Why Nigeria urgently needs to grow non-oil exports

phys.org | 9/11/2018 | Staff
Frost123 (Posted by) Level 3
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The economy of Nigeria has had to navigate a major crisis that started with the collapse of oil prices in 2014 and was worsened by the ongoing restiveness in the oil rich Niger-Delta region.

The crisis of the past four years reconfirms the vulnerability of the Nigerian economy to oil. It underscores the need for Nigeria to look outward, diversifying its export base away from the volatile commodity if the country is to win its battles against poverty and inequality.

Oil - Accounts - % - Merchandise - Exports

Oil accounts for 90% or more of Nigerian merchandise exports. This heavy dependence of the Nigerian economy on oil as the dominant source of foreign exchange is widely appreciated. But the mechanisms through which oil price changes affect the economy and the measures (or lack of them) available to the Nigerian authorities to counter oil price declines are less commonly understood.

We traced the impact of the recent price declines and considered what policy options were available to the Nigerian authorities to come up with counter measures.

Vulnerability - Economy - Oil - Price - Shocks

The vulnerability of the economy to oil price shocks has been known for years, and the case for diversification has been made many times. But, as our paper points out, development of a genuine non-oil export base is, in all likelihood, no longer a policy choice, it is a growth imperative. To grow and develop over the long term, Nigeria needs very rapid growth in non-oil exports.

From 1998 to 2014, an oil price boom unfolded that saw the price of Nigeria's dominant export increase in nominal dollar terms by a factor of about ten – from about USD$10 per barrel to more than USD$100. While the boom period was characterised by some volatility, most notably in 2008, on average the oil price rose continuously for more than 15 years.

Words - Nigeria - USD

In other words, in 1998, Nigeria got about USD$10...
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