Nigeria’s economic future: Moving beyond oil dependency

Nigeria is standing at the crossroads of a critical economic transformation. For decades, oil has been the backbone of the nation’s revenue, providing more than 90 percent of export income since its discovery in 1956.

Yet, the economic tides are turning, and recent data suggest that Nigeria is gradually moving beyond its oil dependence. This pivot toward non-oil sectors presents opportunities that must be seized, but it also demands strategic foresight, reform, and sustained investment.

According to the Nigerian Export Promotion Council (NEPC), non-oil exports increased by 6.26 percent in the first half of 2024, generating $2.7 billion in revenue. This growth, driven by agriculture, solid minerals, and manufactured goods, marks a positive shift. Yet, optimism alone won’t carry Nigeria through the economic challenges ahead. To truly reduce its dependency on oil, the nation must address key hurdles—ranging from infrastructural gaps to regulatory bottlenecks—that continue to impede growth in these sectors.

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Agriculture: Leading the shift

At the forefront of this shift is Nigeria’s agricultural sector, which recorded a 123 percent surge in exports in Q1 2024, with key products like sesame seeds and cocoa beans leading the way. The sector contributed ₦1.04 trillion to exports, a 270 percent increase from the previous year. Agriculture has long been Nigeria’s hidden strength, but its potential has been hampered by poor infrastructure and a lack of investment. The impressive growth in 2024 suggests that with the right policies in place, Nigeria can build on its natural resources to drive sustained economic growth.

“To truly reduce its dependency on oil, the nation must address key hurdles—ranging from infrastructural gaps to regulatory bottlenecks—that continue to impede growth in these sectors.”

However, significant challenges remain. Post-harvest losses, driven by inadequate storage facilities and poor road networks, still cost the nation a staggering ₦3.5 trillion annually. These losses, exceeding the government’s agricultural budget over the past five years, highlight the need for targeted investments in rural infrastructure, transportation, and modern storage technologies.

Solid Minerals: A burgeoning sector

The solid minerals sector is also gaining traction. In Q1 2024, exports in this sector increased by 76.77 percent from the previous quarter, signalling renewed interest from both local and foreign investors. Nigeria’s deposits of limestone, tin, and gold are vast, yet this sector remains underdeveloped due to years of neglect and regulatory inefficiencies.

Chile’s mining industry offers valuable lessons. With strategic investments and government reforms, Chile has successfully diversified its economy through mining, contributing significantly to its GDP. Nigeria must take similar steps—simplifying regulations, encouraging private investment, and addressing illegal mining activities—if it hopes to replicate this success.

Manufacturing: Building local capacity

Another key area is manufacturing, which saw total trade hit ₦6 trillion in Q1 2024. Exporting goods such as aluminium alloys and refined lead, Nigeria’s manufacturing sector is slowly making inroads into the global market. The African Continental Free Trade Agreement (AfCFTA) also offers manufacturers greater access to regional markets, providing a much-needed boost.

Yet, obstacles persist. High production costs, unreliable electricity, and cheap imported alternatives undermine the sector’s competitiveness. While the government has introduced initiatives like Special Economic Zones (SEZs) and the Nigerian Industrial Revolution Plan (NIRP), progress will be limited without addressing the fundamental issues of infrastructure and energy supply. The potential is there, but so too is the risk of stagnation.

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The road ahead

Nigeria’s economic diversification is more than just a policy goal; it is a necessity. The growth in non-oil exports in Q2 2024 presents a glimpse of a diversified economic future, but the road ahead is fraught with challenges. Infrastructure deficits, security concerns, and a cumbersome regulatory environment all threaten to slow progress.

The government must act swiftly to overcome these hurdles. Prioritising infrastructure investment, improving security, and creating a business-friendly environment will be key to sustaining this momentum. Moreover, learning from other countries’ success stories—whether from Chile’s mining sector or Indonesia’s non-oil export strategy—will provide Nigeria with valuable blueprints for success.

Nigeria stands at the cusp of a new economic chapter, one where oil is no longer the sole driver of growth. By capitalising on the progress made in agriculture, solid minerals, and manufacturing, the country can build a more resilient, inclusive economy. The stakes are high, but so too are the rewards.