Trade is the lifeblood of a nation’s existence. Buying, selling, and exchange of goods and services puts a country on the world map and within the global supply chain but sustenance happens when the country is consistent in trading in goods and services despite unforeseen circumstances and disease outbreaks.
Nigeria’s economy has accumulated benefits from its major export, crude oil. The natural resource has been the country’s foremost revenue source, as it accounts for ninety percent of foreign exchange earnings and sixty percent of total income from it. Surprisingly, the oil and gas industry contributes less than 10 percent to the country’s overall gross domestic product (GDP).
Over-reliance on crude oil exports shifted attention from other export products and services that could greatly contribute to the country’s foreign exchange earnings until recently. The fall in global oil prices caused by the COVID-19 pandemic disrupted global supply chains and plunged countries including Nigeria into economic recession. As if that was not enough, the ongoing Russo-Ukrainian war worsened the food security crisis in Africa and led to food price inflation with push-pull effects on the consumer price index. Through these challenges, Nigeria’s non-oil exports have performed beyond expectations.
It is true that Nigeria’s oil production has increased for two consecutive months now, despite its poor daily production in the first and second quarters of the year but there are concerns about sustaining the momentum, especially with the new NNPC Limited. Experts and government bureaucrats have reiterated that the recent growth in Nigeria’s non-oil exports can become a springboard for more diversification of Nigeria’s exports and maximize the opportunities and potentials of the country’s other exports.
Nigeria’s non-oil exports
The National Bureau of Statistics (NBS) reported that Nigeria recorded a 3.2 trillion naira trade surplus between January and June of 2022. Nigeria’s total exports stood at N14.5 trillion and total imports stood at 11.3 trillion naira, which gives a trade surplus of 3.2 trillion naira in the first half of the year. This is despite the fall in daily oil production.
Recent data from the Nigerian Export Promotion Council (NEPC) revealed that Nigeria’s non-oil sector exported products worth $2.593 billion in the first half of 2022. This represents a 62.37 percent increase from the $1.59 billion exported within the same period in 2021. Over 200 different products ranging from manufactured, semi-processed, solid minerals to raw agricultural products are currently exported from Nigeria. The top exported products in the first half of 2022 are urea/fertiliser, cocoa beans, sesame seed, and aluminum ingots.
Otunba Niyi Adebayo, Nigeria’s Minister of Industry, Trade and Investment stated that the AfCFTA can act as a catalyst for the country’s export diversification by providing preferential access to Nigerian products and services to the huge African market which currently sources over 85 percent of imports from outside the continent.
The minister made this statement at a subnational strategy workshop organised by the National Action Committee on AfCFTA in November 2021. A year later, Nigeria was not among the countries selected to provisionally start trading goods under the AfCFTA on a pilot basis. This is partly due to the fact that Nigeria’s implementation strategy for the AfCFTA has just been validated by the National Action Committee on AfCFTA but awaiting the approval and endorsement of the Federal Executive Council (FEC).
How can Nigeria diversify its exports?
It is imperative for Nigeria to diversify its exports. The country is taunted as a major benefactor from the AfCFTA but this can only happen when stakeholders show readiness to benefit from the free trade area through their policies and programs. The country will have to do the following.
Create more transport alternatives
Poor road network especially around the Lagos port areas is a huge barrier for transporting perishable agricultural products to the ports for export. The lack of varied options for transport infrastructure reflects in the NBS data on trade by mode of transport as 99.43 percent of total exported goods were transported via maritime because access roads to the ports are poor.
Also, there is relatively low trade by road happening between Nigeria and Niger, Chad, Cameroon, and Benin Republic, even though we share land borders. The controversial Maradi rail line that the Nigerian government is constructing to connect Kano (Nigeria) to Maradi (Niger republic) is one of the required infrastructures that will facilitate trade. Moreover, the Nigerian government can expand its public-private partnerships (PPP) for building transport infrastructure that will complement the overworked seaports and revamp roads leading to neighbouring countries.
Reduce protectionist policies
Nigeria’s trade policies have only grown more restrictive despite signing multiple free trade agreements (FTAs). Twenty-six goods are prohibited from being imported into Nigeria while the Central Bank denies foreign exchange at official market rates to importers of more than 40 other goods. Nigeria has contrasting laws and policies on trade. For instance, the 1989 Export Prohibition Act states that yam, cassava, and all their derivatives cannot be exported; however, the Nigeria Export Promotion Council (NEPC) is actively promoting non-oil exports including yam.
These protectionist policies hurt exports and need to be throttled back on. Also, the government should harmonise trade policies or formulate ones that mirror current economic and trade realities.
Tackle insecurity issues
Insecurity is a major factor limiting Nigeria’s export trade. Abductions, targeted attacks, and killings met on farming villages in Southern and Northern Nigeria have reduced the output of agricultural produce and considerably affected the export of agricultural and non-oil products. In 2021, experts blamed insecurity for Nigeria’s balance of trade deficit as imports surpassed exports by 503 billion naira in early 2021.
It is imperative that the government address the security situation squarely so that displaced farmers can go back to their trade, make the roads safer for drivers and promote intra-African trade.
Reduce trade tariffs and barriers
The pilot trading of the AfCFTA is being operated using modalities and tariff schedules submitted by participating countries. However, Nigeria is yet to reveal its tariff schedules and modalities for the AfCFTA.
It is imperative that stakeholders and policymakers such as the National Action Committee on AfCFTA be proactive in removing trade tariffs and collapsing barriers such as customs regulations. This will improve export operations for Nigerian SMEs, especially those that want to expand their operations using the AfCFTA.
The NEPC established three export trade houses (ETHs) in Cairo, Lome, and Nairobi. The major objective of the ETHs is targeted at enhancing the visibility of Nigerian products with plans to build more but this will not be needed, if the country’s policymakers focus on diversifying export and promoting intra-African trade under the AfCFTA using recommended transport, supply chain, and security solutions. Conclusively, Nigeria needs more vibrant export alternatives aside from crude oil and it has abundant resources to make it happen if only she can work with well-directed and well-implemented policies and programmes.