US shutdown, slow Euro-zone recovery create opportunities for Nigeria

The United States shutdown and slow Euro zone recovery have created opportunities for diversification of Nigeria’s economy through trade expansion and cooperation with emerging and developed economies, particularly of Asia.

The United States of America had last week begun a shutdown of the world’s largest economy after the two houses of Congress failed to agree on a new budget. There are fears that the impact of the shutdown on Nigeria would largely come from the price of oil.

‘’As far as Nigeria is concerned, clearly, we would have to look into how it is going to affect the price of oil, for instance, because Nigeria is an oil consuming and exporting country,’’ said Christine Legarde, the International Monetary Fund(IMF) managing director in Washington D.C last week.

On the other hand, Euro zone has witnessed slow economic recovery, with the European Central Bank president insisting that the zone remains “weak, fragile, and uneven.”

Analysts, therefore, see great opportunities for Nigeria to strengthen ties with the Four Asian Tigers of Hong Kong, Singapore, South Korea and Taiwan; Four Asian Cub of Indonesia, Malaysia, Philippines and Thailand; China and other emerging markets.

“Not only do they need Nigeria’s oil to meet their ever increasing demand for energy, they also need Nigeria’s raw material as production inputs for their burgeoning manufacturing sector,’’ Gerald Iheoma, economist and

Research Associate at African Heritage Institution, who spoke to BusinessDay.

Experts say the agricultural sector is expected to lead the way in the new trend. This should also be followed by the manufacturing sector.

“The Middle East has a good market for Nigeria’s non-oil exports. Apart from Europe, we should look into the market there for agricultural produce like cashew, cocoa, cotton and others. Moreover, we need to create friendly environment for the manufacturing sector to tap into this trend. Power, tax holidays, concessions and interest rate are issues that must be properly examined by the authorities,’’ said Ifeanyi Ugwu, an industrial analyst.

The need for the continuous diversification of the Nigerian economy is not debatable, as oil exports account for about 95 percent of foreign exchange reserves although non oil exports have been growing, albeit off a low base.

Non-oil export earnings rose by 281.9 percent to $908.15 million in the second quarter.

The development in non-oil sector reflected, largely, the 952.4 percent($614.6 million) rise in receipts from export of manufactured products (including glass and glass products and plastics) and the 68.6 percent increase in receipts from exports of industrial sector (particularly

chemical), the Economic Report in the month of July by the Central Bank of Nigeria (CBN) indicated.

A breakdown of receipts showed that proceeds of manufactured, industrial, agriculture, minerals and food products sub-sectors stood at $614.6 million, $222.3 million, $47.7 million, $13.3 million and $10.3 million, respectively.

Nigeria is a resource-rich country, with about 34 different minerals, including gold, iron ore, coal and limestone. It also has about 70 million hectares of farmland, according to 2013 African Economic Outlook.

Source. BusinessWeek