Diversification Of Revenue In Nigeria
This study is on diversification of revenue in Nigeria. The total population for the study is 200 staff of CBN, Abuja. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made accountants,human resource managers, senior staff and junior staff were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies
1.1 Background to the Study
International Monetary Fund (IMF) has revealed that there has been significant and prolonged drop in oil prices since mid-2014, this has changed the fortunes of Nigeria and many other energy-exporting nations around the world. This, finding from this IMF report that budgets in oil exporting nations have generally turned from surpluses to large deficits, growth has slowed, and financial stability risks have increased (Oriakhi&Iyola, 2013).
However, in such a challenging environment, a policy that will not focus on another source of revenue will not suffice—policymakers will need to adopt significant measures to put public budgets on a sounder footing, address risks to liquidity and the quality of assets in the financial sector, and improve growth prospects. This will be a difficult long-term process, but the positive thing is that many countries have made a strong start, especially in terms of budget policies (Oriakhi&Iyola, 2013). However, Achuzia (2014) pointed out that in the coming years, oil revenues will no longer be sufficient for governments to act as the main employer of their fast-growing young populations. Therefore, it urged policymakers to find new ways to promote private sector development and help their economies diversify away from oil. Therefore, for Nigeria, which is heavily dependent on oil revenue, there is need for the government to pursue genuine economic diversification policies to as to take the economy out of the doldrums. Nwankwo (2015) observed that with the steps taken so far by the government towards refocusing the country’s source of revenue, the economy would no longer be susceptible to events in the international crude oil market in few years’ time.
Following the drop in crude prices from a peak of $114 per barrel in July 2014 to as low as $33/barrel in January 2016, the country’s reserves have suffered great pressure from speculative attacks, round tripping and front loading activities by actors in the forex market. This fall in oil prices also implied that the Central Bank of Nigeria’s (CBN) monthly forex earnings has fallen from as high as $3.2 billion to current levels of as low as $1billion. Yet, the demand for foreign exchange by mostly domestic importers has remained unabated. The net effect of these combined forces unfortunately is the depletion of the country’s forex reserves and pressure on the naira (Udoh, 2014).
Despite the challenges faced by the economy presently, Nwankwo (2015) has described the situation as temporary setback that will be overcame when the government’s policy on diversification of the economy begins to crystallize. Efforts at stimulating the non-oil sectors such as agriculture, solid minerals and manufacturing, among others, will impact on the economy in the next few years. According to Nwankwo (2015), when the economy is diversified, Nigeria’s growth will no longer be determined by the prices of crude oil.Nwankwo (2015)further stated that much revenue would be derived from taxation, adding that the country’s low comparative tax revenue to the Gross Domestic Product (GDP) ratio, at about seven per cent in 2015 against the 18 per cent average in most developing countries, will improve following efficient production. Also through taxes, government can secure the fund to finance major developmental projects that will impact on the people’s lives.
Nwankwo(2015) added that the target of getting the country to rank among the 20 leading economies in the world by 2020 is still being pursued. The crash in crude oil prices should not in any way derail that target. When running a race and something trips and fall the athlete, he/she has to wake up and continue the journey. Also, even if oil is the base for economic growth and development, it was an inappropriate base for growth. But luckily for the country, there are alternatives in agriculture. It is important to note that the country has been unable to exploit up to 25 per cent of opportunities in agriculture. There is need to achieve internal food security and have the opportunity to export agro-based products in processed form. Nigeria is blessed with variety of food stuff from savannah to the deserts, all the various legumes, roots and others that can be grown from these environments. If the nation effectively exploit agriculture, then the major consumer of Nigeria’sforex like agro-based raw materials, rice, fish, poultry, wheat, will be taken care of and government will save billions of dollars from these imports.
1.2 Statement of the Problem
With the continues drop in the crude oil price and considering the fact that crude oil sales constitutes the main source of Nigeria revenue, there is need look for alternative source of revenue following the drop in income and revenue. The total dependence on oil for revenue generation has led the nation economy to total recession as announced in the second quarter of 2016 by the minister of finance.
