Data on the number of confirmed cases of coronavirus coded COVID-19 in Nigeria is getting scarier as the days morph into weeks. It should be recalled that the first index case in Nigeria occurred on February 27th, 2020. As at the March 30th 2020, when the government announced the first cessation of movement, the number of confirmed cases stood at 131 infected individuals, less than five weeks down the line, the number of confirmed cases has risen unprecedently to 2,558 confirmed cases, according to data extracted from the Nigeria Centre for Disease Control (NCDC).
With the ease of movement in Lagos cum the frightening increase in number, it would not be out of place to predict an alarming increase in the number of infected individuals, going forward. The Nigerian government must begin to devise a workable plan to weather the impact this will further have on the economy at large considering the resultant impact of this crisis on the Nigerian economy and its impact on the prices of crude oil.
Nigeria must take hold of the opportunity of the crisis to undertake long-awaited reforms of the economy. Someone who is well acquainted with the Nigerian economy can attest to the fact that the issues of industrialisation and economic diversification are two peas in a pod.
Source: NCDC, BRIU
Why economic diversification matters
Economic diversification is the process of shifting an economy away from a single income source toward multiple sources from a growing range of sectors and markets. Traditionally, it has been applied as a strategy to encourage positive economic growth and development. In the context of climate change adaptation, it takes on new relevance as a strategy to diversify away from vulnerable products, markets, and jobs toward income sources that are low-emission and more climate-resilient.
Economic diversification is a key element of economic development in which a country moves to a more diverse production and trade structure. A lack of economic diversification is often associated with increased vulnerability to external shocks that can undermine prospects for longer-term economic growth.
The world’s poorest countries, many of which are often small or geographically remote, landlocked and/or heavily dependent on primary agriculture or minerals, tend to have the most concentrated economic structures. This creates challenges in terms of exposure to sector-specific shocks, such as weather-related events in agriculture or sudden price shocks for minerals.
In 2016, the Nigerian Economic Society (NES) tagged its conference along the line of economic diversification and industrialisation in a bid to alter the government’s focus. Economists and policymakers alike have both called for the government to shift its focus from crude oil and diversify the Nigerian economy. However, evidence from BusinessDay Research & Intelligence Unit (BRIU) analysis shows that not much has changed in the last 10 years in terms of economic diversification.
Amongst the uncertainties thrown up by the coronavirus pandemic, Nigeria government must encourage the diversification of the Nigerian economy. It is the only viable way to sail through the current environment of global economic uncertainty with the volatility of oil prices.
It will also be recalled again that after more than 58 years of independence, the government has introduced several policies thrust geared towards industrialising and diversification the economy. Some of these policies formed the focal point of Nigeria’s National Development Plans. Among these policies include the import Substitution Industrialisation (ISI) and Export Promotion Industrialisation (EPI) Strategy.
ISI is a theory of economics typically adhered to by developing countries or emerging-market nations that seek to decrease their dependence on developed countries. The theory targets the protection and incubation of newly formed domestic industries to fully develop sectors so that the goods produced are competitive with imported goods. Under ISI theory, this process makes local economies, and their nations, self-sufficient.
The primary goal of the implemented substitution industrialization theory is to protect, strengthen and grow local industries using a variety of tactics, including tariffs, import quotas, and subsidized government loans. Countries implementing this theory attempt to shore up production channels for each stage of a product’s development. Under these arrangements, Nigeria chose to promote domestic production of manufactured goods that were hitherto imported.
Why did ISI fail?
Among the reasons for the failure of this policy is that the government did not show enough political will to support the industries with access to funds. And again, rather than building indigenous manufacturing industries that produced made in Nigeria products more funds were invested into the creation of assembling plants.
Efficient and adequate provisions of infrastructure such as transportation, water supply, electricity supply and telecommunications are what give impetus to industrialisation. The quantity and quality of available infrastructure affect production cost, thereby impacting the profitability of businesses. Unfortunately, the above-mentioned variables remain a major constrain in a bid to industrialise the nation.
“One of the several challenges that have militated against Nigeria’s development efforts has been the lack of capacity to build a development-oriented nation-state that serves the interest of its people. Indeed, such capacity cannot be built without political will. There has to be a total shift from the immense power the political class currently wields over Nigeria’s national wealth for their aggrandizements, to a focus on achieving broad-based industrialization for the benefit of the entire nation”. Precious Kassey Garba, former Chief Economic Adviser to President noted in one of his speeches.
