The Nigerian non-oil export sector is performing sub-optimally, but naira devaluation makes it look bigger than it really is.
The Nigerian Export Promotion Council (NEPC) recently reported that the nation earned N9.65 trillion from non-oil exports in 2024, representing a rise from N3.14 trillion recorded in 2023. In naira terms, the 2024 non-oil export value represents three times the 2023’s.
At first glance, it seems like a success story. However, a deeper look tells a different story.
In dollar terms, the non-oil export value stood at $5.45 billion in 2024, representing just a 20.79 percent increase from the $4.517 billion recorded in 2023. This shows that the naira gap looks exaggerated in dollar terms.
With naira devaluation, a $2 billion earned from the non-oil export in 2024 could mean over N3 trillion. The same dollar income in 2019 meant a little over N600 billion. But that is not all.
Weaker trade
Data from the National Bureau of Statistics (NBS) reveal that non-oil exports accounted for an average of just 10.88 percent of total exports from January to September 2024.
In 2023, non-oil exports represented merely 9.17 percent of total export trade as against 8.94 percent reported the previous year.
In 2019, non-oil exports accounted for 11.97 percent of total exports, with the share rising to 12.68 percent in 2020. The non-oil exports share of the total exports fell to 11.35 percent in 2021.
In fact, a chart shows that the share of non-oil exports has been on the downward trend since 2020.
Before then, the trend had almost been the same. Non-oil exports’ share of total exports was highest at 30.8 percent in 2012 but stood at 11.86 per cent in 2015.
But the trend is different elsewhere. The non-oil exports constituted 25.49 percent of Indonesia’s export to China in 2023 ($56.56 billion). Mobile phone alone constitutes 21 percent of Vietnam’s total shipments to other nations, while textile and electronic make up 24 percent, according to Trading Economics.
Read also: Revitalising Nigeria’s economy through manufacturing-driven non-oil exports
Dollar earnings falling
In 2020 when the COVID-19 pandemic interrupted global trade, Nigeria exported more non-oil products in percentage terms than in 2019, 2021, 2022, 2023 and 2024.
In 2019, Nigeria generated $8.23 billion from non-oil exports at an annual average exchange rate of N305.99 per dollar, according to official data. By 2022, earnings had dropped to $6.03 billion, even as the exchange rate weakened to N423.98 per dollar.
Fast forward to 2024, and despite a far weaker naira, which averaged N1,767 per dollar throughout the year, Nigeria’s non-oil exports brought in only $5.45 billion.
This implies that even in dollar terms, the non-oil export incomes have been on the downward spiral.
Structural imbalance
The reality is that crude oil still dominates Nigeria’s exports. Latest NBS data show that crude oil exports represented 65.44 percent of total exports in 2024, followed by liquefied natural gas, and other petroleum gases which find their way to America and Europe.
Non-oil exports are mainly driven by agricultural products like cocoa, seeds, soybeans, cashews and others, including some manufactured goods. Non-oil exports has been far less than 10 percent of the total trade over the years.
The CBN in January said that earnings from non-oil exports went up in September mainly because of increased sales of farming products.
While higher naira revenue is good news for the national purse, the reality is that non-oil exports still make up a smaller share of total trade.
Odiri Erewa-Meggison, chairman of the Manufacturers Association of Nigeria Export Promotion Group (MANEG), said that Nigeria’s non-oil contribution to exports remains low due to a combination of issues, including poor structure and the high cost of production.
“High cost of borrowing, inflation, depleting infrastructure, anti-business regulations by ministries, departments and agencies whose purview covers the manufacturing and export value chain, and high electricity tariff are some of the major issues limiting our non-oil export potential,” she had earlier told BusinessDay.
The rising logistics cost, due to high diesel and petrol prices, widespread insecurity and delays in administering export incentives further weaken Nigeria’s trade position.
CBN’s role
After floating the naira last year to reduce demand for imports, the CBN has argued that economic fundamentals must be solid for the country to benefit from a floating exchange rate.
“Until the fundamentals are fixed and in place, you will continue to sub-optimise,” said Olayemi Cardoso, governor of the CBN, after an MPC meeting in October 2024.
“As long as we are a monolithic economy, the constraints to having the strong exchange rate that we all desire will continue to be hampered…There’s only so much that the central bank can do.”
According to Obiora Madu, a trade expert, Nigerian products are more expensive than others in the international market as the local producers and exporters still struggle with poor infrastructure that often makes their products.
The NEPC has now set a new 30 percent growth target for non-oil exports. However, it is unclear whether this is a growth in volume or revenue as one does not necessarily need the other to happen.
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