Paying lip service to export promotion

The crash in oil prices has exposed Nigeria as a weak, undiversified and import-dependent economy. Reserves are having a free fall; the naira has been devalued against the dollar; the Wholesale/Retail Dutch Auction (RDAS/WDAS) door has been shut; manufacturers have had their production costs rise significantly and company managers are threatening lay-offs, thanks to Nigeria’s mono-product and ‘export-disoriented’ economy.

Nigeria’s economic history has shown that many past governments, as well as the present one, in the name of bilateral and multilateral trade agreements, have succeeded in opening more doors for imports and less doors for exports. More worrying is the fact that due to a weak manufacturing sector, raw agricultural products have dominated Nigeria’s non-oil exports.

The 2014 non-oil export data compiled by Cobalt International Services show that cocoa made up 27.4 percent of $2.43 billion non-oil exports done within the year. In 2013, cocoa occupied 26 percent. The 2014 data, like those of previous years, were occupied by raw agricultural products such as oil seeds and grains, fruits, fish and crustaceans, among others. 

Export of finished goods such as aluminium products and articles declined 21.63 percent, from $144.65 million in 2013 to $113.36 million at the end of 2014. Similarly, export of leather, skins and hides was $531.3 million by end of 2013, but declined to $488 million in 2014. Generally, non-oil exports fell 18 percent to $2.43 billion in 2014, from $2.97 billion recorded by the end of 2013.

But we believe that a country seeking diversification should strive to export finished goods rather than raw agricultural products or solid minerals. The Federal Government should, therefore, do more to encourage export of finished goods than raw materials by creating convivial atmosphere for manufacturers at small, medium and large-scale levels.

Furthermore, up till now many products that are manufactured locally in large quantity are still allowed to move into the country in droves and mostly without commensurate duties and tariffs. Consequently, these imported products become cheaper than locally produced ones and outdo the latter in terms of price competition in the Nigerian market.

Similarly, manufacturers grudge that many products and commodities get into the country without duties paid on them at all or with just 5 or 10 percent duty, even when this should have been far above that. We ask: is this a result of questionable import waivers they may have got from God-knows-where or shoddy liaison with the Customs officials? With this, how do you expect local manufacturers, many of who may have been de-marketed by this practice, to be competitive enough?

Encouraging export in a country like Nigeria that has found itself in an economic quagmire must begin with protecting local industries. Making imports far cheaper than local products through action or inaction creates and induces unfairness in the market.

Exporters from China, Taiwan and countries of Europe often get single-digit loans from their countries, while Nigerian manufacturers and agricultural exporters get theirs at between 20 and 35 percent. Banks that agree to lend to them often do so on short-term basis, mostly for less than a year. Local banks prefer to finance imports than exports, while up till now no bank in Nigeria appears to operate an export desk.

Ngozi Okonjo-Iweala, coordinating minister for the economy, had promised that the Federal Government would set up a development finance institution to cater for the interest of real sector players, including exporters. But this is yet to manifest.

According to the latest economic review by the Manufacturers Association of Nigeria (MAN), most manufacturers consider a development finance institution a top priority.

It is also our position that the Export Expansion Grant (EEG), which was suspended in August 2013 and is still under review since then, should be re-started basically to encourage exporters that have added value to their commodities to export more.

Many exporters have attributed decline in non-oil export in 2014 to suspension of EEG. Again, outstanding Negotiable Duty Credit Certificates (NDCCs) owed exporters before the EEG suspension should be honoured by the Nigeria Customs Service. Exporters complain that only 4 percent of over N100 billion of the NDCCs has been honoured. They also say that the Customs under-quoted what was actually owed them, saying that it was over N117 billion rather than N93 billion quoted. This is not good news if the country truly wants to promote export.