Every great nation is a trading nation. As Charles Molloy, the 17th century Irish maritime lawyer, famously said of his country: “What would this island be without foreign trade. It is foreign trade that renders us rich, honourable and great, that gives us a name and esteem in the world”. So, trade makes a great nation. But trade in what? Well, as Adam Smith said: “No nation is ever rich by the exploitation of the crude produce of the soil but the exportation of manufactures and services”.
Being a great trading nation is thus not about exploiting and exporting raw materials, but about, as Adam Smith said, “the exportation of manufactures and services.” Every nation with talents can achieve this if they are willing to do the needful. Hence, David Hume said, no nation should be jealous of another’s trading prowess when it could exploit its own human talent and ingenuity to produce quality goods and services for export.
But Nigeria is so defeatist about its trading potential that it wants to turn itself into an autarchy. Yet, the problem is that, despite its abundant human and natural talents, it lacks the willingness to do what is needed to become a major exporter of manufactured goods. Truth is, it’s all about orientation and willingness; it’s about a nation’s policy choices!
Take the so-called Asian Tigers. They were once poor, with rudimentary manufacturing capacities. But they made a conscious decision to pursue export-oriented industrialisation. Or consider even South Africa, which is now Africa’s industrial powerhouse. It was once an inward-looking country, focusing only on mining. But it later decided to become an export-oriented country, with a focus on manufacturing and services. As a result, during the Uruguay Round trade negotiations, South Africa negotiated as a developed country, taking on challenging commitments to liberalise its economy faster than other African countries. Today, it is, at least within Africa, a major exporter of manufactures and services.
By contrast, Nigeria has been talking about promoting non-oil exports for years, but every policy choice it makes undermines that ambition. It is clear, for instance, that you cannot pursue import-substitution and export-orientation at the same time. The policies you need to achieve import-substitution – which are protectionist policies – cannot work for export-orientation, which requires trade openness in order to enhance the productivity and competitiveness of your industries and to secure overseas markets for their products. Yet, Nigeria thinks it can be a protectionist, import-substituting economy and, at the same time, be a major non-oil exporter. Such as a Janus-faced approach doesn’t work in trade!
And, of course, the results show it. In an interesting paper, titled “The African trade profile for manufactured goods”, the economist Ron Sandrey shows how ridiculously miniscule Nigeria’s share in Africa’s total manufacturing exports has been. Nigeria accounted for 0.9 percent of total African manufacturing exports to the world in 2013, compared to South Africa’s 38.6 percent. Indeed, Nigeria’s share fell below Egypt’s at 11.1 percent, Zambia’s 7.6 percent and even Cote d’Ivoire’s and Ghana’s at 1.1 percent each. Nigeria’s share of total intra-Africa manufacturing exports was just 0.8 percent in 2013, compared to South Africa’s 48 percent, Egypt’s 7.1 percent, Congo’s 4.9 percent, and below Ghana, Zimbabwe and Kenya at 2.4 percent, 2.2 percent and 2.0 percent respectively.
Nigeria has been talking about promoting non-oil exports for years, but every policy choice it makes undermines that ambition. It is clear, for instance, that you cannot pursue import-substitution and export-orientation at the same time
Of course, those figures were for 2013, but the situation has hardly changed. For instance, according to the Economic Complexity Index, although Nigeria exported $46.8 billion worth of goods in 2017, making it the 49th largest exporter in the world, 90 percent of the exports were crude oil and gas products. Statistics for the second quarter of this year show that crude oil continues to dominate Nigeria’s export basket, accounting for 86 percent of total exports, with manufactured goods representing a tiny 2 percent. It’s not surprising that Nigeria ranked 124th out of 129 in the 2017 Economic Complexity Index because the knowledge intensity of the products it exports is very low. I mean, think of it, what amount of knowledge is involved in exploiting and exporting crude products, which is why Adam Smith said, “no nation is ever rich by the exploitation of the crude produce of the soil.”
But why is Nigeria not a major non-oil exporter? Well, there are basically three problems. The first is the lack of productive capacity; the second is the lack of quality infrastructure to ensure Nigerian products meet international standards; and the third is the lack of seriousness about securing access to foreign markets and about export promotion.
Let’s start with the first. The fundamental determinant of a country’s ability to trade internationally is its productive capacity, but Nigeria lacks any serious manufacturing capacity. But why? Well, leaving aside the supply-side impediments, the truth is that Nigerian industries are too cocooned within protectionist walls and shielded from the foreign competitive pressure to adapt, innovate and build productive capacities. There is a strong link between open trade and developing productive capacities.
Then, the second problem: poor quality infrastructure. International trade is now significantly subject to standardisation. As a result, exporters must meet stringent quality and packaging requirements in foreign markets. But Nigerian agricultural products are often rejected by the EU for failing to meet safety standards. Similarly, Nigerian exporters of agro-based products can’t take advantage of the preferential US African Growth and Opportunity Act (AGOA) to export to the huge US market because of standardisation requirements. Surely, a country that is serious about increasing non-oil exports should prioritise building quality infrastructure and ensuring its export products meet international standards.
But here is the third problem. Even if Nigerian manufacturers have productive capacities and can produce products that meet international standards, they lack the necessary market-access and export-promotion support. Serious export-oriented countries enter into free trade agreements and establish efficient export promotion agencies to help their manufacturers to take advantage of export opportunities, as Japan’s “JETRO” and South Korea’s “KOTRA” do! But Nigeria has an antipathy towards free trade agreements; as such, it’s not interested in securing market access, let alone engage in serious export promotion.
Think of it. Nigeria is hostile to the EU-West African Economic Partnership Agreement; it is, as the recent border closure shows, uncommitted to the ECOWAS Trade Liberalisation Scheme and Common External Tariff; and it is taking a cynical view of the new African Continental Free Trade Area, AfCFTA. Surely, when a country is not truly export-oriented, when it’s not genuinely embracing free trade agreements, and thus not interested in securing market access, you can’t expect it to engage seriously in export promotion.
To be sure, Olusegun Awolowo, the executive director and chief executive of the Nigerian Export Promotion Council, NEPC, has demonstrated intellectual commitment and good leadership in promoting non-oil exports. But other government policies undermine his efforts.
Recently, the NEPC organised an international trade seminar, with one of its themes being “Nigeria’s preparation in non-oil sector in the face of the AfCFTA”. Yet, one of the special guests was Godwin Emefiele, Central Bank governor, who doesn’t believe in AfCFTA and has introduced protectionist policies that create anti-export bias and undermine Nigeria’s non-oil export capacity. The second guest speaker, Adeniyi Adebayo, trade minister, recently cited several obstacles to the implementation of AfCFTA in Nigeria.
No one in the Nigerian government is talking about the huge opportunities that AfCFTA offers to promote non-oil export; no one is talking about using AfCFTA to build Nigeria’s productive and export capacities. To them, AfCFTA is all doom and gloom!
Yet Nigeria can’t be a great nation without being a serious non-oil trading nation. But to become one, it must have the orientation and willingness. It must make the right policy choices!
