• Thursday, December 07, 2023
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Crude oil remains Nigeria’s export Achilles heel

Crude oil remains Nigeria’s export Achilles heel

On April 21, 2023, Gbadebo Rhodes-Vivour, the Labour Party candidate in the governorship election in Lagos State, tweeted that eight out of every 10 containers that came into Nigeria returned empty.

According to Rhodes-Vivour, Nigeria has been grappling with record-high youth unemployment, and slow economic growth for being a consuming nation that relies mostly on importation, with little to export to other international markets to earn foreign exchange.

Before Nigeria’s independence in 1960, agriculture was the mainstay of the economy, which provided both cash and food crops and accounted for the largest part of the foreign exchange. But, the discovery of crude oil in commercial quantities changed the narrative and led to the neglect of the agricultural product, making the economy depend heavily on crude oil revenue.

Data from the National Bureau of Statistics (NBS) show that the country’s total trade stood at N12.046 trillion in the first quarter of 2023, with total exports valued at N6.487 trillion and imports amounted to N5.559 trillion.

The NBS said total exports increased in the first quarter by 2.00 percent but declined by 8.66 percent when compared to the N6.359 trillion recorded in Q4 2022 and N7.102 trillion recorded in the corresponding quarter in 2022.

A breakdown shows the value of agricultural goods exports stood at N279.64 billion; solid minerals exports were valued at N26.02 billion; energy goods stood at N15.59 billion; manufactured goods exports were valued at N131.15 billion; crude oil exports stood at N5.148 trillion and export of other oil products was valued at N686.17 billion.

This shows that crude oil exports account for 79.37 percent of Nigeria’s export revenue; non-crude oil exports take 20.63 percent while non-oil products contribute 10.06 percent.

The NBS added that Nigeria collected about N652.29 billion in revenue from non-oil export, N1.338 trillion from non-crude oil export, and N5.148 trillion collected from crude oil export.

Nigeria relies heavily on exporting crude oil and other unprocessed commodities to Europe and other countries to earn revenue, which has only left the country in more revenue deficit and massive debt.

This explains why the country must diversify from over-reliance on the export of minerals, crude oil, and other unprocessed commodities to developed countries.

Wamkele Mene, secretary-general of the African Continental Free Trade Agreement Secretariat, said in Lagos at this year’s International Trade Seminar on Non-Oil Export that over-reliance on unprocessed oil and mineral export was not a challenge for Nigeria alone but for many countries on the continent.

According to him, the poor economic growth across the continent has shown that it has become more urgent to boost inter-African trade by dismantling the colonial economic model that existed in the last 60 to 70 years.

Mene said this economic model of relying on Europe and other parts of the world for trading unprocessed commodities had kept Africa trapped in poverty.

“A United Nations Conference on Trade and Development report states that commodities account for more than 60 percent of the total merchandise export in 45 out of 54 African countries. Today, 55 African countries contribute 3.1 percent to the global GDP and 2.2 percent to global trading output while Singapore contributes over 6.1 percent to global trading output,” Mene said.

He said economic diversification must continue to be Africa’s objective to reduce natural resources accounting for the greater share of export earnings in government revenue.

He added that the current deficit should be turned into opportunities for Africa to accelerate its industrial development and competitiveness to create jobs.

Agriculture export is another area that Nigeria needs to harness and to achieve that, Binu Nanda, CEO of WACOT Group, said there are three areas where agric export values have eroded Nigeria and must be targeted to generate foreign exchange.

He said Nigerian crops are of inferior value compared to its ECOWAS neighbours such as Cote d’Ivoire, Ghana, and the Benin Republic.

Nanda said that while the neighbouring Cote d’Ivoire and Ghana have kept on replanting crops to have quality seeds, Nigeria, which is slightly behind, has been playing catch up but not at the same rate as others.

“The second point of value erosion is in the export of agric produce because Nigeria is different in terms of value generation from forex. In the process of import substitution, a lot of the exporters are creating values and adding processing units. These processing units cost money and some of the exporters get offset from exporting countries,” he said.

Nanda however said there are neighbouring West African countries that get distinct benefits from export destination countries that give them export substitution.

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He said Nigeria needs agric subsidies from the destination countries just like other West African countries are doing to end value erosion to the destination market.

On the need to create an enabling environment to grow the volume of solid minerals export, Satya Gopal, managing director of Century Mining Company, said the interest rate for securing loans from commercial banks is on the high side and killing the mining sector.

According to him, mining companies want more support from the banks and more incentives from the government to facilitate the export of solid minerals.

Gopal said the host communities create violence and attack companies in some mining regions, and this affects the capacity of those that want to invest in Nigeria’s solid minerals sector.