The researcher has observed that Nigeria is blessed with several alternatives that can substitute oil in terms of revenue generation. They includes agriculture, solid minerals, sports, culture, engineering, ICT, medicine, manufacturing etc. But the nation has performed poorly in all these listed sectors.
The researcher is also curious of determining if the available human and material resources in Nigeria can ensure effective diversification of revenue. Diversification of the economy and revitalization of power infrastructure is expected to contribute immensely to the Nigeria economy as seen in other developing countries. Hence, the researcher has decided to conduct this study on diversification of revenue in Nigeria.
1.3 Objectives of the Study
- To examine the process of diversification of revenue in Nigeria.
- To examine the role of non oil sector in revenue generation in Nigeria.
- To determine the challenges of diversification of revenue in Nigeria.
1.4 Research Hypotheses
For the successful completion of the study, the following research hypotheses were formulated by the researcher;
- H0: Diversification of revenue will not bring economic growth in Nigeria.
H1: Diversification of revenue will bring economic growth in Nigeria.
- H02: There is no role of non oil sector in revenue generation in Nigeria.
H2: There is role of non oil sector in revenue generation in Nigeria.
1.5 Significance of the Study
The following are the significance of this study:
- The outcome of this study will educate the government of Nigeria and the general public on the consequences of the nation’s dependence on the oil sector which includes inflation and total economic recession. It will also educate on the massive revenue accruable into the government’s coffer through diversification and productivity from the non oil sector of the economy.
- This research will also serve as a resource base to other scholars and researchers interested in carrying out further research in this field subsequently, if applied will go to an extent to provide new explanation to the topic.
1.6 Scope and Limitation of the Study
This study will cover the process of revenue generation in Nigeria with emphasis on diversification of revenue. The researcher encounters some constrain which limited the scope of the study;
a) Availability of Research Material:
The research material available to the researcher is insufficient, thereby limiting the study
The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.
c) Organizational Privacy:
Limited Access to the selected auditing firm makes it difficult to get all the necessary and required information concerning the activities.
1.7 Definition of Terms
Diversification is a corporate strategy to enter into a new market or industry in which the business doesn’t currently operate, while also creating a new product for that new market. This is the most risky section of the Ansoff Matrix, as the business has no experience in the new market and does not know if the product is going
In accounting, revenue is the income that a business has from its normal business activities, usually from the sale of goods and services to customers. Revenue is also referred to as sales or turnover
1.8 Organization of the Study
This research work is organized in five chapters, for easy understanding, as follows
- Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study.
- Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature.
- Chapter three deals on the research design and methodology adopted in the study.
- Chapter four concentrate on the data collection and analysis and presentation of finding.
- Chapter five gives summary, conclusion, and recommendations made of the study
Summary, Conclusion and Recommendation
It is important to ascertain that the objective of this study was to ascertain diversification of revenue in Nigeria. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of diversification of revenue in Nigeria
This study was on diversification of revenue in Nigeria. Three objectives were raised which included:To examine the process of diversification of revenue in Nigeria, to examine the role of non oil sector in revenue generation in Nigeria, to determine the challenges of diversification of revenue in Nigeria. In line with these objectives, two research hypotheseswere formulated and two null hypotheses were posited. The total population for the study is 200 staff of CBN, Abuja. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made accountants,human resource managers, senior staff and junior staff were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies
In conclusion, any government that runs a mono-economy is announcing her economic obituary. Therefore, the only thing that will save Nigeria from her economic crunch now or in future is the diversification of her economy. Nigerians need not to be dismayed by all the noise of what is going on but to persevere because the opportunity of diversification into the agricultural sector is the major ways out of the technical recession.
Based on the findings of this study, the following are recommendations:
- The Nigerian government should focus on the need for diversification into other sources of revenue in order not to be affected by fall of oil price in the international market.
- The government should develop other sectors of the economy such as agricultural sector, and industrial sector by providing incentives such as tax concession, provision of facilities needed by these sectors in order to boost more production
- The government should build more refineries to complement the existing ones that will go a long way to satisfy domestic consumption and generate more revenue for the country.
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