COVID-19: No better time to diversify from oil – NECA

With volatility of global crude oil price and challenge of dwindling revenue, the Nigeria Employers Consultative Association (NECA) has said that there is no better time for the Nigerian government to take the issue of diversification of the non-oil economy seriously and remove subsidy on petroleum products.

Acting president of NECA, Mr. Taiwo Adeniyi, at a media briefing after the association’s governing council meeting, said, with the crashing crude oil prices due to COVID-19 and its imperative for sustained diversification of the economy, the nation cannot plan its future on the unpredictability of crude prices.

“Nigeria had solely depended on crude sale as a main source of foreign exchange, thus, neglecting the rich natural endowments the country is blessed with,” he said.

Adeniyi noted that the organised private sector (OPS) recognised the strict efforts to tap other sources of revenue like solid minerals and agriculture, but successive governments have only paid lip service to this important step.

He stated that NECA expected that more impetus would be given to the exploration and exploitation of many other fronts of revenue in the coming years.

He said, “As we shift focus from crude oil, there is no better time for government to complete the total deregulation of the downstream oil sector to save the nation trillions of naira that annually go down the drain in the name of fuel subsidy.

“We, therefore, urge the passage of a legislative bill that will address the gaps in the petroleum industry.”

The NECA acting president maintained that privatisation of the refineries would further free the economy of billions of naira spent on annual turn-around maintenance of a facility that could not run up to 30% capacity and generated less than 15% of its expected revenue annually.

He recalled that the Nigerian economy was battered by a crushing recession in 2016 due to the global crash in price of crude oil, adding that just like it affected the global economy, the COVID-19 pandemic changed the dynamics of global economies with serious consequences for Nigeria.

Adeniyi explained further that, prior to the scourge of COVID-19, the African Development Bank (AfDB), projected the country’s real GDP growth to about 2.9% in 2020 and 3.3% in 2021, anchoring it on the implementation of the full Economic Recovery and Growth Plan (2017-2020), which emphasizes economic diversification.

He observed that, with the nation’s indecisiveness in diversification away from the current predominantly oil-driven economy and the negative impact of coronavirus, these projections, to a large extent, have become a mirage.

“IMF in its last reviews projected the country’s GDP to contrast by 3.4% in 2020 and the Federal Ministry of Finance also projected a contraction of 8.9%,” he said.

He added, “The anticipated growth expected to be driven by increase in disposable income of households as a result of the new national minimum wage was also wiped off due to general economic conditions, which has remained unpredictable.

“As oil prices falter, national debt profile becoming more unmanageable and government revenue dwindles, the government has gone back to the drawing board, starting with the downward review of the national budget.”