Diversifying Nigeria’s Oil Dependent Economy

In a country where oil exports make up more than 70% of the government’s income, diversifying the economy is vital. The oil market has been volatile in recent times and Nigeria has felt the impact.

A young woman at a market stall which sells yams

According to the Nigerian Minister of Agriculture and Rural Development, Audu Agbeh, yams may be the answer. Nigeria currently produces 60% of the world’s yams. The issue is in exporting these yams. Nigeria is unable to get these yams to market and is therefore missing out on an economic opportunity. As a result, the country recently launched an aggressive yam export initiative.

Mainly privately sponsored, the initiative aims to improve infrastructure to allow the export of yams to international markets and provide jobs for young people in the country. The export infrastructure, from roads to ports, is so poor that around 30% of the country’s yams rot and lose all economic value. The country hopes to build the transport and storage structure necessary to make over $6B per year in the market.

One knock on this plan is the missing opportunity of processing the yams domestically instead of exporting them raw. Agbeh’s response to this is that the country lacks the infrastructure to even export them raw so clearly there is no funding or infrastructure to process them. Hopefully with expansion of electricity and stabilized interest rates this will become possible following the success of exporting the raw crops.

Cole and Chris

Source: http://www.bbc.com/news/world-africa-42197762

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11 Responses to Diversifying Nigeria’s Oil Dependent Economy

  1. ferrise20 says:

    Are there any other crops that Nigeria also hopes to emphasize in diversifying its economy? Does Nigeria aim to improve infrastructure enough to be able to process the yams domestically?

  2. lencionik19 says:

    It is a good idea for Nigeria to take advantage of other resources, so why stop with yams? If the goal is diversification of exports, the country cannot claim to have reached that goal by improving a single export. This is a good place to start though, and if Nigeria is successful in bringing in over $6 billion per year, it will have the funds to diversify further.

    • willinghamt19 says:

      Very good point Kevin.

      It seems that, whether it’s oil or yams, Nigeria is focused on exporting, but only exports a narrow group of goods. Could this put Nigeria at the whim of global trends?

      Also, as Kevin states, bringing in funds from a narrow group of exports is a valid path toward development, but only if those funds are used for diversification so that economies of scale may develop. For Nigeria’s sake, I hope that they are focusing on this. But so many oil-rich nations fail to diversify.

    • willinghamt19 says:

      Very good point Kevin.

      It seems that, whether it’s oil or yams, Nigeria is focused on exporting, but only exports a narrow group of goods. Could this put Nigeria at the whim of global trends?

      Also, as Kevin states, bringing in funds from a narrow group of exports is a valid path toward development, but only if those funds are used for diversification so that economies of scale may develop. For Nigeria’s sake, I hope that they are focusing on this. But so many oil-rich nations fail to diversify.

  3. the prof says:

    As per class discussion, the “resource curse” / Dutch disease impedes investing in agriculture – the foreign exchange rate may be more favorable at the moment, but the next time oil prices spike … (which may not occur for years to come).
     
    Processing domestically may make exports easier: raw yams are bulky and subject to rot and dirt. Canning them eliminates those issues.
     
    Is there a CGIAR center for yams? Someone please check and follow up with a comment!

  4. Mac Zheng says:

    This to me seems like a resource curse story. We have seen time and time again that smaller countries like Nigeria cannot compete on an international scale in competitive market prices. Diversifying is a necessity, even if comparative advantage may not be established.

  5. bryantc18 says:

    There is a CGIAR center for yams: http://www.rtb.cgiar.org/blog/2012/12/29/about-rtb/

    Actually it’s Roots, Tubers, and Bananas, but yams falls under this. This organization conducts research on ways to improve crop production, resilience, seed, and enhance resources for small farmers who harvest these crops. Developing more resilient crops could certainly help Nigeria take advantage of their yam endowment, or find ways to package them for export. At the very least, CGIAR working with small farmers can help improve existing networks and infrastructure to distribute the yams, a benefit to both farmers and consumers.

    • inglism18 says:

      Oops! Didn’t see you had already posted on the CGIAR program. Interestingly, you wrote on the umbrella organization, which includes under it more specific research centers such as the International Potato Center that I wrote about above.

      Before this class, I would have been surprised by the existence of such an institute. However, I now understand the importance of a cheap, nutrient-rich food product such as yams.

  6. nutiw18 says:

    I think it’d be interesting to look into the recent development of Nigeria’s car industry. They are experiencing troubles with development, but if they were to develop an industry that can supply much of developed Africa with vehicles, it could provide a solid avenue to diversification.

    • inglism18 says:

      I think this is in interesting point, but I do not see the car industry as a path to economic growth for Nigeria. Rather, I understand the car industry to be a byproduct of economic growth. As there becomes more of a market for cars in the country, foreign vehicle manufacturers will enter the market. But as it stands now, the barriers to entry are simply too high.

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