“The logic goes like this; if oil share of Nigeria’s economy is 15% – why blaming oil for the recession?”
Nigeria is officially in recession and when you ask the country’s policy makers: What is the cause of the recession? You may likely know the answer they will say even before I called them out on it. Without hesitation, they are quick to blame the falling oil price and its sequential problems. To many Nigerians who are busy working hard to feed their families on this trying time, the answer comes without further inquiry.
Unlike the average Nigerian, financial observers, money managers and economists will not be quick to imbibe the given answer. The logic goes like this; if oil share of Nigeria’s economy is 15% – why blaming oil for the recession? What happened to the remaining 85% of the GDP that makeup the largest pie of the economy? This is time to put our thinking cap and reason together.
Let us start with fundamental reality. Nigeria derived almost 75-80 percent of her foreign exchange (US Dollars) from the export of crude oil. Nigerian economy without diversification implies that most of consumer goods are imported from abroad. To sustain importation, Nigeria needs reasonable amount of foreign exchange to these foreign products. In addition, the few functioning and fairly viable manufacturing industries also need foreign exchange to pay for raw materials and industrial machinery parts that are not available in Nigeria.
Realistically, the falling oil price will affect the status quo and therefore requires some creative adjustments and reset of priorities. It may involve curtailing unnecessary importation of commodities that are locally made in Nigeria. Some of these materials that are made in Nigeria may not be high quality compare to the imported ones. But nevertheless they can be ‘managed’ while foreign exchanges are conserved for the local manufacturers’ raw materials.
Therefore with planning and prudent management, the falling oil price effect on the economy should be minimal. This is not what is happening in Nigeria at the moment because the leaking holes have not been completely plugged.
Oil exploration and export accounts for 15 percent of the entire Nigerian economy and it will not be allow to be spearheading determinant for the pace of economic growth especially in the era of declining oil price. Nigeria’s economy is large and elaborate – which include Transportation, Agriculture, Mining, Entertainment and others that make up the remaining 85 percent of the economy. And these sectors must be expanded to give a soft landing to the effects of the dwindling revenues from oil.
To wholly attribute the economic decline or rather the crushing recession to fall in oil price does not make a logical or economic sense. The problem of the economy dislocations which goes way back to 1970s is inability of the ruling elites and policy makers to formulate a coherent and comprehensive economic blue print. A targeted and grounded policy fabricated with steady hands is required for sound growth and enhancement of the macroeconomic stability of the country.