The call for the diversification of Nigeria’s economy from mono-economy to a diversified one is getting more traction by the day, with the rising Gold prices; occasioned by the effects of COVID-19 pandamic. Analysts believe that this could offer Nigeria the much needed support in the medium term.
Lukman Otunuga, a research analyst at FXTM said that the newly regulated Gold mining sector in the country could provide the needed impetus for the diversification of Nigeria’s economy from monolithic to one that could build economic growth for the country.
Speaking on Thursday at a virtual media roundtable, organized by FXTM and themed: “Is Nigeria heading for a prolonged recession?” Otunuga noted that the high Gold price we are witnessing now could offer employment to Nigerian youths in the mining sector.
According to him “The more Gold that Nigeria is able to find, this has potentials to create more jobs, especially in the mining industry.
“If Gold price continues to rise and if Nigeria continues to mine more Gold, I think in the medium to longer term, it could provide a tailwind to Nigeria’s GDP.
“The higher Gold price trades, it could offer employment to teeming youths as well as support Nigeria’s Gold prospects in the medium term”.
Similarly, Otunuga stated that diversification and infrastructure development remain key in building Nigeria’s economic growth.
“The key to eradicating poverty in Nigeria and getting that potential depends on domestic production, rather than being a heavily import dependant country, we need to start producing those goods domestically, so that it will create jobs and at the same time export those domestically produced goods.
“This will not only impact positively on the trade balance but will also feedback on the GDP growth.
“Nigeria really needs to invest heavily in its infrastructure, if poor infrastructure remains a common thing in Nigeria, she may not be able to move on in building economic growth.
“This is something that will continue to hamper economic growth even if she continues to make a move to diversify away from oil reliance to agriculture”, he added.
Speaking further on things that could impact Nigeria’s economy in 2021, Otunuga explained that with Joe Biden’s election as the 46th President of the United States, the demand for oil in the global market could witness a massive dip as Biden an advocate of renewable energy-driven economy, Could pursue his plans to transit US economy from fossil fuel to one driven by wind, solar, and other renewable energy sources, this he said would mean that countries like Nigeria whose economy is heavily dependent on oil revenue will be tremendously impacted.
According to him, “The Nigerian government is looking forward to funding its 2021 budget largely from oil revenue despite its claims that it’s diversifying the country’s economy for many years”.
“Just like we witnessed last year when the 2020 budget was revised; oil prices have always tumbled far below the benchmark which is likely to affect the present budget. Nigeria is still exposed to external risks”.
Nigeria and the African continent at large are optimistic that Biden’s election could mean stronger bilateral ties than Donald Trump’s administration.
Otunuga argues that Nigeria is one of the strongest economies in the African continent and the Biden election means stronger bilateral ties. “Of course, this is not going to happen immediately but in the long term.”
He added that aside from the Covid-19 which has disrupted the economy globally, uncontrolled inflation in Nigeria coupled with low domestic production after the border closure, poor infrastructure would continue to hamper the economic growth potentials of Nigeria.