24 June 2014, Lagos – The economic nerve centre of Africa shifted northward this year when Nigeria took South Africa’s long-held position as the country with the continent’s largest Gross Domestic Product (GDP).
While GDP neither reflects the wealth distribution nor accounts for the size of the population, it is a significant indication of Nigeria’s emerging economic power. If these growing resources are invested intelligently, the country can benefit and exceed the International Money Fund’s estimated GDP growth of seven per cent this year.
Oil is the lifeblood of Nigeria’s US$510 billion economy, which was rebased – or recalibrated to reflect a more accurate economic picture – in April of this year. Pumping more than 2.5 million barrels of oil a day makes the country the continent’s largest producer. Oil constitutes 80 per cent of revenue and 95 per cent of export earnings, according to statistics from Nigeria’s Finance Ministry.
This can be a blessing or a curse: it provides a large revenue stream in good times but also puts the country at the mercy of cyclical prices. A drop in oil prices has the potential of leaving a government with the choice between spending cuts impacting public infrastructure or a damaging deficit.
The good news is that oil can be used to reduce a country’s dependence on oil. By investing energy profits in projects in the downstream oil sector and manufacturing, it is possible to diversify sources of revenue and brake oil’s dominance of the economy.
Even more importantly, investing in strong and successful manufacturing industries stops Nigeria from exporting valuable resources overseas when they can be turned into something more precious at home while providing jobs for Nigerians at the same time – multiplying the benefit to the national economy.
Nigeria’s natural resources are not limited to minerals. By adopting a development model that capitalises on all of Nigeria’s assets – vast energy reserves, a large labour force, and a huge local customer base – the country can be self-sufficient and prosperous.
At the recent World Economic Forum – Africa, Nigeria’s Minister of Industry, Trade and Investment, Olusegun Aganga, said that Africa must embrace industry in order to manufacture products with greater value than the raw materials used to produce them. He said no country has ever moved out of poverty without making this important step.
– This Day