As oil and other non-oil export products appear increasingly volatile in the international market, experts want Nigeria’s policy makers to shift focus to more stable foreign direct investment (FDI) and Diaspora inflows.
“Nigeria relies almost exclusively on volatile export income for foreign exchange supply, neglecting opportunities to attract more stable Diaspora and foreign direct investment inflows,” said Ayo Teriba, CEO of Economic Associates, on Wednesday in Lagos.
“No point trying to get even portfolio investments because they will leave you when you don’t expect them to. But Diaspora inflows and FDI have been stable. Non-resident Indians and Chinese invest massively at home to fund economic recovery and growth efforts,” Teriba said at an export symposium organised by the Export Group of the Lagos Chamber of Commerce and Industry (LCCI).
“Nigeria boasted more FDIs than South Africa, India, UAE and South Korea in 1990, but all these countries have taken their destinies in their own hands. India is today the most open economy in the world for FDI. In Nigeria, the budget tells you that government can do all things. Why should you borrow and give money to contractors when you can do something to bring people who have cash already?” he asked.
He explained that India’s FDI was $1.6 billion in 1990 but has now risen to $300 billion due to the open policy of the government.
Nigeria’s earnings in non-oil export fell from $3 billion in 2013 to $1.1 billion in 2015, owing to falling commodity prices, low productivity and weather. Oil prices, on the other hand, have seen a steep decline in the last 30 months.
Nigeria’s major export over the years is crude oil or minerals, which account for 85 to 90 percent of total foreign exchange earnings, even though it is now less than 10 percent of the gross domestic product.
Cocoa is Nigeria’s biggest non-oil export earner but its price has been fluctuating. In February this year, benchmark cocoa futures on the Intercontinental Exchange in New York, fell to $2,052 per metric ton, the lowest level since March 2013.
Rubber, Nigeria’s second non-oil export product after cocoa, has had a six-year downturn owing to glut, high-energy prices and falling car prices. International prices are currently picking up but Nigeria’s rubber production is at an all-time low of 60,000 metric tonnes, which is insignificant for substantial dollar inflows.
Prices of solid minerals, which Nigeria is relying on for dollar inflows, have been on the downward spiral in the international market.
The price of iron ore dropped five percent to a six-month low on Tuesday, owing to low Chinese steel prices and global glut.
The Financial Times reported that benchmark Australian ore for immediate delivery into China was down $3.10 to $61.50 a tonne, as iron slumped by a third since hitting $94.5 a tonne two months ago.
“I saw a news item showing how goods were exported from the UK to China by rail. This was across five countries. The Economic Community of West African States (ECOWAS) has rejected the Economic Partnership Agreement (EPA), but how do we invest in infrastructure such as rail to boost the economies of member states? Why are we not taking advantage of the potential of the region?” asked Bamidele Ayemibo, chairman, Lagos Chamber of Commerce and Industry Export Group.
Ayemibo explained that Nigeria is so used to commodities but is neglecting adding value to export products, citing an example with raw cashew, which is sold for $1,500 per ton but goes for between $14,000 and $15,000 per ton when its shells are removed.
Nike Akande, president of Lagos Chamber of Commerce and Industry (LCCI), stressed the need for the government to create an enabling environment for the private sector operators to add value to primary products.
“We must discourage the practice where we simply export primary products without adding any value. We are of the opinion that government has a critical role to play in providing the enabling environment for all the stakeholders in the non-oil sector,” Akande said.
ODINAKA ANUDU
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