For decades, the Nigerian economy has relied heavily on oil as its primary source of revenue. Nigeria’s oil accounts for 80 percent of the country's revenue and foreign exchange gains. In 2023, crude oil export revenue amounted to ₦29 trillion, a 37 percent increase compared to ₦21.1 trillion recorded in 2022. Despite a rise in its contribution to Nigeria's Gross Domestic Product (GDP), the oil sector's overall impact on Nigeria’s economy remains relatively limited.

In the fourth quarter of 2023, the oil sector's contribution to GDP stood at 4.7 percent, while the non-oil sector's contribution amounted to 95 percent. According to a Q4 2023 National Bureau of Statistics report, the oil sector in Nigeria recorded a year-on-year growth rate of 12.11 percent, a significant increase of 25.50 points compared to the (-13.38 percent) rate observed in the corresponding quarter of 2022. Yet, non-oil sectors like agriculture, trade, telecommunications, and real estate were the top contributors to Nigeria's GDP, with significant growth rates and overall economic performance. Therefore, developing and implementing results-driven strategies to diversify the Nigerian economy into these sectors is crucial.

While there are divergent opinions on the scale of diversification in the Nigerian economy, there is a consensus that the country's reliance on oil for revenue is unsustainable. Fluctuations in global crude oil prices heavily impact the economy due to its heavy reliance on oil. Regardless of whether the economy is diversified or not, Nigeria must fully harness non-oil resources to achieve economic sustainability. In the context of Nigeria's financial challenges, there is a pressing need for the government and stakeholders to reassess their strategies for increasing non-oil sector growth. It is crucial to assess the performance of Nigeria's non-oil sector and its current state, and its contribution to the country's revenue generation, given its significance to the economy.

Diversification: A Never-Ending Quest

Diversifying the economy is a recurring theme in Nigeria's national discourse. The drive for economic diversification can be traced to the country's first National Development Plan from 1962 to 1968. The plan emphasised the need for initiatives and projects to swiftly boost domestic resources available for future investment while recognising the need for greater living standards. Since the 1960s, these plans and strategies have emphasised agriculture self-sufficiency, power, energy, transportation sector development, and private sector growth. Successive governments have consistently prioritised these initiatives as crucial agendas.

The Nigerian government has announced plans to invest ₦75 billion in the industrial sector and develop a new Talent Export Programme (NATEP) to encourage non-oil exports. The investment aims to assist Nigerian manufacturers in producing high-quality, exportable products while creating one million new jobs. However, results-driven diversification has remained largely elusive, and growth performance has been inconsistent over time, resulting in a persistent lag in per capita income compared to countries that were once behind it.

Non-Oil Sector Performance

The Nigerian economy's non-oil sector includes economic activities that are not directly related to the petroleum and gas industry. These services include telecommunications, banking, insurance, and tourism services like hotels. The industries include restaurants, parks, carnivals, cinemas, wholesale and retail trade, health services, export trade, agriculture, minerals, and electricity generation (both conventional and renewable. Despite the efforts to promote non-oil exports and the sector's substantial contribution to Nigeria's GDP, its performance in revenue generation has been insufficient. Non-oil exports account for a small percentage of the country's total export profits. For example, Nigeria's non-oil export revenue dropped slightly to $4.5 billion in 2023. This is a $300 million, or 6.3%, decline from the $4.8 billion in revenue accrued to government coffers in 2022.

Non-Oil Sector Potentials and Challenges

Nigeria's non-oil sector offers great potential for economic growth and includes a wide range of enterprises. However, some significant areas within the non-oil industry are low-hanging fruit positioned for greater potential and revenue growth. Some of them include:

• Agriculture: Agriculture in Nigeria is divided into four sectors: agricultural production, fisheries, livestock, and forestry. The Nigerian government and various investors have initiated several projects to enhance agricultural productivity. Despite these efforts, further action is needed to fully leverage the sector's potential. For example, between 2016 and 2019, Nigeria's agricultural imports totalled ₦3.35 trillion, four times more than its agricultural exports of ₦803 billion.

This sector is the largest employer of labour (over 36 percent), with smallholder farmers dominating the industry (over 80 percent). Even though these smallholder farmers account for over 90 percent of farm produce, they lack adequate support, training, technology, and finance to realise Nigeria’s agricultural potential fully. Additional hurdles hindering Nigeria's agricultural sector include outdated farming methods, violent conflicts, and supply chain constraints. Empowering smallholder farmers to increase their productivity will be crucial to overcoming these obstacles.

Nigeria's agricultural products, particularly cocoa beans, face global rejection due to substandard preservation methods, poor handling, diseases, pests, and excessive pesticide use. The federal government must educate Nigerian farmers on Good Agricultural Practices (GAP) to facilitate a smooth export market. Nigeria's capacity to export is also hindered by its inability to meet domestic food needs, inadequate infrastructure, financing constraints, inefficient export incentives, underdeveloped markets, policy instability, capital flight, and marketing issues.

