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How FG can bridge Nigeria’s $18bn non-oil export deficit

As the federal government intensifies efforts in diversifying the economy, there is an urgent need to fully utilize the prospects inherent in the non-oil sector…

As the federal government intensifies efforts in diversifying the economy, there is an urgent need to fully utilize the prospects inherent in the non-oil sector which has been left untapped for years.

The non-oil sector in the last three years have reflected genuine prospects of contributing hugely to the country’s Gross Domestic Product, especially at a time when the fragility of oil is becoming a reality due to external shocks.

Latest Gross Domestic Product report for the fourth quarter of 2021 sourced by Daily Trust on Sunday showed that non-oil sector grew by 4.73 per cent in real terms. This rate was higher by 3.05 per cent compared to the rate recorded in the same quarter of 2020. The sector was driven in fourth quarter 2021 mainly by Agriculture (crop production); trade; Information and Communication (Telecommunication); and Financial and Insurance (Financial Institutions), accounting for positive GDP growth.

In real terms, the non-oil sector contributed 94.81 per cent to the nation’s GDP in fourth quarter 2021, higher from share recorded in the fourth quarter of 2020 which was 94.13 per cent and higher than the third quarter of 2021 recorded as 92.51 per cent. On the overall, the annual contribution in 2021 was 92.76 per cent.

However, despite these contributions to the economy, there is a huge trade deposit gap which needs to be addressed by the federal government in order to make the sector more viable.

In a presentation tagged, ‘Emerging Issues Disrupting Nigeria’s Non-Oil Export and Innovative Solutions’ by the Director General of the Manufacturers Association of Nigeria, Segun Ajayi-Kadir, at the just concluded nation conference on non-oil export noted that Nigeria was buoyant during the pre and post-independence years because of huge earnings from non-oil export like cocoa, cotton, groundnut, palm oil etc.

He however stated that the discovery of crude oil brought a shift that made the country to majorly depend on the oil sector to the neglect of other sectors and further made the economy susceptible to fluctuations in revenue, occasioned by the usual instability associated with the prices of crude oil in the international market.

According to him, “The highest export volume done by Nigerian businesses in recent times was $62.5 billion and that was just before Covid-19. This declined principally due to the Covid-19 pandemic in the year 2020. There was a slight improvement post-Covid in 2021

“In any case, this volume is low compared to what the country is capable of doing. South Africa is doing over $90billion.”

Consequently, data sourced from the National Bureau of Statistics showed that apart from aluminium alloy, urea and re-exports oil and gas, majority of Nigerian export in 2021 remained raw unprocessed products like crude oil, cocoa, and sesame seeds

According to the NBS, the top export of Nigeria in 2019 in the agricultural sector was unprocessed raw commodities.

Challenges of non-oil Export

Data from manufacturers association, shows that Nigeria is only able to take up less than 1 per cent of the global market share of most products coupled with the perennial macro-economic, infrastructure and policy environment challenges, as well as the unconducive atmosphere for doing business.

Also, the repatriation of sales proceeds from exporters by the Central bank of Nigeria has been raised as a challenge by many exporters at different fora.

For instance, the DG of MAN, noted that The CBN RT200 FX programme is a good initiative designed to stimulate the growth of non-oil export in Nigeria which has a pillar for the non-oil export FX rebate scheme.

He however argued that the N65 to $1 offered by CBN does not cover the FX rate gap between the official and parallel market which the exporters are not finding easy to reconcile.

Also, exporters have argued that collateral by banks is a major hinderance to granting credit facilities to export business, saying that replacement of collateral is becoming highly imperative if the country is going to grow its export volume.

Similarly, poor quality and packaging in recent times have proven to be a problem in the Nigerian export market. Nigerian products have been rejected by the same market that buys the same products when it is shipped through other countries.

A classic example was in June 2017 when the then minister of agriculture, Mr. Audu Ogbe, alluded to poor quality as the reason why the United States rejected Nigerian yams.

Recall that in June 2017, Nigeria exported yams to China, England and the United States. The then minister however stated that “the yams were found to be of poor quality.”

In the same vein, the Executive director of the Nigerian Export Promotion Council, Dr Ezra Yakusak, lamented the report from Pre-shipment Inspection Agencies (PIA) which according to him revealed “A significant growth in export proceeds in the last 5 years 2017-2021 from $1.2bn to $3.4bn as against an annual average of $22bn food importation alone into the country.”

By implication, it means that Nigeria has an export deficit of about N7.4trn ($18bn).

Way forward

At the just concluded non-oil export conference in Abuja, the Manufacturers Association of Nigeria through its director general, Mr. Segun Ajayi Kadir, said for the non-oil sector to be more competitive, there is the need to review the vision of NEPC N50 billion Export For Survival fund as well as the CBN (RT200 FX Programme) as it will encourage and empower exporters, expand their market as well as enhance the inflow of non-oil export proceeds into the country.

Also speaking at the non-oil export conference, the executive director/Chief Executive Officer of the NEPC, Dr. Ezra Yakusak, highlighted some of the efforts the agency and the federal government are putting in place to boost export growth.

He noted the relevance of the conference considering the plethora of challenges bedevilling the non-oil export sector which include adverse effect of COVID 19 pandemic on export operations, the distress calls of practitioners on regulatory constraints and restrictions on export business, and the dire need to strengthen the diversification agenda of the Federal Government.

He also raised concern on the Nigerian non-oil export performance in recent times in comparison to import which has a deficit gap of over $18bn.

To close this gap, he said concerted efforts are required from all practitioners in the non-oil export value chain.

“The ‘Export4Survival’ campaign which was launched by the Council on 19th February, 2022, is a clarion call to action. It is a deliberate effort to stimulate national consciousness to current realities in the non-oil export ecosystem. It is also a wakeup call for massive investment and a campaign to leverage our vast potentials and increased opportunities in the sector. This is a sure way to sustainable economic growth and prosperity.

“NEPC has also evolved cutting edge-projects and initiatives to promote and develop the non-oil export economy. Part of Council’s efforts in this regard, amongst others, is the Zero Oil Plan, which was designed at the heels of the economic recession to make the country less dependent on oil while leveraging on the abundant natural and agricultural resources for foreign exchange earnings, employment generation and overall socio-economic development of Nigeria

“Similarly, the Domestic Export Warehouse (DEW) initiative is a one-stop facility aimed at assisting exporters conduct their pre-export operations to ease logistical constraints. Recently, the NEPC launched an Export Trade House in Egypt. In a few weeks, another Trade House will be launched in Lome, Togo. The rationale behind establishing these Trade Houses is to enhance the visibility of made in Nigeria products and increase Nigeria’s market share in the host country as well as other neighbouring countries,” Dr. Yakusak said, while stating efforts made by the federal government to promote non-oil export growth in the country.

Also speaking, the vice president, Prof. Yemi Osinbajo, said the commitment of the federal government to deepen productive and export capacity is evident in the national development plan (NDP 2021-2025).

He said “The strategic objective of the National Development Plan shows clearly where we are headed to in terms of the non-oil export which includes the establishment of a strong foundation for a diversified economy to invest in critical infrastructure enabling human capital, improving governance and strengthening security all of which we expect will contribute significantly to achieving the national development aspiration.”

Speaking further, the vice president added that “The core mandate of the Presidential enabling business environment is to consolidate and remove regulatory constrains especially around agro-export and to drive the electronic filing of taxes and publication of insolvency regulation of companies and Allied matters Act 2020.

“The agro export plan prioritizes trade facilitation reforms to minimize cross border trade transport logistics and for Nigerian companies to do better and to be more compliant with the AFCTA export compliance regulations,” he added.

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