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‘Economic Diversification to Support Exchange Rate Stability’

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A report by BGL Securities Limited has stressed the need for the federal government to initiate policies that would drive the diversification of the Nigerian economy.

The report noted that diversification of the economy would bring about a more sustainable and cheaper stability to the exchange rate, create more employment opportunities, bring about change in the gross domestic product (GDP) composition and bolster the economy’s self-sufficiency index.

Furthermore, it pointed out that the financial market would be one of the beneficiaries of the value chain that would be created around sectors in a diversified economy.

This, it explained would be because of the expanded asset creation opportunities to be birthed by the capital requirement needs and the need to scale up business operations.

Historically, Nigeria’s international environment is one characterised by a few sectors playing a dominant role. Prior to the oil boom era of 1970s, agricultural and agro allied exports constituted an average of 60 per cent of total export of Nigeria.

The major sources of forex and mostly positive balance of payment account between 1960 to 1969, were export earnings from cash crops from various regions of the country.

However, with the advent of oil in Nigeria and the surge in international oil prices in the 1970s, oil became a dominant contributor and has since remained the largest contributor to the export account with its share of export averaging 97 per cent between 1981 and 2013.

According to the National Bureau of Statistics (NBS) trade figures, Nigeria’s total import for the whole of 2013 was valued at N7.015 trillion, representing an increase of 24.7 per cent when compared to the figure for 2012. The figure is however less than the N9.892 trillion achieved in 2011.

This figure however varied with from that of the Central Bank of Nigeria (CBN) which estimated that Nigeria’s total import of 2013 slowed to N8.01 trillion in 2013 from N10.23 trillion in 2010.

In the last 10 years, Nigeria’s export have expanded from less than N2 trillion in 2004 to over N7 trillion currently. At the revised nominal GDP, Nigerian import accounted for 8.7 per cent of GDP (16.5 per cent in old series) in 2013.

“Nigeria’s optimal oil export capacity is yet to be fully exploited. This is indicated by the continued exportation of crude oil when the economy could exploit significant capacity in refined products for domestic consumption and export.

“It is arguable that the N2.3 trillion oil imports could be conserved with the development of virile petroleum refining sector,” it added.

Article Credit: Thisdaylive

Updated 5 Years ago

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Tags:     BGL Securities Limited     GDP     NBS     CBN