Before now, several countries relied heavily on Russia and Ukraine for wheat supplies. The ongoing war has created a significant void in the global wheat market. Fortunately, Nigeria has the capacity to produce wheat, and it can thrive under both irrigated and rainfed conditions. Irrigated wheat is primarily grown in the country's northern regions, where night temperatures range from 15 to 20⁰ Celsius. Certain states in Nigeria, including Borno, Yobe, Bauchi, Jigawa, Gombe, Kano, Katsina, Kebbi, Zamfara, and Sokoto, possess these ideal conditions. Despite this potential, Nigeria has yet to fully utilise its wheat production capabilities.

• Solid Minerals: Nigeria's substantial mineral resources, such as gold, iron, lead, zinc, coal, and gemstones, offer significant development opportunities. The mineral sector has not reached its full potential, accounting for less than 3% of the economy's Gross Domestic Product. The dual nature of being resource-rich yet poor can be ascribed to an overreliance on oil, political instability, and unimplemented legal and regulatory frameworks. There are at least 34 mineral occurrences in Nigeria that cut across metallic minerals, precious metals, precious stones, and industrial minerals.

While several minerals exist, lithium in Nigeria is gaining considerable attention. For example, a Chinese firm is setting up a $200 million lithium processing plant in Nasarawa, Nigeria. Nigeria boasts of massive quantities of lithium, a highly reactive metal utilised in energy-dense rechargeable batteries found in cell phones, electric vehicles, and grid storage systems. Because of the rising interest in renewable energy, the lithium market has grown as governments aim to phase out fossil fuel vehicles in favour of emissions-free electric vehicles. The cost of one tonne of lithium has climbed from £4,600 in 2020 to more than £61,000 in 2022.  According to the World Bank, demand for critical metals such as lithium and cobalt would rise by around 500 percent by 2050.

The global electric car industry will reach £646.23 billion by 2030. Nigeria's lithium market holds great potential, but an unclear and excessive number of regulatory and investment frameworks may hinder its development. Although these regulatory and investment frameworks are essential for managing Nigeria's complex mining (lithium) sector, their effectiveness can only be proven through accountable and responsible implementation. In the face of environmental and conflict threats, the mining sector's governance must effectively carry along local communities in planning mining policies.

Recommendations

• Policymakers and development partners should empower and train smallholder farmers, aiming for food sovereignty and economic prosperity. Policies like granting agricultural exports and improving loan access can secure food production and reduce poverty. Investing in irrigation and water management equipment can help end food shortages. Committing resources to science, training, research, and development is also crucial for food sustainability.
• The Nigerian government should expand irrigated wheat cultivation in the northern states with ideal conditions, provide subsidies and support for wheat farmers, increase funding for agricultural research, implement capacity-building programmes for farmers, establish more wheat farmer service centres, encourage private sector investment, and improve market access and price stability.
• To fully harness Nigeria's substantial mineral resources, especially lithium and boost economic diversification, the government should develop a comprehensive Mining Resource Corridor (MRC) framework that integrates mineral extraction, processing, transportation, and infrastructural development. This framework should prioritise the development of multiple MRCs, leveraging private sector investment and foreign partnerships to create jobs, promote inclusive growth, and reduce reliance on oil exports. Resource corridors require active collaboration, coordination, and integrated planning for effective implementation. Resource Corridors present opportunities to connect communities and attract economic growth and sustainable development, mainly through the collateral impact on other sectors catalysed through access to resource infrastructure.

The Maputo Development Corridor (MDC) is a prominent example of a well-organised and successful transport corridor in Africa. Spanning from the Gauteng Province in South Africa to Maputo's port in Mozambique, the MDC aims to promote developmental cooperation between the two regions. The corridor has played a vital role in regional development by linking the landlocked provinces of Mpumalanga and Limpopo in South Africa and Swaziland. Despite facing challenges, the MDC has become a model for efficient organisation and public-private partnerships (PPPs). Among its most notable achievements is its contribution to the broader initiative of linking the Atlantic and Indian Oceans through the Trans-Kalahari and Capital Corridors.

Nigeria's economy is still strongly reliant on oil despite efforts to diversify. Agriculture, solid minerals, and other businesses are examples of non-oil sectors with tremendous growth and diversification opportunities. However, problems such as antiquated farming practices, violent conflicts, and supply chain bottlenecks impede the sector's performance. To fully realise the non-oil sector's potential, the government must spend on empowering smallholder farmers, strengthening agricultural infrastructure, and creating comprehensive frameworks for mineral resource extraction and processing. The successful execution of these policies will be critical to lowering Nigeria's reliance on oil and attaining sustainable economic growth.

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