Increasing Nigeria’s non-oil exports to U.S. market

The United States of America’s economy is almost $20 trillion in terms of size. It has over 300 million consumers who are educated and sensitive to price, quality, standards and value.

China understood the dynamics of the American market and consumers,  and grabbed the market opportunity with both hands.

Data show that U.S. exports to the China were $179.3 billion in 2018, but China’s exports to the U.S. amounted to  $557.9 billion. The U.S. goods and services trade deficit with China was $378.6 billion in 2018. Though this is the biggest reason forU.S.- China trade war, it underscores  China’s preparedness and deliberate plan to export its products to a thriving market.

“The U.S. has run large deficits with China for years and in some cases no longer produces certain goods such as consumer electronics that are popular with Americans. It won’t be easy, and it might even be impossible, to reduce the gap much any time soon,”Jeffry Bartash of marketwatch.com said recently.

Can Nigeria’s non-oil exporters attempt at taking a small chunk of the U.S market? Experts say they can.

In 2000, the United States of America opened its market for sub-Saharan African (SSA) countries through the African Growth and Opportunity Act (AGOA).

The idea was that countries like Nigeria would export up to 7,000 products to the U.S. without paying any duty or tariff.

The arrangement was supposed to end in 2015 but was extended to 2025 to enable SSA countries, which did not take full advantage of the first trache, to do so.

The legislation significantly enhances market access to the U.S. for qualified countries.

Some of the products/commodities that qualify for export to the U.S. market are poultry, bees, meat of goats, fresh, chilled or frozen, turkeys, live ornamental fish, other than freshwater, mackerel and sardines.

Others are fresh or chilled swordfish other than fillets, milk and cream, yoghurt in dry form, butter, cocoa powder (sweetened or not), guava, apples, ginger, juice and pine apple, among many others.

Unfortunately, despite the opportunity to export 7,000 goods listed under the Act, Nigeria has not taken advantage of the market opening to ship its local products to the U.S. market.  The country has only benefitted from the petroleum products.

The U.S. goods and services trade with Nigeria amounted to an estimated $12.1 billion in 2017. U.S. exports to Nigeria were $4.6 billion, while Nigeria’s exports to the U.S. were $7.5 billion, according to the Office of the United States Representative.

In other words, the U.S. goods and services trade deficit with Nigeria was $2.9 billion in 2017. This may look good on the face value until one understands that oil and minerals were basically what Nigeria offers the U.S.

“Nigeria is currently our 49th largest goods trading partner with $8.3 billion in total (two way) goods trade during 2018. Goods exports totaled $2.7 billion; goods imports totaled $5.6 billion. The U.S. goods trade deficit with Nigeria was $3.0 billion in 2018,” the office wrote on its website.

In 2014, Nigeria non-oil exports to the U.S. were $2.6 million while South Africa exported in excess of $1.2 billion

Experts say this is not good enough, especially when AGOA ordinarily should present opportunities for non-oil exporters. They admit that lack of competitiveness of non-oil export firms contributes to this situation.

Manufacturers and exporters spend billions of naira sourcing alternative energy to keep their factories alive.

Expenditure on alternative energy sources by members of the Manufacturers Association of Nigeria (MAN) in 2018 was N93.1 billion, according to the association’s economic review.

The country’s poor infrastructural facilities, which include transport system, hurt exporters.

Logistics is also a critical issue. Importing inputs and taking them to factories is a big issue, given the state of Apapa and Tin Can ports in Lagos. Delays and gridlocks in Apapa increase companies’ production costs, thereby lowering their productivity.

Taxes paid by businesses in Nigeria today are up to 54, according to experts. Some of these taxes and levies are multiple and need harmonisation, say analysts.

Funding is also a crucial issue. Nigeria’s benchmark interest rate is among the highest in Africa at 13.5 percent. Ethiopia’s is 7 percent;  Kenya is 9 percent;  South Africa is 6.75 percent;  Zambia is 10.25 percent, and  Cameroon is 4.25 percent.

Similarly, Rwanda is 5 percent; Mauritius, 3.5 percent;  Algeria is 8 percent, and Senegal is 4.5 percent. Manufacturers are asking the Federal Government to recapitalise especially the Bank of Industry, which provides single-digit funding to them. Doing this, they say, will increase lending to the real sector.

Today, product packaging among SME exporters is relatively average, say experts.

Again, some small-scale Nigerian exporters compromise standards, making product penetration to advanced markets like the U.S. nearly impossible, say analysts.

Muda Yusuf, director-general of the Lagos Chamber of Commerce and Industry (LCCI), said the major issue is lack of competitiveness. He said efforts must be made to remove business environment-related challenges to spur export firms.

John Isemede, former director-general, Nigerian Association of Chambers of Commerce, Industries, Mines and Agriculture (NACCIMA), once said that Nigeria needs to address its challenges inwardly before thinking of how to benefit from AGOA initiative.

“Failure to do that, whether AGOA is extended for 20 years, we will continue to work for other people,” Isemede said.

Experts say the country must support exporters with incentives.

Up till now, Nigeria is yet to start providing incentives in the form of export grant to genuine exporters. Export Expansion Grant existed until 2013 when the immediate past government suspended it on the grounds of abuse. But it is yet to start, despite that the current Federal Government has been compiling names of qualified exporters and waiting for legislative approval since 2016.

Brent Omdahl, commercial counsellor, US Consulate, Lagos, told BusinessDay in an exclusive interview that participating countries, including Nigeria, need to understand the concept of AGOA. He said being a participating country and enjoying tax free do not mean not following due processes.

Omdahl said products exported to the U.S. would still undergo and pass through necessary regulatory tests, among which are phytosanitary regulations.

“There are some minimum standards that countries have to adhere,” he said.

“Zero duty access does not mean you have to just start exporting. You have to organise yourself.

“In exporting agricultural products, for example, such products would have to be subjected to all of the Food and Drug Administration (FDA) regulations and comply with sanitary and phytosanitary regulations.”

Omdahl said the U.S. government, through the US Agency for International Development, has some small resources available to help companies locally to develop their expertise in order to take the advantage of AGOA.

Omdahl said it is unfortunate that crude oil that has benefitted from the AGOA initiative most, which is against the original intent of the act.

He said the intention of AGOA is to create the pathway for a country like Nigeria to move up the value chain.

“It is the Nigerian industry that needs to organise itself,” he said.

Recounting lessons US-Vietnamese bilateral agreement, which is similar to AGOA, Omdahl said Vietnam does a very good job by adding value to their products in order to meet up with the U.S. standards.

In doing this, Vietnam attracted investments from Taiwan in the textile sector in order to develop their textile industry as well so as to take advantage of exporting it to the U.S., he explained.

The country equally developed its furniture sector and even started importing some hard woods from the U.S. to augment existing local woods, turning them into furniture and sending them to the US to sell in big outlets, he added.

“With this arrangement, Vietnam created wealth and employment,” he said.

Omdahl said Nigeria has a lot of products that can make it to the U.S. markets if properly harnessed and improved upon.

“Nigeria needs to look inwards to find those products, develop them, increase their value addition, export them, and through that, create wealth and employment for the country.”

“So, the question for Nigeria is, what are the products that are going to do that? I can think of some. Talk about the shoes. There is a history of making shoes here. The sky is really the limit,” he concluded.

Odinaka Anudu, Michael Ani & Gbemi Faminu