Obiora Madu is an export consultant and director general of the African Centre for Supply. He recently launched a book tagged ‘Services Export in Practice’ where he outlined the importance of services export, highlighting the fact that the sector can boost Nigeria’s export earnings. Madu said Nigeria needed to put a comprehensive Services Export framework in place that outlines objectives, targets, and action plans for promoting Services Export such that the nation can earn foreign exchange in the wake of scarce dollars and provide a platform for job creation. Amaka Anagor-Ewuzie brings the report. Excerpt:
What is Services Export and how much is its economic value?
Services Export is a significant part of the export business. It is any activity or benefit that one party can offer to another, which is essentially intangible and cannot be seen. Its production may or may not be tied to any physical product. It is the way the world is going now. It constitutes about two-thirds of the global trade. The beauty of Services Export particularly for developing countries is that it is a huge opportunity to tap into global trade such that even the least developed countries have the opportunity to make a living from exporting services.
Most of them are beginning to export services rather than goods. Any nation that is not paying attention to services export is not diversifying and is denying itself revenue.
According to data from the World Bank and World Trade Organisation (WTO), in 2022, the global services export was valued at $7.1 trillion representing 7.1 percent of the world GDP and 23 percent of global trade of goods and services. Right now, investments are going more into services than into commodities.
For Nigeria, we are shortchanging ourselves in terms of services export due to lack of policy direction and the Central Bank of Nigeria has no way of tracking services export from Nigeria.
Statistically, we don’t know how much services export that is going on in Nigeria today. Nigeria must buckle up because we are being left behind despite all the advantages that we have. We are not doing well in outsourcing, business services, and other services in terms of export.
We are doing well in telecoms and financial services, particularly the banking system but for the SMEs to be able to mainstream service as their counterparts do globally there is a need for policy and to create incentives because the nation is losing revenue for not capturing services export.
What is the growth projection for the next five years in terms of services export on the global stage?
We may not be able to predict accurately for the next five years but the fact is that the tendencies are very clear. Factors such as economic growth, trade policies, geopolitical development, technological advancement, and global demand for services will be determinants. Globalisation and industrialisation are expected to drive growth in the services sector. Services such as IT, outsourcing, financial, consulting, and transportation are likely to remain great contributors to the growth of global services exports.
Emerging economies such as least-developed countries are increasingly playing an important role in services driven by their growing services sectors and competitiveness in service areas.
Narrowing it down to Nigeria, what are the growth projections for Nigeria?
Nigeria’s services export potential could be influenced by domestic reforms aimed at diversifying the economy from being oil-dependent. Investment in sectors such as information technology, telecoms, and financial and professional services could contribute to Nigeria’s services export growth.
Again, improving infrastructure, regulatory environment and ease of doing business may enhance Nigeria’s competitiveness in the next five years.
However, challenges such as infrastructure deficit, regulatory bottlenecks, security concerns, macroeconomic instability, and a general lack of awareness could constrain Nigeria’s growth.
Today, America earns 80 percent of its foreign exchange from services and intellectual property. We need to join because so many African countries are ahead of us in this area.
How is Nigeria paying for the absence of a services export policy? What implication does it have for the nation’s economy?
Without a comprehensive Services Export policy, Nigeria may fail to leverage its competitive advantage in various services sectors and this will result in missed opportunities, and an inability to grow the economy, create the necessary jobs, and generate revenue.
It will result in limited diversification. Each time we talk about diversification, we talk about agriculture. Agriculture is very important, no doubt, but services are the new oil. The underdeveloped state of the services sector is part of what it is costing us because as long as we don’t become a known service destination our services export sector will remain underdeveloped.
Only a few people who are strong enough will be able to brave it. Reducing competitiveness is part of the challenge but if you have the policy, you can create the necessary incentive; then service providers can face the challenging international market and break in without any problem.
Our foreign exchange earnings are also being affected here and the underdeveloped infrastructure is also part of the challenge. Without a policy framework to prioritise investment in trade infrastructure Nigeria will struggle to compete effectively. The absence of a well-defined policy in services export will impede the country’s economic development, competitiveness, and resilience to external shocks.
Therefore, developing and implementing a comprehensive services export policy is crucial. One of the key things that are holding Services Export down is the fact that the country does not have a way of capturing Services Export. For that reason, we don’t know if Services Export is happening. I do know that it is happening but we don’t know how much.
What recommendations can you make to the Nigerian government and its agencies to promote Services Export in Nigeria?
First, there is a general lack of awareness about Services Export. So, we need to start from there. I have been part of the Services Export expert in Geneva since 2005 and I just currently pushed out a book on ‘Services Export in Practice’ to get people to understand services export, know the modes, understand the classifications from WTO, how to enter into the international market, and how to prove your credibility including services of the future.
So, we need more of such efforts and the government needs to invest but the number one is to develop comprehensive services export strategies for the country. The last one was done by the Commonwealth Secretariat and that was over 10 years ago, which has become stale. This is an effort that can be carried out locally by maybe a group of consultants. When we develop a well-defined and comprehensive services export strategy that outlines key objectives, targets, and action plans for promoting Services Export, it will focus on identifying key sectors with export potential, addressing barriers, and also enhancing competitiveness.
Another thing is investment in infrastructure and technology. It will go a long to support the development of the services sector especially infrastructure technology, telecoms logistics, improvement in digital connectivity, transport networks, and infrastructure that can enhance Nigeria’s competitiveness in the global services.
Next, is to promote trade facilitation and ease of doing business, streamlining trade processes by reducing bottlenecks and facilitating services export. Nigeria should prioritise trade facilitation measures such as reducing paperwork, expediting the Customs processes, and implementing electronic trade platforms to simplify trade.
Also, there is a need to market the nation as a service-providing country. A lot of efforts need to go in because it is like every activity is de-marketing the country. A lot of help will be needed from the government and embassies. Years ago, the South African President once said the country would be paying attention to two things they are outsourcing and tourism. When a President speaks like that, the economy adjusts itself to go with the presidential statement and the target that the country has.
Strengthening the regulatory framework is very important because right now we don’t know the agency that is regulating outsourcing. We know that the Export Promotion Council is promoting services export but the one responsible for regulating it, is a different thing. These are all the things that a policy and strategic document will do for Nigeria.
Implementing a clear and transparent regulatory framework is crucial. For example, things like service level agreements. In outsourcing business, principals can just call service providers to reduce their administrative fees at will but if there is a good legal framework, that will not happen.
Then, invest in skill development and capacity building. Enhancing skills and capacity development is vital for building a skilled workforce because we need to deliver high-quality services for export. Nigeria needs to invest in education and training programmes to develop expertise in key sectors and promote entrepreneurship in service-related issues.
This is very important because to get SMEs to fall in; we will continue to have issues and cannot get the result that we are looking for. We need to support SMEs and startups. There are a lot of startups in Nigeria and it wouldn’t take too much to push them into doing well. We can also promote private partnerships; where necessary, SMEs can collaborate with the public sector through PPPs. Nigeria should encourage collaboration between the government, private sector, and civil societies to identify opportunities, address challenges, and create incentives that would promote services export.
There is also a need to enhance market intelligence and change strategy for export promotion. The ability to monitor and enhance progress is what we need in Nigeria because we don’t seem to be measuring a lot of things. We need to develop KPIs, track progress, conduct regular evaluations, and adjust strategies as needed for us to get to where we are going. By implementing these recommendations, Nigeria can strengthen its services sector, unlock new opportunities for economic growth, and enhance its competitiveness in the global market.
