In February 2019, the National Bureau of Statistics (NBS) reported that the Nigerian economy grew by 1.93 per cent in 2018. This represents a 135 per cent improvement when compared to 2017’s 0.82 per cent growth. Specifically, Nigeria’s Gross Domestic Product (GDP) grew by 2.38 per cent in real terms in the fourth quarter of 2018 when compared to the same period in 2017 which indicates that the economy rebounded in the last quarter as against the lull in the second and third quarters of 2018.
Remarkably, the non-oil sector contributed significantly to the increase with a 2.70 per cent growth in real terms in the fourth quarter. No doubt, the steady growth in the sector is very welcoming news particularly at this period that the clamour for economic diversification is rife.
Nigeria relies heavily on crude oil earnings which account for 95% of its export earnings and 70% of government revenue, thereby signposting the country as a single product economy. Previous efforts by successive administrations to stimulate growth in the non-oil sector of the economy, particularly agriculture and solid mineral resources through dedicated polices, have yielded little success and barely outlived the administrations that formulated them.
However, the sharp drop in the global oil prices that occurred in 2015 resulted in economic hardships due to the consequent decline of government revenue. This served as a wake-up call to government to explore ways to diversify the economy and broaden government’s revenue sources even as the economy slipped into recession.
After five consecutive quarters of contraction, Nigeria finally exited economic recession in the second quarter of2017, a performance largely buoyed by a rise in global oil prices. However, results also show that performance in the non-oil sector has been growing steadily.
A breakdown of reports by NBS and other economic reporting institutions on the quarterly performance of the non-oil sector for the greater part of 2017 and 2018 showed noticeable increases in volumes and value in sectors such as raw materials, agriculture, solid minerals and manufactured goods. This signifies that the deliberate efforts at diversifying the economy have begun to yield fruits. Notable among the export items were frozen shrimps and prawns exported mainly to the Netherlands, Belgium, and USA; flour and meals of soya bean exported mainly to Spain, Ghana and Senegal; ginger exported to Vietnam, Morocco and Sudan; while manufactured goods such as cigarettes were exported to mainly West African countries. These contributed significantly to the country’s trade balance.
Prominent among companies that have increased the country’s non-oil earnings are Olam Nigeria, which exports agro-based products, including fermented cocoa beans and sesame seeds to the United Kingdom, Netherlands, Turkey, Japan, and Jordan; Eleme Fertiliser and Chemicals Limited with large exports in granular urea to South American countries Argentina, Uruguay and Brazil; Atlantic Shrimpers Limited with fresh crabs to the United States, China, Vietnam and the Netherlands, among others.
Also included are manufacturers like the British American Tobacco Nigeria (BATN) that exports tobacco products to Ghana, Liberia, Cote d’Ivoire, Niger and Guinea, among other West African countries; De-united Foods Industries Limited exports Indomie, and Minimie noodles to destinations such as the United States, and neighbouring West African countries; Guinness Nigeria PLC shipped Malta Guinness to Ghana and Cameroon while Friesland Campina WAMCO exported full cream milk powder and evaporated Peak Milk to Sierra Leone and Ghana.
A lot of government’s diversification efforts have been focused on the agriculture and raw material sector. Interestingly, the sector is also benefiting from increasing patronage of private sector players, particularly manufacturing companies which have adopted backward integration models. Backward integration refers to the process in which a company purchases or internally produces segments of its supply chain. It helps organisations to guarantee access to key materials.
The backward integration policy, which was introduced in 2002, has resulted in a gradual and steady increase in installed capacity of local manufacturers in the country in recent years as they continue to increase the local sourcing of critical materials, which were largely sourced externally in the past. This has also created new capacity and jobs as the sourced inputs usually undergo some processing before final application.
In the solid mineral subsector, for example, the policy has helped harness Nigeria’s huge limestone deposit saving the country about N240 billion per year, according to economic experts. Cement producers that have relied heavily on the use of local content are Dangote Cement and Lafarge Africa PLC. Data from the National Bureau of Statistics show that local production capacity of cement products in the country has increased, thereby changing Nigeria’s status from a top 10 cement importer to a net exporter of cement.
Akinremi Sobowale, Centre for Promotion of Enterprise and Business Best Practices