Economy Watch

Budget 2021: Nigeria Needs to Diversify its Economy to Non-Oil Sector

President Mohammadu Buhari

-By Opeyemi Victoria

As the second wave of the Covid-19 pandemic continues to affect the global economies of countries resulting to lockdown to curtail its spread, the chances of realizing enough foreign exchange to boost the external reserve and generating enough revenue to fund 2021 budget from oil and non-oil sector are also narrowing down with a possible adverse effect.

Some industry watchers say attaining the project $40 benchmark of oil production of 1.86 million barrels per day as contained in the budget will be depending on the wave of global economies.

According to an oil and gas expert, Mr. Chris Igwe, Managing Director of Mainland Oil, “oil is our major source of revenue and if countries continue to lockdown, it means the demand will drop. I appreciate OPEC for cutting down production but even when you cut down, there is a need for the economies of these countries to open up and ease the lockdown so that there will be more demand.”

“Therefore, there is need for Nigeria to develop other economy like agriculture and other sectors so that there will be more exports. Once our revenue base is increased, it will help to bring down the cost of foreign exchange for our industries.”

Oil is an international product that Nigeria does not control and it is the prerogative of OPEC and other oil cartels. With $40, if Nigeria is lucky that the outlook ends the way it is or improves further, the country may be able to fund almost 67% of its budget. But there could be a shock if oil prices fluctuate.

The diversification of Nigeria’s revenue base to increase export is paramount. This will in turn reduce pressure of foreign exchange market thereby reducing risk.  

The Federal Government in its 2021 budget has N13.5 trillion as it projected N7.9 trillion aggregate revenue and a deficit of N5.2trillion

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