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Basic Reasons For The Diversification Of The Nigerian Economy In The 21st Century 

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Basic Reasons for the  Diversification Of The Nigerian Economy In The 21st Century

Basic Reasons For The Diversification of the Nigerian Economy In The 21st Century: Diversification is simply an attempt to reduce the risk exposure and expand the economic activities into the various sector of the economy by often through government directives.

Nigeria’s economy over the years has experienced a mono-economic system of productive activity, by this, depends absolutely on oil exploration and exportation to the impairment of other sectors.

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The most evident advantage of doing so would be to increase the resilience of an economy. Just as one does not “put all eggs into one basket”, national economies as a rule of thumb should not be heavily reliant on a particular sector to drive growth.

Nigeria experienced a similar fate during the coronavirus pandemic which worsens Nigeria’s external debt position. “ IMF proved Nigeria requested for emergency financial assistance of $3.4bn under rapid financial Instrument(RFI) to cover Financial emergencies created by the COVID-19 pandemic.

The federal government made the request due to the fall in oil revenue and to bridge the gap for the revenue needed for health infrastructure due to its high budget, the need for external debt become inevitable”.

Possible Areas of diversification, just to mention a few:

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Various advantages exist as it effect catering for multiple sectors in the economy

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Mining:

These mineral resources can be found in the northern part of the country, such as Adamawa State, Plateau state, Kano state, and another part of Nigeria, such as Cross Rivers and some other geographical locations in the country. This sector produces minerals that can be exported thus creating jobs and bringing in finances exportation.

Tourism:

there are so many tourist states in the country that the government has neglected, just to mention but few, Obudu Plateau, Olumo rock, Okomo forest Reserve, etc. which are a source of revenue  This activity allows foreign investors to see the host country and tourists inject cash into the economy

Agriculture:

Nigeria’s source of revenue was agriculture before the advent of oil exploration. Agriculture has been neglected and contributes less to the economy while oil takes over 80% of the country’s revenue.

This activity ensures that the local population is employed. Food security is addressed and some products may be exported thus further ensuring a source of foreign revenue

THE IMPORTANT OF ECONOMIC DIVERSIFICATION

A notable percentage of the country leaves in abject poverty due to cyclical unemployment, low productivity. this prompts reasons for the possible ways of diversifying the country’s source of output by reviewing the importance of diversification.

Create Job Opportunity:

Unemployment in Nigeria is on the increase which has due to a mono-economic system operated in the country,  Expanding into other sectors will open up a variety of new jobs as the demand increases. helping to alleviate structural unemployment.

Particularly when the economy is trade-oriented, beckons foreign capital investment to flow into the country, energizing businesses and governments to ramp up growth by spending on fixed capital, infrastructure, and so on.

Improved standard of living:

Economic diversification helps improve the economic well-being of citizens, by diversification the economy is open for other sectors to expand, thereby creating opportunities for employment. Especially when one transitions from primary to secondary to tertiary industries in the process of diversification. By this means there is an even distribution of labor and the opportunity of sustenance is made available to improve the standard of living.

Improved Infrastructure:

Diversification of the economy creates an avenue for even development in the country and result in highly skilled individuals in the computer, international banking, and other service-based sectors are employed which generate higher income and further economic growth.

The growth in several sectors of the economy which spread across every part of the country speeds up the economic development of the country as resources consistently distributed and sourced from another sector of the country.

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Risk Reduction:

The emergency situation of Covid 19 faced by Nigeria in 2020. Which lure her into borrowing a huge sum of money to offset the national budget would have exculpated if the economy were diversified. For example, China is a diversified economy. It is rich in natural resources and it has strong industrial capacities and flourishing online services. This contributes to making china a robust and successful country such it could combat the uncertain situation of the Corona Pandemic.

One of the functions of diversification in relation to risk reduction is flexibility and not being fixed in its operation. A sector’s economic health is not tied to a single industry or market sector. This means that should the price drop or the price of agricultural products dropped the region’s economy still remains insulated.

Balanced Economy:

A balanced portfolio is one that properly distributes risk, and not invests in a narrow or mono-economy with an imbalanced economic system, having a balanced economy leverage the outcome of uncertainty as no one really knows what the future holds.

The economic situation of Nigeria can only be sustainable if diversification embrace to balance the present situation. With this, the gross domestic product of the country will be ascertained.

Diversification is a healthy system of the economy as it contains a mixture of small, medium, large businesses, anchor industries such as oil, agriculture, etc. each tie supports each other and provides the services and goods others depend on.

 

Conclusion/recommendation

Diversification while moving up the value chain resulting in higher income and further economic growths and further economic transition into high-value exports, is achievable as a country expands in its productive sector,

Official data has indicated that Nigeria has experienced an economic recession two times in four years as oil prices dropped within the COVID 19 pandemic. The present increase in unemployment and a drop in output has unveiled the possibility of great economic depression in the country.

Diversification is a remedy for economic stability and sustainability, which enables a country not to depend on the sector as a means of sustenance.

Economic diversification expands the country into other sectors, which  will open up a variety of new jobs as the demand increases, this help to elevate structural unemployment

Nigeria has been observed that she want to diversify her economy from oil dependency to the agricultural sector, this is due to the original fall in the price of oil Organization of Oil Exporting Company to regulate the prices.

Diversification is a remedy for economic stability and sustainability, which enables a country not to depend on the sector as a means of sustenance.

 

 

 

 

 

 

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