OIL DEPENDENCY AND ECONOMIC DIVERSIFICATION
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OIL DEPENDENCY AND ECONOMIC DIVERSIFICATION
Chapter one
INTRODUCTION
Background for the Study
Nigeria’s economic landscape underwent a transformation between 2015 and 2023 under President Muhammadu Buhari’s leadership. Nigeria’s troubles during this period were inextricably linked to its reliance on oil as its principal source of revenue (Aiyar, 2016; Cherif, 2021).
The country’s susceptibility to global oil price changes constituted a substantial threat to its economic stability, forcing a strategic move away from oil dependence.
Efforts were undertaken to diversify the economy by researching different sectors, which is an important step towards attaining long-term economic growth (Bughin et al., 2016; Felipe et al., 2021).
President Buhari’s administration understood the importance of lessening Nigeria’s reliance on oil earnings. According to Cherif and Hasanov (2019), the administration’s strategy relied heavily on focused policy implementation.
This entailed a concerted effort to implement changes aimed at reducing the country’s reliance on oil earnings and increasing economic diversification.
The policies and actions implemented during this time established the framework for a comprehensive approach to Nigeria’s economic difficulties (Cherif et al., 2016).
One of the important takeaways from India’s economic reform experience, as underlined by Aiyar (2016), was the importance of private-sector success in achieving economic diversification.
In keeping with this perspective, President Buhari’s administration recognised the importance of actively engaging the business sector. Arvind’s (2022) research on India’s performance in the 1980s and 1990s provides a paradigm for Nigeria’s diversification efforts.
The administration tried to foster private-sector growth, recognising that a strong private sector might play an important role in creating economic diversification.
Despite these efforts, the Nigerian government faced hurdles as it dealt with the intricacies of diversification. Bevan et al. (2019) conducted a study on the political economics of poverty, equity, and growth in Nigeria, which provides useful insights into the varied issues encountered throughout this revolutionary period.
To support diversification measures, the government faced resistance, bureaucratic obstacles, and the need for institutional improvement. These limitations underlined the inherent difficulty of shifting an economy away from a dominating revenue source, as well as the significance of resolving institutional flaws (Aiyar, 2016; Bevan et al., 2019).
The McKinsey Global Institute’s report on African economies (Bughin et al., 2016) provides insight into the broader context of economic diversification. Drawing on lessons from successful diversification efforts in other regions, the administration intended to duplicate such success in Nigeria.
The McKinsey research emphasised the importance of taking a strategic strategy that includes sector-specific policies adapted to Nigeria’s particular economic context. This strategy aims to maximise the potential of non-oil sectors, promoting a diverse and robust economy.
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