A country that runs a mono economy has the high risk of being vulnerable to global market realities. Also referred to as single commodity economy, a state is identified as a mono-economy when it relies hugely on a single commodity/good such as crude oil; an economic sector like ICT; or industry like the commerce to finance its developmental projects and run government. It is characterized by restricted or poor economic diversification and heavy reliance on a particular product to finance the economy.
Examples abound, especially those that are heavily reliant on fossil fuel such as the Brunei Darussalam; the Kingdom of Saudi Arabia; the Republic of Nigeria; the State of Qatar as well as the Republic of Cuba that depends heavily on sugar. It leaves the economy subject to external shocks generated by changes in global prices driven by an array of factors including the forces of demand and supply. Besides, it does not allow for economic resilience due to the effects of high and low, fluctuations in global prices making it difficult to sustain a certain benchmark.
It is the negative effects of mono economy that has resulted in the whole drive for economic diversification by concerned countries. It is a deliberate, painstaking, and comprehensive plan to reduce dependency on a single commodity, industry, or sector by developing other sectors to contribute meaningfully to GDP. The aim is usually to achieve suppleness and check vulnerabilities on the economy. It is achieved through massive investment in other sectors of comparative advantage to build them to the same level of the prevailing commodity that was hitherto the main stay of the economy. Notable countries have successfully diversified their economies. Of particular note is Singapore which moved from an economy based on manufacturing to that focused on tourism; logistics; and finance. There are also Dubai and Ireland. Saudi Arabia is making aggressive investment in mining with a view to shift away from oil.
Nigeria has been faced with the challenge of a mono culture economy, a development that followed primarily, the discovery of crude oil at Oloibiri in the present day Bayelsa state in 1956 and subsequent exploration in commercial quantity. Prior to the reliance on the black gold, the Nigerian economy was driven mainly by agriculture (palm oil, cocoa, and ground nut) and commerce. These created jobs; allowed for multiple source of foreign exchange and insulated the economy from shocks.
In view of the well-known global oil price volatility and the high wired politics in the global oil market, the need for oil dependent countries, as classic examples of monocultural economy, to genuinely diversify their economies remains not to be over emphasized. This can be achieved through targeted investment and promotion of the non-oil sectors with high potentials such as the manufacturing and solid minerals. Others like transportation, Information and Communication Technology (ICT); Services; Energy; and health are all sectors that can contribute substantially to foreign exchange inflow and the GDP of a nation.
It is expedient for concerned nations to work towards mitigating the risks associated with mono-economy by taking deliberate steps to diversify their economy and prevent shocks. This can be achieved through calculated investment in sectors with high yielding capacity.
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