The fact that previous Nigeria Government were unable to diversify the economy is practically having a real negetive effects on the economy. Nigeria is a mono product economy with over 75% of previous annual budget been financed from crude oil.
The price of crude oil has been stable for most part of the last decade. However, consumer demand for clean energy and United State new oil exploration drive is pushing prices to a new low. Previous fluctuations in price was temporary; current indices posits that the price of crude oil will keep decreasing in months.June 2014, it was $140 per barrel while December 2015, it average $35 to $39 dollar per barrel.
The implication is that Government only source of income is gradually decreasing. The international monetary fund late 2015 had forecasted that oil price might decrease between a digit of $5 to $15 in 2016. This means, price could reduce to a record low of $20. The implication of this could put the Nigeria Economy officially in recession.
Crude oil accounted for over 63% of the 2016 budget; benchmark at $38 per barrel. The over-reliance on crude is already affecting the economy. Foreign reserve is depleting, CBN is battling to to avoid Naira devaluation, increasing debt portfolio etcetera.
Nigeria is the largest oil producer in Africa and 6th largest globally. Other countries like the United Arab Emirate has successfully diversified their economy. Previous effort to diversify the economy was not taken seriously because the price of oil, the major source of income was stable.
This oil glut could be a blessing in disguise. The Government has no option but to diversify the economy. CBN has already planned to empower one million young people for micro business start-up in 2016 and 300 billion naira for agricultural financing. In the short run, domestic production capacity must increase via priority areas like textile, technology and agriculture. Entrepreneurs has lot of role to play in diversifying the economy.