Economic diversification in focus at Nigeria-Belgium-Luxembourg Business Forum

As the Nigeria-Belgium-Luxembourg Business Forum kicks off in Brussels this September, the spotlight is once again on Nigeria's ongoing struggle and efforts to diversify its economy. Despite significant declines in production, the country remains heavily dependent on oil exports.

Over the years, Nigeria has consistently grappled with the challenge of transforming its economy from one dominated by oil to a more diversified model that leverages its abundant natural resources and human capital. It has been prey to the so-called resource curse: though oil contributes only about 10 per cent to the country’s GDP, it still makes up about 80 per cent of Nigeria’s export earnings and accounts for half of the total government budget. 

The situation is not sustainable. Oil production has been steadily declining over the past decade (nearly forty per cent since 2012), mostly as a result of onshore disruptions. Theft and vandalism are plaguing oil production companies: over 400.000 barrels are being stolen every day. It is estimated that 20 per cent of Nigeria’s entire oil capacity is being stolen every year. Other internal challenges, from environmental degradation to infrastructural decay, only further underscore the need for diversification. 

“The oil industry has been very powerful for many years. It absorbed all the focus and brain power, which has resulted in the underdevelopment of other sectors. Nigeria’s ports, for example, are seriously deficient compared to its smaller neighbouring countries,” says Pieter Leenknegt, the Belgian Ambassador to Nigeria. 

In the agricultural sector, domestic food crop production has not kept pace with population growth, resulting in rising food imports and declining national food self-sufficiency. “A French-Nigerian factory in Kano, in the north of the country, for example, imports sixty per cent of the ingredients used for basic foods, such as palm oil, peanuts and milk powder.”

New regime, new hopes

Bola Tinubu, a former governor of Lagos who became Nigeria’s president in May last year, is trying to turn the ship around. During his first year in office, he attempted to revitalise the economy by subsidy removals and currency devaluation. “The economy has been in desperate need of reform for decades. It has been unbalanced because it was built on the flawed foundations and over-reliance on revenues from the exploitation of oil,” he said on 12 June, when Nigeria celebrated Democracy Day.

The economic reset, a move towards macroeconomic stability and a lean government, is meant to draw in new investors. The logic is that investors and multinational companies will be more willing to pump capital into the country when they know the government is not throwing money out of the windows. 

As part of the economic sanitation, Tinubu is seeking to shore up Nigeria’s image on the international stage. Since assuming office, the president has embarked on more than 20 overseas trips, from the United States and the Netherlands to India and China. These foreign trips have not been without criticism but the goal is clear: the president is not picky in finding new investors. "On every foreign trip I have embarked on, my message to investors and other business people has been the same. Nigeria is ready and open for business," Tinubu said in his New Year’s speech. 

Opportunities

Nigeria still has a long way to go but president Tinubu’s leadership marks a pivotal shift in its economic strategy. His shock therapy includes creating a more conducive environment for investment in sectors like agriculture, manufacturing, mining, and the tech industry. 

Agriculture, for instance, presents significant opportunities for investment. With over 70 million hectares of arable land, Nigeria can become a major regional, if not global player in food production. Tinubu’s government seeks to attract investments that would modernise farming techniques, reduce the country’s reliance on food and therefore make the sector more market-oriented. ​ 

Similarly, the manufacturing sector, which has been stunted by poor infrastructure and energy supply, is being targeted for revitalisation. The president seeks to rethink the country’s reliance on imports and aims to promote the production of capital goods for competitive export by expanding the production base and prioritising local content development.

To learn more about how Belgium plays a crucial role in supporting Nigeria’s diversification efforts and the significance of the Nigeria-Belgium-Luxembourg Business Forum, read part two.

^{An employee at the Afam VI power plant, owned by the Shell Petroleum Development Company of Nigeria (SPDC), uses a walkie-talkie © AFP PHOTO / FLORIAN PLAUCHEUR Florian PLAUCHEUR / AFP}