The Lagos Chambers of Commerce and Industry (LCCI), has once more warned against the danger of having the oil sector as the country’s economic mainstay. Thus, the Chamber stressed the need for the diversification of the economy.
The President, LCCI, Mr. Goodie Ibru, stated this in an address presented at the organisation’s Independence anniversary lecture held in Lagos.
He noted that the economy had undergone major transformation over the decades, citing the remarkable developments in the telecommunications, entertainment, services, financial and retail sectors.
“However, the economy is still too dependent on oil and gas; weak in domestic production and local addition. The diversification of the economy has become imperative and compelling. Disproportionate reliance on natural resources exposes the economy to tremendous risk of shocks and vulnerability,” Ibru warned.
The LCCI boss pointed out that studies had shown that countries that failed to diversify their economies and depended almost entirely on natural resources recorded less development and growth and were characterised by high incidence of poverty.
“This presents a paradox of poverty in the midst of plenty and underscores the complacency which natural resources endowments often breed in many developing countries,” he added.
Furthermore, Ibru argued that the heavy reliance on crude oil, a non-renewable resource and failure to diversify the economy, had turned out to be the country’s undoing.
He listed some of the challenges that had emerged as a result of the overdependence on crude oil to include regular conflict within the society; Dutch disease, revenue volatility and corruption.
Ibru explained: “Dutch disease is a situation where revenues from natural resources exports ultimately results in the neglect and damage of the productive sector of the economy. The manufacturing sector for instance currently accounts for less than five per cent of the country’s Gross Domestic Product (GDP).
“Public sector revenue is characterised by large volatility as a result of fluctuations in commodity prices. Again, our current experience underscores this position.”
Speaking on corruption, he said: “Natural resource economies are generally more corrupt because the political actors are often preoccupied with revenue sharing than wealth creation.
“I have reviewed the implementation of undue dependence on natural resources to underscore the need for economic diversification, development of our human capital and promotion of the culture of enterprise. This is the way to ensure an economic progress that is inclusive, equitable and sustainable,” he added.