Economic recession currently besetting Africa’s biggest economy provides big opportunities to formalise
Nigeria’s export sector is still largely unorganised, undocumented and hard to track, as the majority of trade take place in the informal sector, which is open to corruption and robs government of the much needed revenue and data for monitoring and planning, according to John Kachikwu, CEO of John Tudy Interbix, a foods exporter to the US and Africa.
Lack of formal structure of the export sector means that Nigeria’s government is under-recording goods leaving the country, which according to BusinessDay calculations from the International Trade Centre (ITC) data, amount to $17 billion in the last three years.
Olusegun Awolowo, chief executive officer (CEO), Nigerian Export Promotion Council (NEPC), had confirmed in early 2015 that 80 percent of non-oil export transactions of the country were not being recorded, accounting for the wide disparity in the official statistics in the country and those provided by the ITC.
There is often a wide disparity between the ITC data and data from Cobalt International Services, which is the indigenous company assigned with the role of calculating non-oil exports in Nigeria. This is because Cobalt calculates Nigeria’s non-oil exports from the point of exit or at the ports, while ITC calculates countries’ non-oil export figures from import countries or points of arrival, the point NEPC acknowledges. ITC is a subsidiary organisation of the World Trade Organisation (WTO) and the United Nations Conference on Trade and Development (UNCTAD) and provides trade-related technical assistance to 117 countries
BusinessDay compared data between the two and found that more goods are leaving Nigeria unrecorded due to lack of formalisation of several businesses in the country.
While ITC recorded $11.2 billion in 2013, Cobalt’s figure was $2.97 billion. Also in 2014, ITC recorded $9.4 billion, while the local data estimated the non-oil export value that year at $2.43 billion. This was also the case in 2015 when ITC arrived at a figure of $2.88 billion, different from $1.10 billion posted by the local data compiler.
BusinessDay gathered from the Manufacturers Association of Nigeria Export Group (MANEG) that each exporter is often mandated to pay 0.5 percent of the total value of Freight on Board (FOB) to the Nigeria Export Supervision Scheme (NESS), which in the last three years amounted to $85 million. This figure was arrived at from multiplying 0.5 percent against the $17 billion, which is the difference between the ITC data and the Cobalt figures from 2013 to 2015.
This is bad for Nigeria’s economy hit by recession arising from oil price lows, which has slashed government revenue by over 50 percent, creating market distortions, job losses and hunger.
This poor formalisation also robs government and private sector agencies of funds such as certificate fees at the NEPC, certificate of origin fees payable to the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), non-agric fund paid to the government, and fees paid on the basis of products being exported.
Omowumi Gbadamosi, country director, Centre for International Private Enterprise, said over 60 percent of informal traders in West Africa (particularly Nigeria) are women, for whom the informal market provides opportunities to reduce poverty, create wealth, and find employment.
This kind of situation is well known,” said Dele Ayemibo, CEO of 3C Impex and vice president of Association of Metal Exporters of Nigeria in a telephone interview.
“We are losing a lot of money from this,” Ayemibo added.
Similarly, lack of formalisation of the mining sector makes it difficult for financial institutions to fund the sector valued at over N400 billion.
This consequently makes the sector prone to abuse, prevents proper planning and robs government of huge revenue in the sector.
Indigenous and foreign companies make millions of dollars from the sweat of poor miners, who only get stipends as pay.
Eleven gold miners in Zamfara State were paid N420, 000 in 2015 by a Chinese company, after toiling for 15 days. The Chinese company Trupsy Limited made N25.87 million ($130,000) from the sale of ounces of gold, without paying taxes to the federal government of Nigeria, miners told BusinessDay.
In 2011, illegal mining left 2,000 children with lead poison, killing 400 children, said Nasiru Tsafe, the then deputy coordinator of the state’s rapid response team.
“One of the first things we should do is to formalise the sector,” Shehu Sani, president, Miners Association of Nigeria told BusinessDay.
“We have to pay less attention to illegal mining for now and more attention to formalising the artisanal miners,” Sani said.
Razia Khan, analyst with Standard Chartered Bank, London, in a recent note entitled, ‘Nigeria–The rising cost of economic informality’, said banks comprise a key part of Nigeria’s formal sector economy, contributing even more significantly to government revenue . “However, the diversion of
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