The International Monetary Fund (IMF) has explained why economic diversification is important to Nigeria and critical for its economic recovery.
This is as it says that Nigeria’s export structure has not fundamentally changed over the decades, with crude oil still accounting for about 90% of the country’s export earnings as they did in the 1970s.
This disclosure is contained as part of the IMF’s statement in its latest economic assessment of Nigeria, Africa’s largest economy, where it says that successful economic diversification requires trade openness and competitive discipline.
The international multilateral organization stated that the limited gains from inward-oriented policies in terms of creating jobs and improving living standards suggest that Nigeria needs to have a change of strategy. It pointed out that in order to accommodate a growing number of young people entering the labour market, Nigeria will need to create at least 5 million new jobs each year over the next decade.
The IMF said based on the experience of other countries, embracing more open trade and competition policies would help diversify the economy and reinvigorate growth, particularly as the African Continental Free Trade Area takes effect.
It also pointed out that the experience of Malaysia, Indonesia, and to some extent India has shown that a shift toward export-oriented industrialization can boost GDP. The IMF states that the real GDP growth per capita of Nigeria has lagged behind compared to Asian economies that have adopted export-oriented policies.
Why this matters
- As a matter of urgency and priority, the diversification of Nigeria’s economy is the only viable way to survive the current environment of global economic uncertainty especially with the volatility of oil price.
- The country’s over-dependence on oil for about 90% of its export earnings appears unsustainable as no country can depend on one economic sector for its development.
- This is even more important now as the global economy is also undergoing some structural changes that will affect demand for Nigeria’s oil, leaving oil-dependent countries more vulnerable.
What you should know: Recently, the International Monetary Fund (IMF) advised the Federal Government on how it can raise more revenues to ensure a more sustainable fiscal position. The Brettonwood organization also stated that Nigeria has one of the lowest revenue levels as a share of GDP globally.