The Minister of Budget and National Planning, Senator Udoma Udo Udoma, CON, has said that Nigeria’s over reliance on oil and gas exports has held the economy hostage.
He made the statement while speaking at the 42 Annual Conference of the Institute of Chartered Secretaries and Administrators of Nigeria (ICSAN) on Thursday.
Speaking on the theme: ‘Exploring the diversification agenda towards the emergence of a resilient economy,’ Udoma said “It is most embarrassing for us in Nigeria that over 40 years later we are still lamenting the same condition. Now our dependence is no longer on crude palm oil exports, or groundnuts exports, or cocoa exports, but on the export of unrefined oil and gas.
“As you know large reserves of crude oil were discovered in the country and as our revenues from crude oil exports increased, we neglected agriculture and became more and more dependent on the oil and gas sector. Indeed, since the 1980’s the oil and gas sector has become the major source of government revenues.
“Even more worrying, the economy has become over reliant on oil and gas exports for our foreign exchange earnings. This over reliance has made the economy hostage to the fortunes of the oil and gas sector.”
He further narrated how President Muhammadu Buhari’s government met a “perfect storm” when he took the reins of leadership and how Nigeria slid into recession.
He said, “Prior to the coming into office of this Administration, as from the middle of 2014 oil prices began to drop dramatically. They declined from US$111 per barrel in June 2014 to about US$64 by the time President Muhammadu Buhari was sworn in at the end of May, 2015.
“Thereafter, it continued its precipitous drop, falling to below US$30 per barrel by January 2016. President Buhari therefore came in to meet a crisis of major proportions!
“In the absence of any fiscal buffers built up when the price was high, the economy was set on a downward spiral. The situation was compounded by a fall in oil production caused by the disruption of oil production in the Niger Delta region by a resurgence of militant activity. The resulting foreign exchange scarcity led to a suffocation of many businesses. This caused a general reduction of economic activity, forcing some employers, particularly in construction, to lay off staff.
“Consequently, tax collections and customs revenues dwindled, thereby constraining the ability of government to generate non-oil revenues. This, in turn, led to a loss of confidence in the economy by both foreign and local investors. In short, we came in as an Administration to meet a perfect storm!”
Speaking on how the President Buhari led government halted the recession, he said, “you may recall President Buhari had promised to do three things – fight corruption; restore security; and fix the economy. We were therefore determined to halt the economic decline.
“We accomplished this, first, by introducing an expansionary fiscal budget in 2016 to reflate the economy and stimulate economic activity. This expansionary budget was accompanied by the Strategic Implementation Plan (SIP). The SIP consisted of a series of short-term measures aimed at boosting economic activities so as to restore confidence.
“We followed this up, after extensive consultations with all segments of society, with the launching by the President of the Economic Recovery and Growth Plan (ERGP) 2017 – 2020. In developing the ERGP we consulted the States; we consulted the National Assembly; we consulted our development partners; we consulted members of academia and leaders of thought. And, most importantly we consulted the private sector, including small and medium scale enterprises.
“And when the ERGP was launched it received broad acceptance. It was designed to stop the economic decline and restore the economy to the path of sustained, inclusive and diversified growth driven mainly by the private sector.
“The aim of the ERGP is to change Nigeria from a nation with high import dependence to one that makes most of the products it consumes; from a nation that relies on a single commodity for survival to one that runs on multiple engines of growth; and from a nation of consumers to a nation of producers.
“As Mr. President has said, the ERGP is aimed at building a new Nigeria where “we grow what we eat, consume what we make and produce what we use”.
Speaking further, Udoma said the country was making good progress in efforts to revive and diversify the economy.
He said, “We are not where we want to be, but there is no doubt that we are making significant progress in resuscitating the economy. Not only is Nigeria out of recession, the country is beginning to grow again particularly in the non-oil sector. The non-oil sector of the economy grew by 2.05% by the second quarter of this year – representing the strongest growth in the sector since the fourth quarter of 2015. The Manufacturing sector, which had experienced consistent quarterly contraction since Q1 2015, except in Q4 2015, has started growing again. At 0.68% in the Q2 2018, this growth is still quite low, but it is movement in the right direction. The Textile sub-sector improved from 0.2% in Q2 2017 to 2.73% in Q2 2018, while Cement which contracted by -4.16% in Q2 2017 by Q2 of this year is now growing at 3.84%. Whilst still very far from our targets these are very positive movements.
“By way of further illustration of the direction of movement, the Purchasing Managers’ Indices (PMI) for manufacturing which had consistently stayed below the 50 points threshold between January 2016 and April 2017, has risen to 56.8 index points in the month of October 2018. This indicates expansion in the manufacturing sector for the 19th consecutive month. This expansion was driven by improvements in business activities, production and employment across most sectors.
“Other economic indices are also improving. Inflation rates have maintained their declining trend. From a peak of 18.7% in January 2017, inflation started trending down gradually to 11.14% in July 2018. However, it went up slightly to 11.28% in September 2018. The external reserves have nearly doubled since September 2016, from $23.81 billion to $41.79 billion by early November this year. The exchange rate gap has narrowed, and confidence in the economy is returning. Capital inflows have risen from $710 million in the first quarter of 2016 to $5.5 billion by the second quarter of this year. Supported by a gradual recovery in oil prices, as well as the level of oil production, our exports have grown by 59.5%, from N8, 527 billion in 2016 to N13, 598 billion in 2017, and our trade balance has grown from a deficit of N290.1 billion in 2016 to a surplus of N4, 035.5 billion in 2017. The good news is that this increase in exports includes a significant increase in non-oil exports.”