• Wednesday, November 06, 2024
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Nigeria’s non-oil exports decline amid push for FX earnings

Nigeria’s non-oil exports decline amid push for FX earnings

Amid efforts to boost dollar inflows, Nigeria has failed to increase its FX non-oil exports significantly in five years.

Data from the National Bureau of Statistics (NBS) show that the country’s non-oil exports accounted for 9.65 percent of total exports in H1 (half year) of 2024 from 15.30 percent in 2020, showing a decline of 5.65 percent over the period.

Odiri Erewa-Meggison, chairman of the Manufacturers Association of Nigeria Export Promotion Group (MANEG), said the country’s non-oil contribution to exports has been low owing to a combination of issues, noting that manufacturing exporters are operating under the high cost of production.

“High cost of borrowing, inflation, depleting infrastructure, anti-business regulations by ministries, departments and agencies (MDAs) 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,” Meggison said in a response to questions.

She added that the escalating logistics cost due to the increasing cost of diesel and PMS, prevalent insecurity and delays in administering incentives are also factors lowering non-oil exports.

Uchenna Uzo, professor of marketing at Lagos Business School, Pan-Atlantic University, said that the growth of non-oil exports is hindered by an underdeveloped regulatory landscape, noting that incomplete tax policies and legal requirements for non-oil trade are also key inhibiting factors.

He further said that the lack of understanding among non-oil exporters regarding the necessary knowledge and networks to succeed in exporting is also hindering non-oil export growth.

Read also: Nigeria’s local industries push to export made-in-Nigeria goods

“A lot of the laws governing trade and exports for non-oil products are not fully developed yet in terms of tax policies, legal requirements, and trade arrangements and agreements,” Uzo, who is also a consumer expert, said.

He noted that despite the challenges, there is a significant demand for Nigeria’s non-oil products across the West African region due to devaluation that has made them cheaper.

The share of non-oil exports in Nigeria’s total exports in the last five years has remained low despite the recent naira devaluation.

In value terms, it appears that the country’s non-oil exports increased by 283.7 percent from N964.2 billion in 2020 to N3.7 trillion in 2024. But due to the naira devaluation, it does not necessarily mean that export volumes increased over the period.

“We aren’t reaping the possible naira devaluation gains because of our low non-oil exports. The country is supposed to benefit from the naira float of the Central Bank of Nigeria, but that is not the case as we speak,” said Obiora Madu, CEO of Multimix Group.

“Nations, at times, deliberately decide to devalue their currencies to increase their exports, but we are not benefitting from the recent devaluation, and this is because of the lack of competitiveness of our products,” Madu said.

Read also: Saudi warns of $50 oil if OPEC+ fails to honour cut deal

According to him, Nigerian commodities are more expensive than others in the international market as local producers and exporters constantly struggle with poor infrastructure that often makes their products costlier when compared to their peers globally.

The availability of adequate infrastructure is a major determinant of the success or otherwise of every country’s industrial sector. However, Nigeria lacks the necessary infrastructure needed to grow businesses, especially developed transport systems such as roads and rails that are connected to the nation’s seaports.

Olayemi Cardoso, governor of the Central Bank of Nigeria (CBN), said the country must fix the fundamentals, diversify its economy and drive import substitution to have a stronger exchange rate system.

“Until the fundamentals are fixed and in place, you will continue to sub-optimise. Non-oil exports — and I spoke about the sad situation that we, as Nigerians, face today — whereby we are a monolithic economy,” he said after a recent Monetary Policy Meeting (MPC).

“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.

“We need to diversify our economy. There’s only so much that the central bank can do. Without the fundamentals in the right position, we will continue to support and optimise. Again, as Nigerians, we must look for ways of import substitution. It cannot all be about import, import, import. Our taste for foreign goods also must be calibrated accordingly.”

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