The export of goods and services represents one of the most important sources of foreign exchange earnings for a country as it complements imports and eases the pressure on the balance of payments. Nigeria’s economy has accrued major benefits from exporting crude oil, and this has been the country’s major source of foreign exchange earnings, representing over 50 percent of government revenue. But, over-reliance on oil exports led to neglect of other export products and services that could greatly contribute to the country’s foreign exchange earnings. Several government policies have been geared towards the diversification of Nigeria’s economy from oil to other sectors such as agriculture in order to boost non-oil exports.
In recent times, the fall in global oil prices as well as challenges including the COVID-19 pandemic, disruptions in global supply chains, economic recession, the Russia-Ukraine conflict, and attendant food security crisis has exacerbated Nigeria’s economic woes. Though the aforesaid challenges may have propelled the current rise in Nigeria’s non-oil exports, it shows the foreign exchange earnings that can come from the non-oil economy, if the government gives it the needed attention.
The current state of 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.
The Nigerian Export Promotion Council also stated that between 2019 and 2021, Nigeria exported non-oil products worth $3.455 billion. According to OPEXA, a think-tank on the non-oil sector, over eleven million Nigerians earn their livelihood from non-oil exports. This implies that non-oil exports can become a major determiner of Nigeria’s economic growth and development.
Though non-oil export is positioned as a major source of foreign exchange earnings for Nigeria, it only accounted for over 10 percent of total exports in the first half of 2022, while crude oil exports contributed about 79 percent to the country’s total exports.
The government and non-oil exports
One of the oldest policies on non-oil exports is the federal government’s Export Expansion Grant (EEG) scheme which operates under the legal context provided by the Export (Incentives and Miscellaneous Provisions) Act of 1986. The policy is a fiscal policy instrument implemented by the NEPC, the CBN and the Nigeria Customs Service. The grant is given to exporters to reduce the impact of infrastructural disadvantages faced by exporters and to make Nigerian exports competitive in the international market.
In 2020, the federal government also rolled out a 50 billion naira Export Expansion Facility Programme (EEFP) under the NGN2.3 trillion National Economic Sustainability Plan. The programme which is also implemented by the NEPC aims to increase Nigeria’s export capacity in the near term and export volumes in the medium term by supporting exporters, especially micro, small and medium entrepreneurs (MSMEs).
The Central Bank of Nigeria (CBN) plays a significant role in boosting financing options for non-oil export value chains through several ongoing initiatives. There is the 500 billion naira Non-oil Export Stimulation Facility, designed to enhance access of exporters to concessionary finance and attract new investments in value-added non-oil export production. Also, the 300 billion naira Real Sector Support Facility (Differentiated Cash Reserve Requirement Facility) seeks to increase the flow of credit to the real sectors of the economy.
Recently, the CBN launched a $200 billion foreign exchange repatriation (RT200 FX) initiative. This initiative plans to raise $200 billion in foreign exchange earnings from non-oil exports over the next three to five years. The programme arose from the need to diversify Nigeria’s export earnings from oil which is battling a serious decline in daily production and foreign exchange earnings. The NEPC also unveiled the Export4Survival campaign in February 2022. This is a strategic initiative to increase awareness of opportunities in the sector and to highlight the benefits of exporting Nigerian goods and services to boost the overall growth of the Gross Domestic Product (GDP).
Te NEPC announced in December 2020 that it is in the process of establishing a domestic export warehouse (DEW) to tackle supply chain constraints in the export of non-oil products and hence, enhance competitiveness. As of July 2022, the NEPC had issued licenses to thirteen DEW operators across the country’s geopolitical zones to kick-start the initiative’s implementation.
In the quest to improve non-oil exports, the Nigerian Ports Authority (NPA) created ten new export processing terminals to facilitate cargo exports. The port authority is also in the process of automating port operations and launching the National Single Window platform where all transactions will be done, including payments.
The federal government through its ministries, departments, and agencies (MDAs) may have implemented multiple policies to boost non-oil exports but at the state level, the story is different. Some states have positioned themselves as ‘civil service states’ with little contribution to non-oil exports while others, such as Lagos, Kaduna, and Ekiti states are attracting investments that will help boost their non-oil exports. It is thus imperative for governments at all levels to implement policies that will boost their non-oil sectors.
The current insecurity situation has had a negative impact on non-oil exports in Nigeria as it affects cultivation in the agricultural sector and production in the manufacturing sector. The federal government needs to tackle the security situation in the country as this will encourage diversification of the economy and help to boost non-oil exports.
Nigeria also has the opportunity to platform its non-oil exports using the African Continental Free Trade Area (AfCFTA) to increase its earnings by opening up Africa’s supply chain to raw materials, finished products, and access to credit for non-oil products. When import tariffs and taxes are minimal, exporters will be encouraged to expand their reach.
Photo by AMISOM via Iwaria