What Oil Windfall Can Do For Nigeria
By Eze Umezuruike
 10th SEP 2006

As Nigeria continues, like several other African countries, to benefit from recent commodities boom, it is the application of the surplus to the long-term development of the economy that observers are doubtful of.

Nigeria’s economy is underpinned by a sector that relies heavily on oil earnings. Yet there are other industries capable of competing in the world market. Some see the oil earnings as a distraction for an economy which had about 50% of its GDP accounted for by agriculture until the 1960s.

Today, there is a grossly under-valued tier of the market which comprises agriculture and trade. There are sparsely distributed farms in the rural areas of the country with inadequate equipment, knowledge-base and resources. Transporting the cash crops to the urban markets where higher purchase value can be achieved is very difficult. The poor state of roads, railways and public transport presents unwanted obstacles to the farmers. An investment in better road and rail networks, will provide some of the stimulation the agricultural sector requires. Encouragement of research and development by the government will no doubt strengthen the sector.

The recent reforms in the banking sector, regarded widely as successful, have seen the emergence of fitter banks with the scale to operate more efficiently. Some of these banks are spreading internationally setting up branches in other West African countries. The operation of these banks internationally will correspond with the emergence of Nigerian businesses in the world market. It is still not thought that the business sector in Nigeria is thinking that much ahead and is therefore lacking in the knowledge of strict corporate governance issues which regulate commercial entities globally.

A booming movie industry, known as Nollywood, reported by National Film and Video Censors Board (NFVCB) as the second largest employer in Nigeria with an annual sale of $200 million plus exists. Yet the industry has potential for growth. The growing number of fans worldwide and in Nigeria should mean commercial success for actors, producers, other employees of the industry and investors. But it is the lack of market control that threatens the industry. It is known that implementation, internationally, of a secure distribution which tackles piracy is highly needed. This will in turn, provide reliable distribution data which has so far been lacking. This is considered by most industry observers as the most crucial change needed as it will ensure higher revenue whilst the data can be used by Nollywood entrepreneurs to get access to credit which is much needed for further development of the industry.

There are several other aspects of the economy with the potential to develop into world contenders. The right stimulation to create a multiplier effect is required in the economy. This will be enabled by the right infrastructure, policies, training, research and development, increased investment in education and healthcare amongst others. The resources required for this is enormous and any windfall will come in handy.

As instability in the oil producing areas of the world persists, developed countries become more urgent in the search for alternative energy sources. It is therefore not unlikely, that oil and gas will be come less relevant earlier than originally thought by many. Developing a multi-dimensional economy will reduce risk-exposure of Nigeria to uncertainties of the oil sector and perhaps affect the face of politics in the country as less businesses look to government patronage which derives its strength from oil.

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