Africa’s largest economies have had a rough start to the year. With rising debts and currency crises, leaders search for “best fit” solutions amidst popular discontent in their countries. The steep drop in crude prices continues its negative impact on oil-dependent African economies, revealing a rather bleak outlook for the affected countries on various media platforms.
In Nigeria, the inflation rate has surged to a three year high of 11.4% in February from 9.6% in January, while disposable income continues to erode among the low-income and middle-income consumers. The record fall of the naira remains a disturbing concern, sparking debates for and against the devaluation of the currency as a recourse for this financial quagmire. Barely a week ago, Unilever Africa’s president Bruno Witvoet joined the growing number of business leaders who are speaking out on the disparity between the naira’s official and black market rates:
“It would be very insane to continue like this for months and months,” he said, emphasizing that “clarity on the right rate would help businesses make more sensible decisions.”
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The discussions and argument on the fiscal challenges of Africa’s largest economy and biggest oil producer will not run dry anytime soon, given her record dependency on oil (95% of exports and 75% of government revenues) as well as her track record of mismanagement and corruption. However, there is much to learn from these unfortunate events. In the words of Carlos Lopes, executive secretary of the UN’s Economic Commission for Africa (UNECA), “macroeconomic crises in Africa are largely caused by policy blunders, and not even so much by commodity fluctuations or what is happening in the global economy.” This implies that our problems aren’t without reasonable solution.
First, the economic challenges facing Nigeria have revealed the overwhelming importance of having a diversified economy. It is of utmost necessity that countries affected by their over-dependence on oil revenue must extensively pursue feasible ways of diversifying their economic base. Hence, the need for proactive steps in strengthening the country’s industrial/manufacturing sector. Solving the manufacturing puzzle has eluded so many governments and administrations due to corruption and lip service.
Also, we must learn that industrialization of the agricultural sector will not occur on mere words and promises. Boosting the value of our agricultural chain goes beyond production alone. African countries with agro-potentials must incorporate value-added processing after harvesting raw materials if farming is to have any meaning in economic development.
More than ever, African economies – particularly import-dependent nations such as Nigeria – must step up their game to produce innovative local goods and services in a variety of sectors. The unpleasant economic situation across Africa is ultimately a challenge to our creativity – government and people alike.