidates for strategic investment into Nigeria.”
In Nigeria, the public sector has historically designed, funded, and executed development projects. But these projects, characterized by inefficienciesand red-m, have consistently failed to deliver optimum benefits, leading to severe drawbacks for business and the economy. Theresult is stagnant economic growth and grinding poverty among Nigerians. However, with the gradual diversification of the economy, which the private sector is expected to drive, opportunities would be created and if taken would subsequently accelerate economic recovery and growth.
With supportive regulatory framework, private sector participation is expected, in the same manner that it has transformed telecoms, petroleum products’ distribution, and financial services, among others, to help unlock Nigeria’s largely untapped solid minerals industry. It is in this regard that Nigerian banks, just as Stanbic IBTC Bank has indicated, should demonstrate their capacity to finance major development initiatives that have the potential to engender rapid economic transformation. Without concerted effort by government and requisite funding and project finance expertise to stimulate growth of the solid minerals sector, diversification of the economy would just become another sloganeering stunt.
– Ogunlade is of the Centre for the Promotion of Enterprise and Business Best Practice, Wuse 2, Abuja