Oil Dependency and Economic Diversification; A Case Study of Buhari Administration, 2015-2023
Chapter One
Abstract
This quantitative survey research design aimed to investigate the impact of the economic policies implemented by the Buhari administration in Nigeria between 2015 and 2023 on economic diversification. A structured questionnaire was meticulously designed and administered to a sample of 120 respondents, strategically selected to provide a representative view of individuals directly or indirectly affected by the policies. The survey instrument focused on gathering perceptions regarding the effectiveness of the policies in reducing the country’s dependency on oil, promoting investment in non-oil sectors, encouraging technological innovation, and attracting foreign direct investment. The data collected were meticulously presented and analyzed using SPSS27, a statistical software well-suited for quantitative data analysis. A one-sample t-test was employed to rigorously test the hypotheses related to the policies’ impact on economic diversification. The assumed mean of 0 was used as a benchmark, and a critical table value of 2.92 at a 5% level of significance guided the assessment of statistical significance. The findings from the t-test provided compelling insights into the respondents’ perceptions of the policies. The study revealed a mean score of 73.00 for the effectiveness of policies in reducing oil dependency, 66.00 for their impact on economic diversification, and 89.75 for the challenges and lessons learned during diversification efforts. These results indicated a generally positive perception among respondents. The policies were seen to effectively aim at diversifying the economy, promoting investment, encouraging technological innovation, and attracting foreign direct investment. Challenges identified included policy implementation and execution, funding and investment, and resistance to change from stakeholders. In conclusion, the study contributes valuable empirical evidence to the discourse on economic diversification. The findings underscore the need for targeted and well-implemented policies to foster diversification effectively. The recommendations emanating from the study provide actionable insights for policymakers, emphasizing the importance of addressing challenges to ensure sustained economic growth beyond oil dependency.
CHAPTER ONE
INTRODUCTION
Background to the Study
The economic landscape of Nigeria witnessed a transformative phase between 2015 and 2023 under the leadership of President Muhammadu Buhari. The challenges that Nigeria confronted during this period were intricately tied to its heavy reliance on oil as the primary source of revenue (Aiyar, 2016; Cherif, 2021). The country’s vulnerability to fluctuations in global oil prices posed a significant threat to its economic stability, necessitating a strategic shift away from oil dependency. Efforts were made to diversify the economy by exploring alternative sectors, a critical step towards achieving sustainable economic growth (Bughin et al., 2016; Felipe et al., 2021).
President Buhari’s administration recognized the urgency of reducing Nigeria’s dependence on oil revenues. As outlined by Cherif and Hasanov (2019), the implementation of targeted policies was a cornerstone of the administration’s strategy. This involved a deliberate effort to introduce reforms aimed at breaking the country’s reliance on oil revenues and fostering economic diversification. The policies and initiatives put in place during this period laid the groundwork for a comprehensive approach to addressing Nigeria’s economic challenges (Cherif et al., 2016).
One of the key lessons learned from the Indian economic reform experience, as highlighted by Aiyar (2016), was the importance of private-sector success in achieving economic diversification. In line with this insight, President Buhari’s administration recognized the need to engage the private sector actively. Arvind’s work (2022) on India’s success in the 1980s and 1990s serves as a model for Nigeria’s pursuit of diversification. The administration sought to create an environment conducive to private-sector growth, recognizing that a vibrant private sector could play a pivotal role in driving economic diversification.
Despite these efforts, challenges emerged as the Nigerian government grappled with the complexities of diversification. The study by Bevan et al. (2019) on the political economy of poverty, equity, and growth in Nigeria provides valuable insights into the multifaceted challenges faced during this transformative period. The government encountered resistance, bureaucratic hurdles, and the need for institutional strengthening to support diversification initiatives. These challenges underscored the inherent difficulties in steering an economy away from a dominant revenue source and highlighted the importance of addressing institutional weaknesses (Aiyar, 2016; Bevan et al., 2019).
