Diversification of Nigeria’s productive sector and broad basing of the revenue base is a policy imperative. We are currently at a crossroads in terms of revenues on the one hand and veritable foreign exchange receipts on the other. This requires a pragmatic multi-agency approach in-country and the collaboration of all stakeholders and support of Nigeria’s International development partners.
The agro-allied sector should be given a priority. Millions of Nigerians depend on agriculture for their livelihood. Further development of cash crops for exports (e.g. Cocoa, cashew, sesame, ginger, cassava,soya), industrial linkages for agricultural products (e.g.cotton-textiles and leather) and development of the food processing industry. Development of the agro-allied value chains will boost value addition and generate employment, grow exports and conserve foreign exchange through import substitution. Above all boosting local production will to an extent contain inflation. We need to wean ourselves from sourcing the inputs for these industries from abroad by ensuring that we produce locally and at scale.
Realization of the above priorities needs further investment from the private sector. Therefore, attracting investment -both local and foreign direct investment FDI- should be of utmost priority. But as a precursor to this happening, the Government must provide an enabling environment in terms of stimulus for Domestic direct investment (DDI) from which Foreign Direct Investment (FDI) will take a cue.
This brief description and random thoughts of mine will focus on short term interventions that are required between 2023-2025:
1. Ease of doing business
First and foremost, the government needs to address the constraints faced by the private sector. Unlocking the productive potential for existing industries is a low hanging fruit. The Nigerian enterprises, especially the formal sector, face acute operational challenges in terms of multiple taxation, port congestion and arbitrary interference in the area of frivolous taxes by government authorities at three levels; Federal, Sub-nationals and Local government level.
An intervention from the top leadership will send a clear signal to investors and restore confidence.
Adequate supply of power is a prerequisite for manufacturing. Government should complete the gas pipeline to Kano as a case in point to improve energy supply to the north. Infrastructure at the ports logistics needs investment to remove bottlenecks. We have been on this for a while now and hopefully the Nigerian Ports Authority and the entire Marine and Blue economy ecosystem will up the ante. We cannot be globally competitive with these constraints.
It will take time to improve overall infrastructure but we must strive to be effective and efficient. Special Economic Zones (SEZ) on a Public Private Partnership (PPP) basis should be developed to provide efficient infrastructure at a limited scale to attract investment. Government cannot fund SEZs alone for now but should enable proper legislation to encourage investors with a proven track record and facilitate the set-up process.
3. Industrial policy
The extant Industrial Policy should be revisited to make it relevant in the modern context. The incentives to attract investment in the agro-allied sectors should be enhanced and must be transparent. The Export Expansion Grant (EEG), an incentive for Agro- allied exporters should be revived to make our products more competitive. As a first step all outstanding payments and obligations should be settled between a one to two year time frame. As you might be aware, there are linkages between Agriculture and Industry as a lot of raw inputs have value adds and are processed in manufacturing facilities thus boosting trade.
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4. Development finance
Development financing institutions should be provided adequate funds to be able to lend to the manufacturing sector for meeting their working capital and long-term funds at competitive (single digit) interest rates. As a first step urgent measures should be taken to further capitalize development banks like Nigerian Export Import Bank (NEXIM), Bank of Agriculture (BOA) and Development Bank of Nigeria (DBN) to enable them to accommodate the bulk of the borrowing public.
Commercial banks are not wired or geared to providing such funds at attractive rates and the Central Bank should suspend intervention funds for now and stick to its core mandate of monetary policy as experience shows bulk of disbursed funds have met with a high rate of default.
5. International trade
Implementation of the African Continental Free Trade Area- AfCFTA should be expedited to promote regional trade as Nigeria has signed and ratified but not domesticated due to some concerns we need to address but time is not our friend. At the international level, Nigeria should persuade the US -through ECOWAS- to extend AGOA which is due to expire in 2025 for say another 10 years. Time is ripe for the world to diversify global value chains and to strengthen the trade cooperation between the US and sub-Saharan Africa.
On its own part, Nigeria needs to crack down on the influx of smuggled goods through sea and land borders to provide a level playing field to the local industry and plug revenue leakages. We equally need to enhance intra african trade as statistics show it is less than 4% which is very poor indeed. Trade with Asia particularly with South East Asia can be enhanced too. According to UNCTAD, Last year 2022, Singapore recorded $195 billion dollars in value of foreign direct investment and can you believe it Africa’s 55 countries attracted $45 billion down from $80 billion in 2021.
A holistic and more coordinated approach is needed if we are to grow geometrically rather than arithmetically our non -oil exports. The Ministry of Trade and Investment alongside its agency; Nigeria Export Promotion Council, and the Ministry Of Agriculture and Food Security as well as Ministry of Water Resources and lastly Ministry of Finance must all work in unison to achieve this lofty objective.
Adefeko is a policy advisor on Agriculture, Trade and Development Finance and chairman, Publicity Group, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA)