• Wednesday, July 17, 2024
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BusinessDay

Nigeria’s free trade fruit rots on the vine

. Despite FX crisis, AGOA, AfCFTA gains go begging

. Critics say country has no ‘export culture’

Nigeria is not making the most of opportunities to earn scarce dollars by tapping free trade agreements to which it is a signatory, falling behind regional peers who are seizing the chance to boost non-oil exports.

After 24 years of the African Growth And Opportunity Act (AGOA) which allows over 6,000 products to be exported to the US, duty-free, till 2025, Nigeria is yet to raise its export substantially to the world’s biggest economy.

South Africa, Kenya, Madagascar, Lesotho, and Ghana dominated the non-oil AGOA exports, accounting for 90 percent of the total non-oil exports in 2022. Nigeria’s export was mainly dominated by crude oil and its non-exports have remained stagnant, primarily comprising a few agricultural products and handicrafts.
Nigeria’s weak non-oil exports under its free trade agreements dampen its capacity to earn foreign exchange amid an acute dollar scarcity that has left the naira and the economy reeling.

Obiora Madu, an export consultant and the director-general of the African Centre for Supply said Nigeria’s failure to maximise free trade benefits is based on its non-export culture and capacity.

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“We have failed to utilise our free trade agreements to grow our non-oil exports because we have never been intentional and have no export culture,” he said.

Madu stressed the need for the government to build an export culture and capacity needed to boost non-oil exports and harness opportunities in its free trade agreements.

“Nigerians are very enterprising but there is no strategic intent from the government to boost non-oil exports,” he noted.

He urged the government to move beyond the talking stage of diversifying the economy into an actionable strategy that brings results.
Also, after five years of the African Continental Free Trade Area (AfCFTA) – a borderless Africa with a single market for 1.5 billion people which has been projected to expose each country to a $3.4 trillion market opportunity on the continent, Nigeria’s manufacturers are yet to harness this potential owing to lack of competitiveness.

Sada Ladan Baki, chairman of the export group, Lagos Chamber of Commerce and Industry (LCCI), said the country’s several trade agreements have failed to boost its non-oil exports owing to lack of competitiveness and the government’s unwillingness to look beyond crude oil.
“We are not maximising our free trade exports because we have failed to look beyond oil revenue and we do not have a coherent policy on the export drive,” he said.

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“We do not have a robust and ambitious export policy and this is responsible for our inability to harness opportunities in AfCFTA and AGOA,” he noted.

Muda Yusuf, chief executive officer at the Centre for the Promotion of Private Enterprise (CPPE), said the major challenge hindering the country from maximising free trade agreements is a lack of competitiveness.

“Lack of competitiveness is why most manufacturers are inward-looking and more dependent on domestic than international markets,” Yusuf said.

“Nigeria’s low non-oil export reflects the challenges of our manufacturing sector. How can you compete when your cost of production keeps increasing daily,” he said.

“Our cost of production is too high for us to be able to make any significant impact as far as export is concerned and this is why primary products export has continued to dominate,” he added.

Crude oil and minerals have remained Nigeria’s dominant export.

In the first quarter of 2024, crude oil and minerals accounted for 90.72 percent of total exports for the period, while non-oil exports accounted for 9.28 percent.

The total amount of money received by Nigeria from both exports of crude oil and non-oil exports was N19.17 trillion in the first quarter of 2024. Non-oil exports earned N1.8 trillion out of the total $19.17 trillion for the period.

Odiri Erewa-Meggison, chairman of the export group, Manufacturers Association of Nigeria, said the country needs to finalise the date to launch its participation in the Guided Trade Initiative for Nigeria to benefit from AfCTA.
Meggison added that the current high cost of production for manufacturers remains a huge threat to Nigeria-based companies’ competitiveness under AfCTA.

Boosting exports and maximising the potential of free trade agreements is considered by economists as a more sustainable approach to achieving a stronger currency.

The naira has somewhat stabilised at 1,480 to the dollar but has shed over 70 percent of its value since the first of two defacto devaluations in June 2023.

“It’s another one of those paradoxes when it comes to Nigeria,” a senior business leader who did not want to be named said.

“Here we are on one hand desperately looking for loans to help boost dollar inflows but on the other hand we are overlooking opportunities that will unlock substantial inflows,” the business leader said.

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