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Time to diversify Nigeria’s economy

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MINISTER of Finance, Budget and National Planning, Zainab Ahmed disclosed that the lingering Covid-19 Pandemic on broad sectors of the economy, resulted in about 65% decline in projected net revenues from oil and gas sector in the first half of 2020 fiscal year. She dropped this hint at the Konrad Adenauer Sifting (KAS) capacity building for special advisors and technical assistants of the minister recently.

THE minister reiterated that these challenges are still being anticipated in the 3rd quarter, stressing that the impact of Covid-19 which necessitated the lockdown of the economy with businesses, household purchasing power, in short the whole of social life and governance was greatly affected. This has increased the levels of competitive pressure on improving or sustaining performance.

MOST oil producing nations like Nigeria are heavily reliant on crude oil revenue to balance their budgets. Although Brent crude, the global benchmark traded slightly above $40 per barrel (pbl) at the end of last month; that price is still below the fiscal breakeven of oil producing countries.

THE dependence of the Nigerian economy on the oil sector has made the Nigerian currency susceptible to price fluctuations, and this has continued to mount pressure on the naira; currency devaluation in a country that is heavily import-dependent, has the effect of increasing the cost of imported goods, including raw materials used in production; this will no doubt dip the household income which is less than N137,000 per annum (e.g N11,000 per month) for more than 40% of Nigerian households.

THIS health crisis which has quickly snowballed into a global economic crisis, has in the words of Vice President Prof. Yemi Osinbajo, brought to Nigeria a perfect storm for oil prices, with Russia and Saudi Arabia choosing  such a moment for a price war;  our huge informal economy, has crashed and government revenues fell too by over 40 percent. Million of Nigerians were already facing hardship before the pandemic, and with 50 t0 70 percent of the economy of Nigeria being informal, with the employees living on daily subsistence conditions, the effect has really been devastating.

WHILE no economy is spared from the fallout from Covid-19 outbreak, it is more critical for mono-product economies like Nigeria, as oil prices have dipped to historical lows and its support levels are obviously not in sight as it pared as low as US $20 pb.

THIS new reality has therefore, brought to limelight the need for the diversification of the nation’s economy to accommodate present realities. This has more than ever before become necessary because of the attendant consequences of the shocks in the oil sector with prices of commodities skyrocketing and getting out of the reach of the common man.

IN line with this therefore, the Federal Government needs to go back to the drawing board and come up with ways to help the poor and vulnerable in the society. Of utmost importance is the reintroduction of the price control board to serve as a check for the continual increase in the prices of commodities, supposedly due to the Covid-19.

IT is also not the right time to tinker with subsidies, as this will inflict a murderous blow on ordinary Nigerians. Even the earlier increased value added tax (VAT) by 50%, should either be imposed selected on luxury items or reviewed downward.

THIS is the time to carry out governance with the milk of human kindness, so as to ease the sufferings of many Nigerians, more so that no one knows when this pandemic will end.

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