McKinsey Global Institute’s study on Africa’s economies (Bughin et al., 2016) sheds light on the broader context of economic diversification. The administration, drawing from lessons learned from successful diversification efforts in other regions, aimed to replicate similar success in Nigeria. The McKinsey report emphasized the need for a strategic approach, incorporating sector-specific policies tailored to Nigeria’s unique economic landscape. This approach aimed to unlock the full potential of non-oil sectors, fostering a diversified and resilient economy.
Challenges notwithstanding, the Buhari administration made strides in breaking the oil spell, as indicated by Cherif et al. (2016). The Gulf Falcons’ path to diversification served as a source of inspiration, and Nigeria sought to emulate successful strategies employed by other oil-dependent nations. The administration’s commitment to learning from global experiences underscored a pragmatic approach, recognizing that a diversified economy is more resilient to external shocks.
The Nigerian context, as explored by various scholars (Ogbuigwe, 2018; Page & Okeke, 2019; Sayne et al., 2021), revealed nuanced challenges within specific sectors. The intricacies of refining in Nigeria, corruption negating government assistance to small businesses, and the need for reform in oil sales highlighted the multifaceted nature of the diversification process. These case studies underscored the importance of addressing sector-specific challenges and tailoring policies to the unique characteristics of each industry (Ogbuigwe, 2018; Page & Okeke, 2019; Sayne et al., 2021).
The International Monetary Fund’s (IMF) involvement, as seen in various working papers (Cherif & Hasanov, 2019; Cherif et al., 2018; IMF, 2019), showcased the global community’s interest and support for Nigeria’s diversification efforts. The collaboration with international organizations brought invaluable expertise and financial support, reinforcing the significance of global partnerships in achieving economic diversification.
Statement of Problem
The period between 2015 and 2023 in Nigeria was marked by significant economic challenges, primarily stemming from the country’s heavy reliance on oil as the primary source of revenue (Aiyar, 2016; Cherif, 2021). Despite efforts to diversify the economy away from oil, a critical problem persisted throughout this period. The over-dependence on oil revenues left Nigeria vulnerable to fluctuations in global oil prices, exposing the economy to external shocks and hindering sustainable development (Cherif et al., 2016; IMF, 2019).
The volatility of oil prices presented a substantial threat to Nigeria’s economic stability, leading to budget deficits, reduced government spending, and a lack of fiscal resilience (Cherif, 2021; IMF, 2019). The economic implications of such vulnerabilities were profound, affecting various sectors and impeding the government’s ability to meet its developmental goals (Bevan et al., 2019). The problem extended beyond mere economic challenges; it encompassed broader issues of institutional weaknesses, bureaucratic hurdles, and resistance to change within the existing political and economic structures (Bevan et al., 2019; Cherif & Hasanov, 2019).
Additionally, the effectiveness of the policies and strategies implemented by the Buhari administration to reduce oil dependency and foster economic diversification became a focal point of concern (Cherif & Hasanov, 2019). The complex nature of these challenges required a nuanced understanding of the specific obstacles encountered in various sectors, such as refining (Ogbuigwe, 2018), customs reform (Meyers & Oliver, 2015), and corruption affecting government assistance to small businesses (Page & Okeke, 2019).
Therefore, the gap revolves around the overarching issue of Nigeria’s over-reliance on oil, the economic vulnerabilities associated with this dependence, and the effectiveness of the implemented policies in mitigating these challenges and fostering sustainable economic diversification. Addressing this problem is crucial for ensuring the resilience and long-term viability of Nigeria’s economy in the face of global economic uncertainties and evolving market dynamics.
Objectives of the Study
- To evaluate the policies and strategies implemented by the Buhari administration between 2015 and 2023 to reduce oil dependency.
- To assess the impact of these policies on economic diversification across various sectors.
- To analyze the challenges encountered and lessons learned during the efforts to diversify the Nigerian economy.
Research Questions
- What specific policies and initiatives were introduced by the Buhari administration to reduce Nigeria’s reliance on oil?
- How did these policies affect the growth and development of non-oil sectors in the Nigerian economy?
- What were the main challenges faced in the process of economic diversification, and what lessons can be derived from these challenges?
Research Hypotheses
Null Hypotheses(H0):
- The implementation of targeted policies by the Buhari administration does not significantly reduce Nigeria’s dependency on oil.
