FEATURE ARTICLE

Innocent A. OjefiaThursday, November 24, 2016
innojefia@hotmail.com


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ECONOMIC DIVERSIFICATION: LINKING VISION TO ACTION

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ABSTRACT

or several decades, the economy Nigerian has been hinged mainly on proceeds from the sale of crude oil. This has been at the expense of other sectors such as agriculture and solid minerals among others, which hitherto, were the mainstay of Nigeria's economy. All attempts in the past at diversify the economy, has always ended up in sloganeering with no concrete action to bring the idea to fruition.

This paper seeks to show that with vision, the agricultural sector, if given the right place, can contribute to the economy of the country and the sub-national entities. Specifically, the paper argues that emphasis on the development of the agricultural sector could help to increase revenue base and combat poverty in Nigeria via job creation and exports.

Most importantly, it could help alleviate some of the problems associated with "enclave" nature of the Nigerian economy that has always been vulnerable to fluctuations in global oil prices. To realize these potentials, the paper highlights the need for the federal and State governments to come up with concrete blueprint detailing an action plan for achieving economic diversification. It notes the need for government to create an enabling environment for the private sector to take the lead in this critical pursuit.

INTRODUCTION

Before the discovery of crude oil in 1956, Nigeria's economy was essentially agrarian, which produced such cash crops as oil palm, cocoa, rubber, timber, ground nut, among others, which were exported. According to Mary Uzowanne, this made Nigeria a major exporter of those crops. In the same manner, Nigeria had over 19 million heads of cattle, the largest in Africa. Today, Nigeria is no longer a major producer of groundnuts (peanuts), rubber and palm oil. Cocoa production is now mostly from obsolete varieties and over aged trees, with production hovering between 180,000 tons to 350,000 tons annually.

Though the discovery of crude oil has contributed and assisted Nigeria's economic prosperity and growth, nevertheless, the fall of oil prices since June 2014, after five years of windfall, has immensely affected the country's economy. This has become more critical with the United States' reduction of the quantity of barrels of oil they imported from the country. Consequently, Nigeria's economy and those of the subnational governments are presently unstable and in recession. This scenario is worsened by Nigeria's mono-economy and its fixation on petro-dollars.

There is, therefore, widespread clamour for the urgent need of the Federal and all State governments to look towards diversification of the economy to attain sustainable economic growth. Every segment of the Nigerian society more than ever before, now support the call for diversification of the Nigerian economy with the pressing need to decentralize the concentration on the mono product, crude oil.

This paper argues that diversification of the economy with more emphasis on agriculture will create alternative sources of revenue, enhance stable and viable economic growth in Nigeria.

ECONOMIC DIVERSIFICATION: CONCEPTUAL ISSUES

Most times, when the idea of economic diversification is floated, it is too effusive and does not convey the right meaning to even the educated. But the truth is that it is a simple idea, which is used all the time as a financial motivational concept, which every family unit is encouraged to attain. It is basically the idea of having multiple streams of income, it encourages the creation of different ways to increase cash flow. It recommends creating multiple revenue centers, as opposed to building a single income stream. The idea therefore is simple enough to understand: diversify your businesses and investments into various, non-correlated sources of residual income, so that you are never reliant or dependent on only one source.

Economic diversification was described by Samuelson as an act of investing in a variety of assets. Its benefit is that it reduces risk, especially in the time of recession, inflation, deflation, etc. Economic diversification strives to smoothen out unsystematic risk events in a portfolio so that the positive performance of some investments will neutralize the negative performance of others.

The effect of Nigeria's dependence on crude oil for its economic growth was examined by Muttaka, M, when he observed that Nigeria has wasted much of its opportunities to break away from underdevelopment despite its massive natural and human resources endowment due to heavy reliance on her huge crude oil resources, regrettably mismanaged, as the major source of revenue. He identified and discussed some key drivers of economic diversification such as investment, governance and regional dimensions of economic diversification, including human and natural resources. He maintained that of all the other drivers, good governance remains a prerequisite in building an enabling environment for such diversification.

On the other hand, Adebayo O.O, noted that the neglect of agriculture, the rural economy and the concentration of economic activity in the oil sector, was the cause of the current scarcity of raw materials and foodstuff. This has led to heavy imports of raw materials and foodstuff, thereby creating scarcity of foreign exchange and the current economic recession.

