What Nigeria should learn from South Africa’s economic crisis
South Africa’s economic woes continue as its mining sector suffers a huge blow. News emerged, on Monday, that as many as 50,000 miners are set to lose their jobs. This comes as a result of the global fall in commodity prices as its main export country, China, suffers from an economic slowdown. The Rand has been weakening against the Dollar for the past 18 months, reaching a record low last month. Also, hopes that exports from its manufacturing sector would be boosted by the weakening Rand have been dashed as Unions demand for more wages and power cuts have become quite rampant.
Before Nigeria took over in 2014, South Africa was the largest economy in Africa, with its services sector contributing 73 percent to the country’s GDP. Meanwhile, mining and quarrying account for 8.3 percent, while agriculture accounts for only 2.6 percent of the GDP. However, its top exports are from the mining sector, according to a 2013 report by the OEC. Gold, diamonds and other metals bring the most money from outside its shores with China being its biggest exporting country, while its agricultural exports like corn and apples also contribute largely to the economy. However, now, even the latter has been hit hard by drought. The South African drought, which it is presently at its worst in more than 100 years, has been tipped to push another 50,000 people into poverty. The International Monetary Fund has predicted that 2016 might see the country undergo a recession, but it is poised to recover slightly in 2017, due to plans to reduce power cuts and provide loans to SMMEs (Small Medium and Micro-sized Enterprises) and also encourage exportation.
Africa’s largest economy, Nigeria, is undergoing a similar crisis amidst calls for devaluation of its local currency. Its main export commodity, oil, has been hit especially hard by the global fall in oil prices and that has necessitated calls for diversification of its economy and the cessation of certain imported items in order to encourage the manufacturing sector. This sector contributes about 10 percent to Nigeria’s GDP, a slight difference from petroleum’s 11 percent contribution to the GDP. The only problem is the country appears to be waiting for oil prices to go back up, to allow it continue to depend on oil and this seems to have happened after resolutions made by OPEC giants, Saudi Arabia and Russia, yesterday. However, oil prices might not go back to that value of $125 per barrel experienced few years ago. There were rumours that mining could be Nigeria’s new oil, along with a reinvigoration of the country’s agricultural sector. However, just as South Africa has shown, Nigeria needs to do more than that.
Nigerians buying more goods made in Nigeria is good for the GDP and the Naira. However, what would help save the Naira is to look further than exportation in the mining, agriculture and oil sectors, and concentrate on the export of commodities in other sectors. Nigeria’s export problems seem to be a matter of meeting international standards rather than an over-reliance on oil. If the manufacturing sector exports more and imports less, with more government involvement, we could see more contribution from that sector. However, the government seems to be more invested in helping private international oil companies in Nigeria meet international standards, over helping products of small and medium scale businesses leave Nigerian shores.
It seems important that Nigeria focuses more on pushing its commodities out there, apart from oil, mining and agricultural based products. Either that or we may still find ourselves in the quandary oil has recently put the country in. Buhari might have to devalue the Naira sooner or later but, in the long run, there is a need to develop an equally diversified export culture.
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