Poor yields, incentives slash Nigeria’s non-oil export earnings by 59%

Nigeria’s economic diversification mantra may remain  wishful thinking, except both the Federal and State governments intervene to save the dwindling receipts from the non-oil export sector, which fell by a dismal 59 percent in 2015.

The fall of the non oil export value was on account of the absence of support for exporters, poor yields of crops, low competitiveness and falling global commodity prices.

This is coming at a time that the government, through the Nigerian Export Promotion Council (NEPC) is expecting to generate $100 billion in revenue from the non- oil sector in 15 years.

“Sectors to replace Nigeria’s crude oil exports must be carefully selected to ensure that sufficient income can be earned to replace lost national revenues within a reasonable investment cycle”, Olusegun Awolowo, executive director,/CEO, NEPC, said in Lagos at international trade seminar organised by Zenith Bank International Plc.

However, Nigeria, an import-dependent economy, is going through foreign exchange scarcity, casting doubt on the readiness of the country to earn sufficient forex to support foreign reserves and manufacturers who need to have inputs in their factories.    

According to data obtained by BusinessDay, non-oil export earnings fell from $2.71billion in 2014 to $1.10 billion by the end of 2015, indicating a 59 percent drop.

When compared with $2.97 billion earned in 2013, this will represent a 63 percent drop. The 2013 figure represented a 14 percent rise from $2.56 billion earned from non-oil exports in 2012.

The drop in the non-oil export earnings began in 2014 after the suspension of the Export Expansion Grant (EEG), which was the only incentive provided for importers to enable them become competitive in the global market.

“If we are serious with the diversification, we have to resuscitate the EEG and ask the Customs to start honouring the Negotiable Duty Credit Certificates (NDCCs), otherwise this trend may worsen next year,” said Tunde Oyelola, chairman, Manufacturers Association of Nigeria Export Group (MANEG).   

“It is alarming to see several factories and export firms close down in one fell swoop because many of them have obligations tied to the Negotiable Duty Credit Certificates (NDCCs). Many of them borrowed from banks and other sources to do transactions, and when the government could not honour the NDCCs for over two years, they shut down,” Oyelola said.

Jaiyeola Olarewaju, executive secretary, Organised Private Sector Exporters Association (OPEXA), said it is paradoxical that one sector that has the potential to cushion the commodity shock has been paralysed due to lack of inter-ministerial coordination.

“If the EEG policy has been sustained, our non-oil exports today, would have easily crossed $5 billion by 2016 and brought some relief to tackle the foreign exchange crisis prevailing in the economy,” Olarewaju said.

Ede Dafinone, an exporter of crumb rubber, said the situation might go from bad to worse, except the government resuscitates the scheme to boost export.  Dafinone, who is the CEO of Sapele Integrated Industries Limited, said the uncertainty in the scheme, which has been suspended eight times since 2005 when it was started, cannot support the growth of export.

Globally, the price of rubber has fallen by over 40 percent in the last 36 months. Production has also reduced on account of low yield in plantations, dwindling international market for cars, volatility of oil prices and energy challenges.

Nigeria’s cocoa exports dropped by 59 percent in 2015, as the country earned $270.7million, as against $666.45 million generated in 2014.

This is in spite of high cocoa prices, which hit $3,265.78 per ton in 2015, according to the International Cocoa Organisation (ICCO).  “There was a serious weather problem last year, beginning in 2014, when it became too unfavourable,” Rabo Adhuze, chief operating officer, Centre for Cocoa Development Initiative told BusinessDay.

“Most of the crops in the south west of Nigeria were affected. It was only in Cross River that we had some respite, but yields in the south west dropped,” Adhuze said.

Apart from poor weather, the European Union, in August 2015, banned, till 2016,Nigerian beans from coming into its market.

The European Food Safety Authority said the rejected beans were found to contain between 0.03mg per kilogramme to 4.6mg/kg of dichlorvos pesticide, despite that the acceptable maximum residue limit was 0.01mg/kg.

Other food items banned were sesame seeds and melon seeds.  “What many exporters do not seem to understand is that there is an increasing restriction in the international market and this will likely continue. If we are to participate in global trade, we cannot ignore standards and international arrangements,”

Charles Malata, technical supervisor, the National Quality Infrastructure (NQI), a project supervised by the United Nations Industrial Development Organisation (UNIDO).   Awolowo, who was represented by Taofik Owoseni, from NEPC, said the agency, through the National Strategic Export Program (NSEP) has implemented a rigorous screening criteria to map out the most promising non-oil export sectors for Nigeria, which would be reviewed periodically.

In his welcome address, Peter Amangbo, managing director/CEO, Zenith a Bank, said the country is faced with an urgent task of improving its balance of Trade (BoT) by focusing on the alternative – non-oil export.

ODINAKA ANUDU & Hope Moses-Ashike