AN OVERVIEW OF THE AGRICULTURAL SECTOR

The Nigerian agricultural sector is predominantly dominated by resource-poor farmers who still practise the traditional or subsistence agriculture in which simplest traditional tools are used; output and productivity are low, capital investment is minimal, while land and labour constitute principal factors. Over the years, several efforts have been conceived to reverse this trend. Governments at various levels have through one programme or the order, gotten involved in agriculture.

Ogidefa, 2010 noted the involvement of successive governments in several programmes targeted at boosting agricultural production. He identified some of the programmes initiated and chiefly targeted at agriculture by successive governments to include the following:

  • National Accelerated Food Production Programme (NAFPP)

  • River-Basin Development Authority (RBDA)

  • Agricultural Development Programme (ADP)

  • Operation Feed the Nation

  • The Green Revolution

  • Agricultural Credit Guarantee Scheme (ACGS)

  • Directorate for Food, Road and Rural Infrastructure (DFFRI)

  • National Agricultural Insurance Corporation (NAIC)

  • National Agricultural Land Development Authority (NALDA)

Some other approaches have been made by Non-Governmental Organizations, cooperatives, individuals through private initiatives, corporate bodies and International Organizations.

An overview of the introduction, establishment, implementation and the objectives of majority of the above programmes, reveals that they were mainly targeted at boosting agricultural development to enhance economic growth and get the sector to contribute meaningfully to national economic development.

The level of public spending on agriculture across all levels of government in the country has remained low regardless of the indicator used. Agricultural spending as a share of total federal spending averaged 4.6 percent between 2008 and 2012 and has been trending downward precipitously. Budgetary allocation to agriculture compared with other key sectors is low despite the sector's role in the fight against poverty, hunger and unemployment, including the pursuit of economic development.

Aderibigbe et al, showed that large part of the federal budgetary allocation on crop value chains went to subsidies for inputs, including fertilizers, seedlings and agrochemicals. But findings of the benefit incidence analysis of public spending on fertilizer subsidy suggest that the target population of the programme did not benefit as intended. Allocative efficiency of overhead spending was generally poor, because of the tendency for overhead spending to be used to support the bureaucracy rather than operations and service delivery.

The picture of budgetary allocations and actual expenditures for the last decade show that though the government put up ambitious policies through financial commitment and consideration but the results do not indicate rising agricultural production. That clearly shows that most of the budgetary allocation went down the drain through corruption. It is therefore not surprising that these policies have not achieved the food self-sufficient, self-reliance and other agriculture-development goals.

Ariyo (1997) pointed out how agriculture has suffered from long years of neglect, mismanagement, inconsistent and poorly conceived government policies, lack of government meaningful incentive to farmers, lack of basic infrastructure and a lot of bureaucratic bottlenecks in executing policies and agricultural programmes among government agencies. Today every level of government is seeking out ways to diversify the economy with emphasis on agriculture to enhance revenue and bring about a stable and viable economic growth in Nigeria.

The graph below provides us with some information on the role agriculture played in Nigerian Gross Domestic Product before its neglect.


Sources: CIA Fact book (2013) and NPC Annual Report (2012) Culled from Maria Uzonwanne (2015)

The graph points out that from the wake of the oil boom in 1970, the decline in the agricultural sector commenced. Looking closely, the decline has perennially lingered on. It could be observed from the graph that the plight of agro-economy has recurrently depreciated as the histogram chart displayed a zigzag flow. The collapse of crude oil prices and the sorry shape of agriculture in Nigeria has informed the clarion call for the diversification of the economy.

CURRENT PUSH FOR ECONOMIC DIVERSIFICATION

From the chaotic situation of the international oil market since 2014, it has become obvious to those in authority, policy makers, private sector operators, labour unions and scholars that any modern government that runs a mono-economy is heading towards economic doom. Therefore, the only forward looking option to save Nigeria from her economic crisis now or in the future is the diversification of its economy. But the clarion call should not place diversification as a government responsibility. Other stake holders, especially the private sector must cooperate and collaborate in the process, with the government playing the role of a catalyst.

