For decades, Nigeria’s economy has been closely tied to the fluctuations of global oil markets. Since the discovery of oil in 1956, it has been the main source of revenue and dominated exports.
However, as the world moves towards greener energy and oil prices become increasingly volatile, Nigeria is shifting its economic focus.
Recent data from the Nigerian Export Promotion Council (NEPC) shows a turning point: non-oil exports increased by 6.26 percent, bringing total revenues to $2.7 billion in the first half of 2024.
This increase is an important step towards reducing the country’s dependence on oil.
The Shifting Landscape
Thus, the growth in non-oil exports, driven by agriculture, solid minerals, and manufacturing, highlights this change and points to a new direction for Nigeria’s economy. As these non-oil sectors grow, they indicate a shift away from an oil-dependent economy, changing Nigeria’s economic future.
According to the NEPC, non-oil exports reached $2.7 billion in the first half of 2024, up from $2.5 billion in the same period last year. This shift, supported by the focus on semi-processed products, marks a significant shift in Nigeria’s export dynamics.
During this period, total export volume amounted to 3.834 million metric tonnes, spanning 211 different products. These products ranged from agricultural commodities to items in the extractive industries.
“We are seeing the results of our diversification strategy, particularly through the ‘Operation Double Your Exports’ initiative,” said Nonye Ayeni, executive director and CEO of NEPC.
“This performance shows that Nigerian exports are gradually shifting from raw agricultural products exports to semi-processed and manufactured goods,” she added.
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Agriculture Leads the Shift
Agriculture is at the forefront of this shift. Nigeria’s agricultural sector recorded strong growth in the first quarter (Q1) of 2024, with exports rising to ₦1.04 trillion—a 123 percent increase from the previous quarter and a staggering 270 percent rise compared to Q1 of 2023, according to the National Bureau of Statistics (NBS).
This surge was primarily driven by exports of sesamum seeds and cocoa beans, with demand particularly strong in Asia and Europe.
The momentum continued in the second quarter (Q2) of 2024, with the agricultural sector growing by 1.41 percent, while the oil sector’s contribution to GDP dwindled to 5.7 percent. This trend suggests that Nigeria’s economy is gradually diversifying, with agriculture positioned to play a pivotal role in its future growth.
Solid Minerals Gaining Momentum
Another promising area is Nigeria’s solid minerals sector, which is gaining momentum as part of the government’s agenda to transform the sector for international competitiveness and domestic prosperity.
In Q1 2024, trade in solid minerals reached N134.79 billion, representing 0.42 percent of total trade. Exports surged to N63.41 billion, a 76.77 percent rise from Q4 2023 and a 143.69 percent increase from Q1 2023.
Key exports included tin ores and concentrates to China, valued at N17.09 billion, and cement clinkers to Cameroon, worth N8.62 billion.
Despite historical underinvestment, Nigeria’s abundant deposits of limestone, tin, and gold are now attracting private investors. Regulatory reforms aimed at creating a more business-friendly environment are gradually paying off, with the solid minerals sector showing potential to become a major revenue stream.
This transformation echoes a similar pattern in Chile, where mineral exports have been a significant driver of economic diversification. Chile’s success, where mining contributes a significant portion of GDP and export revenue, provides a model Nigeria could follow.
Manufacturing Boost: Nigeria’s Local Production Rise
Manufacturing, another key sector, has seen significant growth in Q1 2024. Trade in manufactured goods reached N6.007 trillion, accounting for 18.88 percent of total trade.
Of this, exports totaled N268.70 billion, with key products including unwrought aluminium alloys, cathodes, and refined lead exported to markets in Japan, China, and the United States.
Most manufactured goods were exported to Asia, which accounted for N148.13 billion of the trade, followed by Africa and Europe. The sector’s expansion reflects the government’s emphasis on local production and reduced reliance on imports.
However, this growth faces challenges, including inconsistent electricity supply, high production costs, and competition from cheaper imported goods.
“The manufacturing sector is vital to reducing Nigeria’s import dependency, but we need reliable power infrastructure to stay competitive,” said Funmi Ogundele, a factory owner in Lagos.
Despite these challenges, optimism remains high. Ogundele added, “The African Continental Free Trade Agreement (AfCFTA) is creating opportunities for us to export across Africa, but the government needs to provide the right policies to fully realise this potential.”
The Manufacturers Association of Nigeria (MAN) said, “Energy prices are affecting its members.” It added that the cost of logistics, foreign exchange crisis and taxes are hitting several factories hard.
Read also: Trade surplus hits N12trn in H1 as weak naira raises exports
The Challenges of Diversification
Despite the promising rise in non-oil exports, Nigeria faces considerable challenges in sustaining this momentum. Poor infrastructure—ranging from inadequate roads to congested ports—continues to stifle productivity and export efficiency.
Post-harvest losses in agriculture exceed 50 percent, costing Nigeria an estimated N3.5 trillion annually—far more than the government’s agricultural budget over the past five years, BusinessDay findings.
This is particularly severe for tubers, fruits, and vegetables, where losses can reach as high as 60 percent.
“Reducing post-harvest losses will help Nigeria increase its food supply without necessarily increasing its production,” AfricanFarmer Mogaji, former head of agribusiness, Lagos Chamber of Commerce and Industry, said.
In addition, regulatory bottlenecks and limited access to affordable financing create substantial hurdles, particularly for SMEs in the non-oil sectors.
“Getting loans is almost impossible for small players like us,” lamented Mary Olowu, a cocoa exporter.
“The high-interest rates and collateral demands make it hard to grow, even when we have international buyers waiting.”
While government initiatives such as those from the Nigerian Export-Import Bank (NEXIM) and the Bank of Industry (BOI) offer support, high-interest rates and stringent collateral requirements keep many businesses from accessing much-needed capital.
Insecurity further disrupts operations, exacerbating the already challenging business environment.
Opportunities for Diversification
Despite these obstacles, the growth potential in Nigeria’s non-oil sectors remains vast. Agriculture, bolstered by vast arable land and a growing population, could significantly increase export revenues while simultaneously improving food security and job creation.
Initiatives to enhance mechanisation and provide farmers with better seeds are positive steps, but more investment in infrastructure, financing, and technology is crucial for long-term success.
Similarly, the solid minerals sector holds immense promise. Although Nigeria has over 44 commercially viable minerals, the sector remains underdeveloped.
Government initiatives to attract foreign investment and map resources are promising, but combating illegal mining and ensuring the local population benefits from these resources will be key, experts say.
Manufacturing also presents opportunities, with Nigeria’s large population offering a substantial market for locally produced goods.
Special Economic Zones (SEZs) and the Nigerian Industrial Revolution Plan (NIRP) are designed to boost capacity, but power supply and access to financing remain critical challenges.
The Road Ahead
Nigeria’s non-oil export growth in Q2 2024 offers a glimpse of a more diversified economic future, but sustaining this progress is crucial if the country hopes to reduce its dependence on oil. While the challenges—such as infrastructure gaps, security issues, and regulatory bottlenecks—are significant, the opportunities for growth are equally substantial.
To fully realise the potential of its non-oil sectors, experts say Nigeria must prioritise improvements in infrastructure, enhancing security, simplifying regulations, and expanding access to financing are essential steps.
Looking abroad, Nigeria can draw valuable lessons from successful diversification efforts. Chile’s mining sector offers insights for Nigeria’s solid minerals industry, while Indonesia’s non-oil export strategy underscores the importance of making strategic investments in high-growth areas. By adopting these models, Nigeria can chart a course towards a stronger, more diversified economy.
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