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The United Arab Emirates (UAE) is currently giving a perfect illustration of what could happen if Nigeria is able to reap the economic gains in a row. Like Nigeria, the Middle Eastern country is an oil producer and a member of the 15-member Organization of the Petroleum Exporting Countries (OPEC). At the same time, like Nigeria, the UAE is largely a monocultural economy, dependent on oil export revenue. But that’s where the comparisons stop, starting in 2016 when the country with a population of just under 10 million is determined to reduce its dependence on oil and focus on boosting its non-oil trade.
Judging by the data available, this determination is starting to pay dividends, as the UAE’s non-oil trade crossed the AED1 trillion (the country’s currency) mark for the first time in the first half of 2022. Over the same period, non-oil trade imports rose 19%, while re-exports rose 20%. How did the UAE achieve this rapid transformation? First, the country has been actively establishing trade agreements with a number of trading partners such as India, Indonesia and Israel, resulting in an increase in trade volumes. At the same time, the UAE has been pushing for a strong reform agenda centered on opening the country to international talent and foreign investors. Significant growth in non-oil exports is evidence that this strategy is working.
To be sure, the UAE is not entirely out of the woods. All in all, it’s still a rentier country, and its relatively small population means that any kind of comparison with Nigeria (population about 200 million) has to be done with extreme caution. Still, the progress the small Middle Eastern country has made in breaking free from hydrocarbons means that no country is doomed to depend. This is a key point that Nigerian state and federal government leaders must keep in mind.
For some time, successive Nigerian governments have vowed to wean the country’s economy from oil dependence and expand its sources of foreign revenue. However, due to various factors, including a lack of political will and high levels of corruption, Nigeria remains largely a rentier country, highly vulnerable to fluctuations in the global oil and gas economy. Every Nigerian leader knows this is not the way to run a modern economy and the country needs a complete economic repositioning, but no one seems to be powerless about it. Instead, the Nigerian elite continues to live a life without tomorrow, borrowing at will in an endless frenzy of financial recklessness. Just last week, Finance Minister Zainab Ahmed revealed that the country was ready to borrow more than 11 trillion naira and sell some state assets to fund next year’s budget.
The UAE’s modest success in economic diversification shows that if there is a will, it can be achieved.
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