Willie Obiano, the Governor of Anambra State in Southeast Nigeria has become a leading voice in the on-going debate on economic diversification. He has consistently been speaking on the overriding need to diversify the nation's economy, stating that: "We have a lot to gain from redirecting our gaze to agriculture as one of the most attractive alternatives to our mono-economic status". He noted that sustainable agricultural development is a sure way the nation can be free from dependency on revenue from oil. Interestingly, that is exactly what the governor claims to be doing in Anambra State today. The evaluation of his claims about the success of economic diversification in Anambra State is not the focus of this paper.

In the same strain, Olusegun Obasanjo, Nigeria's former president who in all sincerity, should not speak on the subject, because of his abysmal failure to diversify the country's economy while in office on two separate occasions, has become an apostle and now pontificates on the subject. He recently stated that the present drop in the global prices of crude oil and the reality of the present economic situation in Nigeria, can lead the country to the reality that agriculture has the capacity to successfully drive the nation's economy. He noted: "In the past, the bane of agriculture in Nigeria was lack of continuity and consistency in government policy. May be the present situation in which we find ourselves and the low price of crude oil may be a blessing in disguise to wake us to the reality of agriculture as the mainstay of our economy, and as a renewable system of production compared with oil and gas, which are being depleted. Interesting postulations. The former president had good opportunities to redirect the nation's economy, which would have saved the country from going through its present economic travails.

At another forum, Prof. Osinbajo, Nigeria's Vice-President, has also spoken in the same direction. Consistent with the current clamour, the Vice President noted that President Buhari was ready to support agricultural plans "in any way necessary," assuring that the federal government will ensure conducive customs and immigration policies including tariffs to attain the vision. He also said: "There is no doubt in which direction we should go, agriculture is in the forefront and we do realise the urgency of the moment and the importance of getting things done quickly,".

While speaking to reporters in Nairobi Kenya during the sixth Tokyo International Conference on African Development (TICAD VI), President Mohammadu Buhari said: "We intend to dedicate more resources to agriculture in our 2017 budget, especially in the procurement of machinery for land clearing, fertilizers, pesticides and training of less-educated farmers, as farm extension instructors".

The President claimed that "We have already registered some success this year in several States, we identified some 13 States that will be self-sufficient in rice, wheat and grains before the end of 2018".

Most of the claims by President Buhari are vague and difficult to establish. It is uncertain what data the president is basing his allusion of success upon. The fact remains that despite all these statements, the federal government at this moment, does not have any blueprint outlining policy objectives towards economic diversification. The administration of President Buhari is simply muddling through. This has been corroborated by the recent call of the World Bank and the IMF on the federal government to come up with a clear cut economic blueprint for which the Group will offer support.

It is disconcerting that with barely thirty months to the end of the present administration, the whole talk about diversification of the Nigerian economy remains once again at the level of sloganeering.

Though the statements of intention from the President and his Vice are encouraging and hopeful, it is not lost on Nigerians that successive administration since 1982 have all vowed, albeit unsuccessfully, to diversify the nation's economy. The direction, which the federal government is going, gives the impression that we are threading the same old path of so much talk and little action, with almost half of the tenure gone.

ECONOMIC DIVERSIFICATION IN NIGERIA: A MIRAGE

The current pursuit and clamour for economic diversification is quite germane and necessary given the challenges of a mono-economy, especially with continuously falling price of crude oil at the international market.

However, over the years, glitches in oil prices has always forced the Nigerian leadership to think about " economic diversification" especially since the 1982 Economic Stabilization Act (Austerity measures) and "Diversification of the Economy". The introduction of the Economic Stabilization Act was an immediate reaction to dwindling oil earnings and major external sector imbalances.

This piece of legislation was the first concrete step taken by the Federal government of Nigeria to diversify the nation's economy but it was mere lip service and was soon forgotten when oil prices rose. Nigeria has never lacked "sound economic policies" or competent managers. Only that policies are never implemented or followed up, either because of corruption, politics or the will to follow through.

Essentially, the main reason why various policies have continued to fail in Nigeria is largely because of lack of discipline and commitment among the Nigerian ruling elites. Discipline is an important ingredient in the successful implementation of public policies and programmes. Charas Madu Tella, Shehu Mustapha and Paul, Y. Mbaya, have argued that: "apparently, today we are all witnesses to Nigeria's 'growth without development", because of indiscipline, corruption and lack of political will to address issues squarely by successive administrations. Discipline and commitment are key. Economic diversification is achievable if the leaders of government are sincere and have commitment. What government needs is the political will to do the needful in developing a heterogeneous economy.

