There is something the Federal Government of Nigeria can learn from Vietnam. Once a very poor country, the Southeast Asian country embarked on reforms, removed market unfriendly policies and built an export-oriented economy.
Today, it has emerged from the ashes of poverty and become an Asian miracle, moved to the middle-income country category and attracted many investors, including big phone manufacturers such as Samsung, Intel, and LG.
This has paid off. As of December 2019, it had earned $51.8 billion from export of phones and components, a 5.3 percent increase from 2018, according to General Statistics Office of the country. It earned $17.97 billion from garment and textile export in the first half of 2019, and expects to earn $21 billion from leather when calculations are concluded. Nigeria’s total non-oil earnings from January to September (first to third quarters) amounted to only $5.191 billion (N1.87trn), less than one-thirds of Vietnam’s earnings from garments and textiles, according to BusinessDay calculations from the National Bureau of Statistics (NBS) data.
In September 2014, India’s Prime Minister Narendra Modi launched an ambitious ‘Make In India’ campaign to promote local manufacturing, foreign investment and lower barriers to business. Six months after, Foreign Direct Investment in India rose from $24 billion to $41 billion. Manufacturing giant Foxconn immediately announced plans to spend $5 billion on factories in the western state of Maharashtra, India. General Motors immediately announced $1 billion investment. Each month in 2019, the South Asian country earned over $25 billion from exports. It earned an estimated $300 to $330 billion in the whole of 2019, from exports.
After cutting its massive fuel subsidies, which were planned to cost $14 billion in October 2005, Indonesia restructured its economy to be led by agriculture and auto industry. Today, it produces over 30 million tons of palm oil—the highest in the world— earning over $21.5 billion from it.
From Bangladesh to India and Indonesia, countries are earning billions of dollars from non-oil exports, but policy choices in Nigeria show the country’s leaders are not thinking of this as a possibility.
Today, the Nigeria-Benin Republic land border, which serves as an exit point of many export products, is closed with no signs of reopening. The reasons for the shut-down may be justified, but analysts believe the country’s non-oil export earnings are in for a plunge.
Ede Dafinone, chairman, Manufacturers Association of Nigeria Export Group (MAN-EG), wonders what happens to the Nigerian economy should crude oil fortunes change suddenly.
Crude oil still made up over 70 percent of export earnings in nine months of 2019.
As of 2016, when crude oil price crumbled at the global market, the Nigerian economy fell into recession, taking with it over 220 businesses, more than 200,000 jobs and 54 manufacturing firms.
“The economy is still vulnerable to external shocks, notably fluctuations in global oil prices. This partly explains why two global credit agencies – Moody and Fitch— recently downgraded our economic outlook from stable to negative on the back of slow fiscal growth and increasing vulnerability to exogenous shocks,” Toki Mabogunje, president, Lagos Chamber of Commerce and Industry (LCCI), says.
As of the third quarter of 2019, Ghana was the biggest importer of Nigerian products. It imported 17.18 percent of made-in-Nigeria products within the period, beating the European Union and China, according to the NBS data. This is no longer a possibility.
Okhai Ehimigbai, export manager, Aarti Steel, which exports steel products and zinc ash, says his company has stopped export to the Economic Community of West African countries (ECOWAS) due to the closure of the border, disclosing that exporters are struggling to get vessels for export to the African market. He says export to Ghana by sea takes one month now as against two weeks or less through the land borders.
At the moment, made-in-Nigeria products are scarce in the ECOWAS market because of the border closure, according to Nexportrade Houses Limited (NHL), a trade house that focuses on increasing and organising trade relations among business groups in ECOWAS member states and African countries.
Apart from border closure, the country now has no support for genuine non-oil exporters. The Export Expansion Grant (EEG), which is a practice in Brazil, China and many European countries, was suspended since 2013 and the process is yet to be fully reinstated. Even though there have been cases of abuse of the EEG by fraudulent firms, data have shown that export will rise when the EEG is given to genuine exporters. For example, non-oil export rose from a little above $1 billion in 2005 to $2.97 billion in 2013, when exporters enjoyed the EEG.
At the moment, Nigerian exporters are struggling to compete with Chinese, Indian, and European counterparts even in the African market, BusinessDay was told. Many Nigerian exporters are not competitive owing to high production cost, and absence of support is not doing them much good.
Moreover, the funding method adopted by the Federal Government shows the administration of Muhammadu Buhari is not too bothered by the non-oil export earnings’ concerns.
According to the NBS Q1 to Q3 2019 data, major export food products were sesame seeds, cashew (fermented), cocoa beans (raw), cocoa butter, ginger as well as sea foods such as shrimps and prawns. Tens of billions have gone to rice farmers, but these cash crops that generate foreign exchange gets less support. Also, cash crops with long value chains and high export demand such as cocoa, rubber, wheat, and palm oil, among others, get less support than rice with one or two value chains.
The CBN said in 2019 that it had disbursed N30 billion to boost oil palm plantations. However, smallholder farmers, responsible for 90 percent of palm oil output, told BusinessDay that they were yet to access funds for expansion.
“We only hear that on the radio, hoping to be remembered one day,” one palm oil miller in Imo State states.
Moreover, as a sign that the current government is not building an export-oriented economy, the country has failed to make proper use of the National Quality Infrastructure to standardise exports. The European Union funded this with about 12 million Euros to better the standards of export products. Some progress was recorded, but most exporters have benefitted nothing from it, thanks to the Federal Government’s lack of interest.
As at today, the European Union is yet to unban Nigerian beans and other crops, which it prohibited from entering its domain since 2015. After extending it in 2016 for three years, the ban was supposed to end in June 2019, but no seriousness has been shown by the country to ensure that the products are unbanned.
The Nigeria Agriculture Quarantine Service says it is making efforts to ensure they are unbanned, but it is difficult to determine if exporters have learnt some lessons, considering that there is no standards facility in the country today.
“The potential for growth is immense. But we cannot remain a nation with potential. In order to unlock the potential, we need to put in place appropriate policies and regulations,” Muda Yusuf, director-general, LCCI, states in the chamber’s economic outlook.
ODINAKA ANUDU
