The richest man in Africa says crude oil prices would do Nigeria a favor if they stay lower for longer.
Last week at the UN General Assembly, Nigerian billionaire Aliko Dangote, whose main business is in cement but also holds interests in agricultural commodities and petrochemicals, said that agriculture—not crude oil—is the way forward for Nigeria, and that Africa “will become the food basket of the world.”
The latest economic data from Dangote’s home country tend to support his view. GDP grew by 0.55 percent in the second quarter of the year, which, although a meager growth rate, was welcomed because it signaled Nigeria’s exit from the recession that it plunged into due to the oil price crash.
The problem with this recovery, according to local economists, is that it was mainly a result of improving international oil prices rather than any actual economic growth at home. The figure, in other words, once again highlighted Nigeria’s reliance on crude oil revenues for its growth prospects.
Yet the country is already taking steps toward diversifying its economy away from the world’s most traded commodity. These steps were, like elsewhere, prompted by the oil price crash, and in Nigeria took the shape of a Zero Oil Agenda. The agenda, approved by President Muhammadu Buhari’s government, aims to wean the country off oil.
Second-quarter export figures suggest that things are moving in the right direction slowly, but hopefully surely. According to the National Bureau of Statistics, Nigerian exports in the second quarter of this year grew by an impressive 73.5 percent on an annual basis. Crude oil accounted for the biggest portion of the exports, at 42.57 percent, with other oil products making up another 21.86 percent.
This leaves less than a third for non-oil exports, but it seems that the government is happy: The head of the Nigerian Export Promotion Council, Olusegun Awolowo, noted that cashew nuts exports alone brought in $40 million (13.5 billion naira) in the second quarter.
The prioritization of agriculture as a greater export revenue stream is in perfect tune with Dangote’s business plans, especially with strong government support for the growth of this stream. The billionaire has $5 billion invested and planned for agricultural projects at home through 2020. Incidentally, he also spent $11 billion on the construction of a 650,000 bpd oil refinery, so it seems that oil does have a place in a diversified portfolio of businesses.
The subject of economic diversification away from oil has grown popular in the last couple of years, for obvious reasons. Yet efforts by major oil producers have shown that it’s easier said than done. Perhaps the biggest challenge to these efforts is the improvement in oil prices – it’s all too easy to slip back into the familiar rut. So, in this sense, Dangote is right: lower oil prices will provide the necessary stimulus to put more effort into diversification.
Nigeria, which was exempted from OPEC’s oil production cut deal, said it is ready to join the pact when its daily output hits 1.8 million barrels. In August, according to OPEC’s secondary sources, this output averaged 1.86 million bpd. Nigerian records put it at 1.74 million bpd. It seems Africa’s second-largest oil producer isn’t willing to relinquish its hold on oil too quickly.