The success of economic diversification is therefore hinged on attitude. When policy makers have the right attitude to do things correctly and sustainably, the process will succeed. But in Nigeria, majority of the ruling elite across the political divide are not disciplined and not committed to public interest. The underlying reason for most public policies and programmes is pecuniary gains. That makes corruption pervasive.

The pervasiveness of corruption in public institutions undermines the achievement of most public goals. Major government projects and programmes remain unsuccessful, because they are easily transformed into personal gains. To illustrate this, subsidies in the agricultural sector creates many inequities and distortions. Most important of all, are the effects of government's monopoly in procuring and distributing subsidized fertilizer. The inadequate quantities procured, combined with the high level of subsidy, leads to illicit rents being obtained in the distribution process.

As it stands today, it is uncertain whether the Nigerian government is committedly focused on achieving the diversification of the nation's economy. So far, the talk or "vision" to diversify is not matched with concrete actions. The country is once again back to status quo. With two years almost gone in a four-year tenure, discussions around diversification is still following the path of talk show and sloganeering. The interest of those in government remain centred on crude oil and the hope of a rise in its price. This is a major distraction and disincentive.

A PEEP AT ATTEMPT OF A SUB-NATIONAL ENTITY TOWARDS DIVERSIFICATION: THE DELTA STATE EXAMPLE

The awareness towards the diversification of the economy of a sub-national entity in Nigeria, was first raised by the immediate past governor of the of Delta State in the Niger Delta, Dr. Emmanuel Ewetan Uduaghan. This was even before the collapse of crude oil prices in 2014, with the idea of "Delta Beyond Oil" but it was mere sloganeering, rather than a conscious policy pursuit. The administration did not put in place any policy direction or feasible structure to actualize the vision of "Delta Beyond Oil".

With the continued fall in international oil prices and the attendant fall in revenue, his successor, Senator Ifeanyi Okowa, upon assumption of office on 29 May, 2015, promised to revolutionize the agricultural sector for economic diversification. He identified the dire need to diversify the State economy and reduce undue dependence on the proceeds from oil. He promised to build a flourishing agriculture and agro-business sector.

Prof. Eric Eboh, the Chief Job Creation Officer of the State government, outlined the agricultural agenda of the administration, which is anchored on the Production and Processing Support Programme - PPSP - an agricultural value chain support programme. The programme is designed to upscale the use of modern inputs technologies and increase output and productivity of crops, livestock and fisheries enterprises. The packages include inputs, technologies and materials necessary to make production and processing more efficient.

He emphasized that the production and processing support programme is about using target priority commodities across the State, particularly cassava, fishery, aquaculture, vegetables and oil palm. The logic is to support viable agricultural production and processing enterprises to increase outputs thereby employing additional labour and creating wealth.

The strategies adopted under the PPSP include:

  1. Provision of subsidized inputs and production technologies to crop, livestock and fisheries;

  2. Provision of subsidized agricultural processing and value addition equipment and facilities to agricultural cooperative societies, commodity associations and women;

  3. Facilitating private sector-owned and managed agribusiness service centres, including tractors and implements, processing mills, inputs and commodity marketing;

  4. Mobilizing and facilitating high impact PPP investments along the agricultural value chain for integration of agricultural production, processing and markets; and

  5. Facilitating agricultural cooperative societies, farmers, processing entities and operators along the agricultural value chain.

From the report of the Chief Job Creation Officer, the PPSP has made some achievements; these include the distribution of tractors to thirty-nine cooperative societies, melon shellers to one hundred and six cooperative societies, outboard engines and fishing gears to eighteen other cooperative societies as support packages.

In addition, a total of 815 farmers were given various support packages, such as improved variety of cassava cutting, fertilizer and cash components; fishery farmers were supported with fingerlings, feeds and cash each; poultry broiler farmers were supported with 200 day-old chicks, feeds and cash each; poultry layers' farmers were given 200 layers, feeds and cash each; piggery farmers were supported with 10 growers, feeds and cash each; tomato farmers were supported with seedlings, agrochemicals and cash.

