Nigeria’s dependence on oil is waning, but it is not down to deliberate government policies, otherwise it would have boosted confidence in the management of the economy.
At the current run rate, the oil sector will contribute 8.05 percent to the gross domestic product (GDP) in 2021, marking the lowest contribution in six years, according to data by the National Bureau of Statistics (NBS), while the non-oil sector’s share of GDP will inversely rise to the highest in six years at 91.95 percent.
Nigeria, dogged by its heavy dependence on its oil sector, has been attempting for decades to reduce the costly reliance on a sector whose performance has contributed to its two economic recessions in five years.
Every government since 1999 has promised to reduce the economy’s reliance on oil but with little success.
That reliance has however somewhat reduced and the economy is growing in spite of the oil sector’s prolonged downturn, even though most of the growth this year is due to the low base of the COVID-19 ravaged 2020.
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The oil sector has contracted for six straight quarters, the most recent being by 10.73 percent in the third quarter of 2021. Yet in that time, Nigeria’s economy has exited recession, grown by the most since 2014 and expanded for four consecutive quarters.
That is all thanks to a resilient non-oil sector, which is being powered recently by a resurgent trade sector and the ever-thriving information and communications technology (ICT) sector.
“The diminishing dependence on oil is instead due to the rise of other sectors particularly the information and communications technology sector whose contribution to GDP has more than doubled to around 12 percent,” said Tajudeen Ibrahim, head of research at Chapel Hill Denham.
“The sector has thrived this year in spite of government policy that has tried to stifle the sector’s growth,” Ibrahim said.
The ICT sector grew by an impressive 9.6 percent in the third quarter of 2021, making it one of the best performing sectors.
The trade sector has also helped ensure the economy does not overly feel the impact of a shrinking oil sector. The sector grew 11.90 percent in the third quarter of 2021; again, this is in spite of harsh government policy that has stifled trade.
It shows what is possible if the government would support these sectors to achieve more robust growth, according to Ibrahim.
Oil woes
The negative oil sector outturn in the third quarter can be attributed to weaker domestic oil production, which continues to be hampered by the slowdown in drilling activities and pipeline sabotages.
