Stakeholders see devaluation driving non-oil export, local industries

Contrary to popular assumption that devaluation does all harm and no good, industry stakeholders have predicted that it will favour businesses in the non-oil export sector as well as manufacturers that source their raw materials locally rather than from markets outside Nigeria.

Stakeholders say devaluation, which was recently sanctioned by the Central Bank of Nigeria, will make exporters of non-oil export products have more monetary value for their products while also bringing more dollars to the Nigerian economy. They also say that manufacturers that source raw materials from abroad will likely be the real losers as they will have to spend more naira to get one dollar within the year.

“The exchange rate depreciation offers an advantage to exporters of non oil products. The naira value of their export proceeds has gone up considerably. This will improve returns on non-oil exports,” said Remi Bello, president, Lagos Chamber of Commerce and Industry (LCCI), in an economic review.
According to Bello, the current exchange rate condition offers some advantages to industries with high local value addition as it makes them more competitive than their foreign or import dependent counterparts.

“The current situation is therefore a good opportunity to encourage industries and investors to look inwards for products and services that are hitherto imported,” he said in an e-mail to BusinessDay.

Though analysts say devaluation would favour non-oil exports sector, analysis has shown that the sector is still relatively weak.
Total earnings from Nigeria’s non-oil exports in 2013 were $2.97, according to the Nigerian Export Promotion Council (NEPC). BusinessDay calculation shows that this is equivalent to 0.6 percent of Nigeria’s $510 billion GDP.

Nigeria’s 2013 non-oil exports data show that cocoa and cocoa preparations make up 26 percent of non-oil exports at the end of the year, while sheep, goat skins and leather make up 19 percent. Others are sesame seeds (12%), aluminium (5%), rubber (5%), tobacco products (4%), cotton, yarns and fabrics (3%) and copper (3%).

This is a far cry from Argentina, with a GDP of $488.2 billion, exporting motor vehicles and parts (12%); chemicals and related products (7%); crude oil and fuels (5%) and base metals and glassware (4%). The difference is that while Argentina’s non-oil exports are mainly finished products, Nigeria’s is majorly agricultural.

Also, Thailand with a GDP of $401 billion mainly exports manufactured goods (86% of total shipments), with electronics (14%), vehicles (13 %), machinery and equipment (7.5%) and foodstuffs (7.5%).

“This is why we are calling for packaging incentives and return of the Export Expansion Grant to drive the non-oil export sector,” said Tunde Oyelola, chairman, Manufacturers Association of Nigeria Export Group.

Furthermore, stakeholders say in spite of the fact that devaluation will drive industries that source more raw materials locally, there is still need to develop this sector to reduce the level of importation of raw materials and capital flight.

“We will need to develop local raw materials. Gypsum is an example of one such raw material,” said Joe Hudson, immediate past CEO, Lafarge WAPCO, in an earlier interview with BusinessDay.

ODINAKA ANUDU