- The diversification efforts do not positively impact the growth and resilience of non-oil sectors in the Nigerian economy.
- Despite challenges, lessons learned from the diversification attempts have not significantly provided valuable insights for future economic strategies.
Alternative Hypotheses(H1):
- The implementation of targeted policies by the Buhari administration significantly reduced Nigeria’s dependency on oil.
- The diversification efforts positively impacted the growth and resilience of non-oil sectors in the Nigerian economy.
- Despite challenges, lessons learned from the diversification attempts have provided valuable insights for future economic strategies.
Significance of the Study
The significance of this study lies in its profound examination of Nigeria’s endeavours to diminish reliance on oil and cultivate economic diversification. By comprehensively analyzing the policies and their consequential impacts during the Buhari administration from 2015 to 2023, this research contributes valuable insights crucial for policymakers, economists, and forthcoming administrations. The findings hold the potential to inform the strategic formulation and implementation of more effective measures for sustainable economic development in Nigeria.
As the study delves into the nuanced intricacies of policies implemented during the Buhari era, it seeks to unravel the successes and challenges encountered in the pursuit of economic diversification. This in-depth analysis goes beyond a surface-level examination, offering a granular understanding of the factors influencing policy effectiveness and their subsequent impacts on various sectors of the economy. Consequently, the research becomes a reservoir of knowledge, providing a comprehensive blueprint for future policymakers keen on steering the nation toward a more diversified and resilient economic landscape.
Policymakers stand to benefit from the insights garnered from this study by gaining a deeper comprehension of the intricacies involved in transitioning away from oil dependence. By understanding the successes and setbacks of past policies, they can refine their approaches, implement targeted measures, and navigate potential obstacles more adeptly. Economists, too, will find value in the study’s examination of the economic repercussions of diversification efforts. This understanding is essential for forecasting, economic modelling, and advising on future policy directions.
Moreover, the study’s significance extends to future administrations, providing a repository of lessons learned during a crucial period of economic transformation. Armed with insights into the strengths and weaknesses of previous strategies, future leaders can devise more informed and adaptive policies. This not only fosters continuity in economic development initiatives but also ensures a more resilient and responsive approach to the ever-evolving challenges in the global economic landscape. In essence, this study serves as a beacon, guiding stakeholders towards a more sustainable and diversified economic future for Nigeria.
Scope of the Study
This study focuses specifically on the economic policies and diversification initiatives implemented by the Buhari administration from 2015 to 2023. It examines the strategies adopted, their implementation, and their effects on various sectors of the Nigerian economy during this period.
Operational Definition of Terms
Oil Dependency: The degree to which a country’s economy relies on revenue generated from oil exports and sales.
Economic Diversification: The process of shifting an economy’s reliance from one dominant sector (such as oil) to multiple sectors to ensure sustainable growth.
Policies: The deliberate actions, regulations, and initiatives introduced by the government to achieve specific economic objectives.
Non-oil Sectors: Industries and economic activities excluding the oil and gas sector, encompassing agriculture, manufacturing, services, etc.
Revenue Diversification: The process of broadening the sources of government income beyond oil revenues.
Economic Resilience: The ability of an economy to withstand and recover from external shocks or fluctuations.
Government Spending: The allocation and utilization of funds by the government for various programs, projects, and services.
Budget Deficits: Occur when government spending exceeds its revenue, resulting in negative balances that require borrowing or other funding sources.
References
- Sayne, A., Gillies, A., & Katsouris, C. (2021). Inside NNPC oil sales: A Case for Reform in Nigeria. Natural Resource Governance Institute, August 2021.
- Tashakkori, A., & Teddlie, C. (Eds.). (2017). Handbook of Mixed Methods in Social and Behavioral Research. Sage.
- Tijaja, J., & Faisal, M. (2022). Industrial Policy in Indonesia: A Global Value Chain Perspective. Asian Development Bank Economics Working Paper Series, (411).
- Tornell, A., & Lane, P. R. (2019). The Voracity Effect. American Economic Review, 89(1), 22-46.
- Venables, A. J. (2016). “Using Natural Resources for Development: Why has it Proven so Difficult?”. Journal of Economic Perspectives, 30(1), 161–84.
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