By Chigaemezu Oparaugo and Emmanuel Ogbonnaya


As commodity prices plummeted globally, devastating Africa’s economy which has been touted as the next frontier of global capitalism and expansion, policy makers have taken up the din chant of economic diversification as a rallying cry to surmount the headwinds and resuscitate a continental economy in shock.

Nigeria as Africa’s number one economy and reference point for the continent’s growth has been a major casualty of dwindling oil prices, which represents over 80 per cent of its foreign exchange earnings.

Recent inability of the government to meet its 2016 budget revenue estimates due to oil output levels dropping significantly, has resulted in a depletion of its foreign reserves, weakened currency, unprecedented economic recession, job losses and rising inflation.

As Nigeria and other African governments intensely preach ‘diversification’ as a potent strategy to restore their economies to prosperous paths, a closer scrutiny shows that their strategies are not SMART (specific, measureable, attainable, relevant and time-bound), rather they are rudderless and obviously hatched in a hurry with no real intention of it being carried out to the letter.

What is obvious to the discerning mind is that policy makers still harbour a faint hope that commodity prices will sooner than later revert to prior levels and all be well again.

However, instead of this pointless expectation that the economy will rejuvenate as soon as commodity prices bounce back, akin to a drowning man clutching on a straw, policy makers should quickly evaluate the needs of their economies and devise short, medium and long-term action plans to effectively stimulate productivity.

Identifying Industrial Catalysts

Indeed while diversification will create more jobs and value-added exports from agriculture and manufacturing, it cannot be achieved overnight. A great measure of discipline must be established to prioritise the allocation of limited resources to the most critical primers, in order to achieve the needed spark that will accelerate production and decrease imports consumption.

For example, the renewed intention of the Nigerian National Petroleum Corporation (NNPC) to explore for oil in Nigeria’s Lake Chad basin using scarce state resources should be discouraged for now, to avoid a wasteful venture on a commodity that has globally lost significant price value.

Rather, in the spirit of really diversifying the economy, resources should be channelled into improving power infrastructure which is the most essential foundational component for industrialisation.

Nigeria has a lot of challenges that are now so complex and needing a lot of effort to address. At this point, the right approach would be for the Nigerian government to prioritise those problems by first, looking at the catalyst that will yield the most positive impact in resolving other problems.

The challenges in Nigeria is not one that a solution can easily be proffered, however Nigeria can start tackling those problems by making sure that at least 80 per cent of the country has stable power supply and secondly, by reforming the judiciary to truly establish the rule of law.

The issue of reforming the legal system should be a discussion for another day as top on the priority list is the provision of stable power supply in the country.

According to the Electricity Commission of Nigeria (ECN) electricity peak projection for Nigeria, the nation would require 28,360MW at reference growth rate; 30,210MW and 31,240MW at high and optimism growth rate respectively in 2015.

This was categorised based on speculated Gross Domestic Product (GDP) growth rate: seven per cent referred to as reference growth; 10 per cent (high growth) and 11.5 per cent (optimistic growth).

Unfortunately the country has a generated capacity of a mere 4,000MW, for a population of about 170 million, with energy per capita of 30 Watts.

Socio-Economic Impact of Stable Power Supply

In no particular order below, is what stable power supply can do for Nigeria:

Stable power supply will attract foreign direct investment. Investors looking for cheap labour, revenue growth and even market diversification will be attracted to set up production plants and service centres in Nigeria. This can benefit Nigeria through job creation, resource transfer for the workforce and balance of payment.

Stable power supply will encourage entrepreneurship. Nigerians are a very industrious and creative people. Give them a tool to work on and they can create means of livelihood. Stable power supply is a tool that will empower individuals to create jobs for themselves and become self-employed, like setting up salons, sewing business, food processing business etc.

It will improve security situation in the country in many ways – such as providing security forces with the necessary structure to work on, like implementation of good communication medium and systems such as CCTVs. Secondly, efficient road traffic system will result to less accidents, also more employment and entrepreneurship will keep both young and old from turning into criminals thereby fewer armed robbers to deal with which will result to improved security.

The biggest challenge the Nigerian petroleum sector has is the inability to operate refineries and the major cause is poor power supply. Steady power supply will enable functional refineries in Nigeria. In a recent interview, President Muhammadu Buhari pointed out that if all the refineries operate in full capacity, Nigeria will not have any need to import fuel. With fully functional refineries the Government will be able to make huge savings by refining crude oil locally and could also export refined products which will increase government revenue.

As the Nigerian government and other organisations import less goods and services including generators and fuel as a result of increase in production of goods and services at home, it will result to less money leaving the system. This will lead to reduction in Nigeria’s Balance of Trade deficit which in turn, will help Nigeria maintain a healthy foreign reserve, reduce inflation and increase/stabilise the value of the naira.

As stable power supply helps the government save money and generate more revenue, it will have enough money to invest into areas such as roads and drainages, seaports, airports, rail network, hospitals, schools, pipe-borne water, and storage facilities for agricultural produce and irrigation systems. Good infrastructure brings more development and attracts investment.

Stable power supply will help in the fight against fraud and corruption through the ICT sector. The ICT sector benefiting from steady power supply will create an environment that will help bring efficient management of institutions that are the building blocks of every economy. ICT will help government agencies and organisations maintain effective internal control systems for prevention and detection of fraud.

Improvement in areas such as security, infrastructure and other amenities will improve the Nigerian tourism industry which could become globally competitive considering the rich Nigerian landscape and colourful culture. This will result to more job creation and major source of revenue for the government and the general public.

Stable electricity supply will enhance the educational sector, agricultural sector, health sector, etc., creating an environment that is conducive for humans to live in, hence improving the quality of life of Nigerians.

http://footprint2africa.com/prioritising-energy-infrastructure-key-resuscitating-ailing-economy/