To facilitate end to end intervention along the value chain, that is from production to marketing, the State government created the Agricultural Marketing Coordination Committee. The necessity for the Committee was summarized by the State governor, Senator Okowa: "As long as our farmers don't have ready markets for their produce and at the right price, they will remain in perpetual poverty, even if their yields triple or quadruple. In addition, they will not see the value in embracing government policies targeted at higher productivity in the face of low returns on investments. Worse still, farming will remain unattractive to would-be farmers and investors".

There is no doubt that the Delta State government under Senator Okowa has the foresight to comprehend the danger inherent in depending solely on crude oil for its revenue, and proactively outlined its policy on economic diversification.

The idea of facilitating private sector-owned and managed agribusiness service centres, which includes tractors and implements, processing mills, inputs and commodity marketing is also quite innovative but should be consistently followed with the encouragement of cooperative based production system. But these agribusiness service centres should be near the communities were their services are required.

An assessment and evaluation of the implementation and expected outcome of the programmes so far put in place cannot be satisfactorily done now, because the programme is less than a year.

Overall, it is doubtful, if emphasis on agriculture as outlined above can lead to diversification of the State's economy. The programmes as outlined may improve agricultural production, reduce youth unemployment and alleviate poverty but they will not necessarily lead to diversification of the State economy in the short or long run.

Most of the agricultural crops and fisheries mentioned in the road map, are mainly produced for domestic consumption and of little export value. The essence of diversification is for the State to have another stream of revenue. To achieve that, steps should be taken to revive cash crop production, particularly those in which the State has comparative advantage.

In other words, Delta State should look towards the revitalization of rubber, timber and oil palm among others. The underlining rational for emphasis on agriculture should be towards creating alternative stream of revenue. The entire value chain of cash crops production is empowering, because production generates economic activities, as it is mainly geared towards the export market.

There is also the need to add rice production to the portfolio of crops receiving attention in the programme of the State government. Rice has become a staple for majority of Deltans, while several communities in the State have capacity for commercial rice production.

THE WAY FORWARD

Conclusions

From the foregoing, it is certain that any government that runs a mono-economy in this century is on the path of continuous economic fluctuations and instability. A diversified economy will surely increase revenue base and GDP for sustainable development. Therefore, the only thing that will save Nigeria from her economic crunch now or in the future is the diversification of her economy. But government must have the political will to do the needful, by evolving a working blueprint in collaboration with the private sector.

Diversification through agriculture requires concrete policy guidelines and action plan. It requires timeframe for target implementation of agricultural operations. Implementation agency should be established, while input supply services and training of functioning extension services put in place. It is not easy for all this to happen within one implementation cycle of less than four years. And as is usual with government in Nigeria, projects and programmes are easily discarded by a new administration. The critical challenge, therefore, is sustainability of whatever programmes and policies that are put in place to achieve the vision.

Maria Uzonwanne in her 2015 paper put forward several articulate recommendations for the central and sub-national governments, to urgently create enabling environment that will favour diversification of the economy and de-emphasize mono-economic system, while paying more attention to heterogeneous economy.

A major step towards diversification is to encourage private sector participation, because it is on record that direct participation in agriculture by government has not achieved the desired results in Nigeria in the past. The primary strategy should therefore, be to make the private sector the key to the development of the agricultural sector. Genuine investors should be encouraged to invest in agriculture to fast track diversification, ensure wider revenue base and reduce food imports, while increasing the export of non-oil products.

There is need to act with more transparency in subsidizing agriculture. A public complain unit should be established both at the presidency (federal level) and governors' office (at the State level) to enable genuine farmers air their grievances and frustrations that spring from the corrupt tendencies of government officials.

Many farmers in Nigeria are still making use of crude and un-mechanized methods that favour low productivity. Therefore, it is necessary to introduce at all levels, mechanized system of agriculture to increase productivity and to reduce strenuous human labour.

The sub-national governments should identify those cash crops for which they have comparative advantage and direct investments to them. This is necessary, because the whole essence of economic diversification is to widen revenue base.

The various agricultural research institutes and schools of agriculture should be revitalized, farm settlements and river basin authorities reintroduced to encourage massive production of agricultural produce.

Politicizing the implementation of agricultural policies and programmes, especially where politicians hijack the system against genuine farmers should be checked.

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