Network of Practicing Non-Oil Exporters of Nigeria

INCENTIVIZING NIGERIA’S EXPORTS: A STRATEGIC IMPERATIVE

BY
OLUFEMI BOYEDE, CITP

CERTIFIED INTERNATIONAL TRADE PROFESSIONAL

Since adopting the Structural Adjustment Programme proposed (more like dictated) by the IMF in
1986, successive Nigerian Governments have mouthed the desire to diversify the base of the
country’s economy away from oil. In the earlier years, there was a welcoming realization that
Nigeria’s only salvation was a deliberate concentration on developing her non-oil exports. In
preparation for this new direction, the Ibrahim Badamasi Babangida administration created a few
structures, the most prominent being the establishment of the Nigerian Export Promotion Council as
an autonomous agency with full mandate for the new economic direction. The administration followed this by promulgating, under the Export Incentives and Miscellaneous Decree number 41 of 1986, a basket of eighteen different incentives to support the country’s export drive. Nigerian Export Promotion Council then launched, and quickly etched itself on the Nigerian space via a very catchy, sexy and forward-looking slogan: EXPORT NOW FOR SURVIVAL. This slogan has metamorphosed, through the years and through successive leaderships at the agency to what we now have today, under the charismatic personality of Olusegun Awolowo as EXPORT BUSINESS, TOMORROW’S BUSINESS (I wonder why it is not TODAY’S BUSINESS?). A dedicated implementation of a few of these incentives at the onset (and through the years up to 2011-2012 actually saw a significant growth in Nigeria’s participation (and share ) of the international market in terms of volume, value and new markets. As an example, Nigeria’s total export value rose from N98.457,223,020 in 2005 to N17, 321, 887,924,274 in 2010! A progressively increasing number of new exporters were also added. Over the past few years however, there has been a decline in terms of Government’s understanding of the critical importance of supporting non-oil exports. Of the eighteen incentives that were introduced in 1986, only one – the Export Expansion Grant, EEG, is active today. Even this life-saver for the Nigerian exporter has witnessed a drastic reduction. In the 2020 national budget which was recently signed into law for example, a paltry sum of N2.5bn has been allocated to export incentives (only N1.9bn for EEG). In a global market place described as a fiercely competitive economic battlefield, every country supports their exporters to beat the foreseen and generally obvious competition.

Why Non-oil Exports?

With over 5,000 exportable commodities in available in Nigeria as well as over 48 Minerals and Gemstones in heavy commercial and exportable quantities, it certainly must baffle other countries of the world, why Nigeria would continue toundervalue her potential to become an export-driven economy. Nigerian entrepreneurs have great potentials for profitable participation in international business because Nigeria:

  •  Is rich in resources
  •  Has a continuously emerging consumer class;
  •  Has potentials for sharpened efficiency;
  •  Has incredible growth potential and thus;
  •  Can become en emerging market leader;
  •  Nigeria is obviously the Gateway for Sub Saharan Africa
  •  Nigeria’s economic situation of today demands that one needs to, wherever possible, “manufacture” his own hard currency.
  •  International Business (Exports) is the processing factory for hard currency as sale is made in foreign currency
  •  For the country, export trade enables the country to build her foreign reserves and thereby shore up the value of the Naira.
  •  It also guarantees convertibility of the national currency.

 With the newly created One Africa market, Nigeria can speedily grab and control a significant share of this new “foreign” market.
 It is estimated that 70% of goods in West Africa’s markets originate from Nigeria

A Perennial Misconception About the EEG Although, as stated earlier in this write-up, the EEG remains the only functional incentive in Nigeria, there is an erroneous perception on the part of the authorities that export business is already, in itself, a very profitable business and therefore requires no further support. Indeed, most of the Government authorities liken the EEG to oil subsidy and classify it as fraught with all manners of abuse and fraud, and at best, unnecessary. But, a more objective perspective would be to understand a few of the realities below:

1. Most of the multinationals “controlling” Nigeria’s non-oil export business today, bring in their operating funds at single-digit borrowing rates. The indigenous Nigerian exporter, if he is lucky to secure a loan to fund his exports, must accept the going lending rates of between 22% and 28% per annum. Lending rates in Nigeria are one of the highest in the world. How would this exporter survive, talk less compete, in an international market where prices are uniform and most times regulated by international market exchanges?

2. The perennial decay, deficiency and sometimes absolute lack of trade infrastructure (efficient transportation system from farm-gate to port, power, water, etc), the proliferation of pre-export agencies at the ports, the high costs of pre-shipment logistics, our never-ending port congestion, etc, exert an overall exorbitant extra cost on the unit price of Nigeria’s export products. There is, therefore, no doubt, that unless they can somehow have a hedge to fall back on, Nigerian exporters and their products start out second best against competitors from other parts of the world. The EEG as at today, is the only incentive that can provide such a hedge. The obvious questions then would be why Nigeria’s authorities are oblivious of these realities and if anything is being done to bring it to their attention. There is no doubt that Nigeria’s export sector is unorganized, with only the Export Group of the Manufacturers Association of Nigeria (and recently, the Organised Private Sector Exporters Association, OPEXA- which are in themselves restrictive in membership) claiming to represent the interest of exporters. In other climes, a sector as sensitive as this, and holding so much potential for the country’s economic redirection, would have a strong lobby or pressure group that provides evidence-based advocacy that would improve Government’s understanding of the issues and help it (Government) to evolve new and efficient support schemes.

 

In the continued absence of such a vehicle (or seeming difficulty with the two bodies above- mentioned), the most vocal effort, over the past five years, has been the Trade Stream of UKAID’s Project Development Framework II. Through its Exporters’ Voice, PDFII has held not less than twelve dialogues, with each focused on key issues plaguing Nigeria’s export growth. Their approach has been consultative, broad-based and research-supported. Relevant Government Regulatory Agencies, Certification Companies, Banks and financial institutions, Logistics Services Providers, active exporters and knowledgeable export consultants have been the pool from which PDFII draws participants for each dialogue. The results have been not only comprehensive and impressive, but, more importantly, unanimous. Nigeria now boasts of a Non-Oil Export Community of Practice as well as a non-oil export cooperative that includes members from all the segments of the non-oil export value-chain. PDFII is currently encouraging the Community of Practice to set up a Coalition of Nigerian Non-Oil Exporters. It is our humble opinion that PDFII has done more than a lot to support Nigeria’s non-oil export sector and should be commended. More importantly, it behoves on all and sundry in Nigeria’s non-oil export value chain, to ensure that the initiatives and programmes launched by the PDFII are sustained well beyond the project.

 

There is no understating the need to deliberately and proactively evolve a national non-export strategy that prioritises active support for non-oil exports through creative incentives to enhance and ensure competitiveness. Australia, a one of the world’s top-five exporting countries currently has about thirty-four (34) different incentives to support the country’s export trade by making her exporters and their exports continuously competitive. Nigeria has the capacity and the resources to do the same. So, LET’S Do IT.

Olufemi Boyede, CITP/FIBP
MD/CEO, Koinonia Ventures Limited, Nigeria
President, Koinonia Global Services Inc., Canada.

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