• Tuesday, June 18, 2024
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How Nigeria’s export processing terminals will boost intra-African trade and non-oil exports

GATF initiative drives increased border agencies collaboration to enhance trade

In November 2022, the Federal Government of Nigeria, through the Nigeria Port Authority (NPA), licensed five new Export Processing Terminals (EPTs) across the country to begin the operation of handling and processing export cargoes. Establishing and licensing these export processing terminals are critical to increasing Nigeria’s foreign exchange earnings and boosting intra-African trade. The African Free Trade Agreement (AfCFTA) seeks to create a $3.4 trillion economic bloc and end food insecurity in the continent.

Through the EPTs, Nigeria could maximise this advantage by creating an agricultural value chain hinged on production, processing, and export. Also, in line with the current administration’s commitment to diversifying the economy, EPTs are a timely innovation to boost exports in Nigeria.

The EPTs will also seek to address quality concerns over Nigeria’s export through the timely processing of export and onward delivery to the port. In the past, exports from Nigeria arriving at destination ports were rejected because they either expired or halved their shelf-life because of longer waiting time accessing the port and longer time spent on sea-going vessels. Exporters lose about N700m worth of exports annually due to rejection.

The EPTs serve as a pre-gate, especially for Agro-exports, by sorting, processing, sealing, and certifying exports arriving at the terminals. The five export processing terminals licensed are Diamondstar Port & Terminals Ltd, Ijora; Esslibra Terminal, Ikorodu; Sundial Global Trade & Service Ltd, Kirikiri; Bellington Cargo Ltd, Okokomaiko; and Tenzik Energy Ltd., Kirikiri Lighter Terminal. Speaking at the inauguration of the DiamondStar terminal in Lagos, the managing director of NPA, Bello Koko, remarked that exports will now undergo sorting, processing, certification, and packaging at the EPTs. He reiterated the EPTs will “reduce the cost to the exporters, reduce the time that it takes to export these goods out, and then make the process faster and seamless, actually.”

The overall effect of value addition will not only open access to new markets but also remove restrictions on some of Nigeria’s agricultural products blacklisted in the international markets

In November 2021, Nigeria ratified its membership in the AfCFTA, which aims to create a single continental market for goods and services. Establishing these EPTs will position Nigeria to benefit from intra-Africa free trade policies. As a major producer of agricultural produce, the EPTs will further improve Nigeria’s export processing capacities and volume of exports. In the H1 of 2022, Nigeria recorded N343.4 Billion (without the EPTs) only from Agro-exports, which accounted for 4.92% of Nigeria’s total foreign earnings within the same period. It is expected that the commencement of operations at the EPTs will further increase the volume of (agro) export, estimated at $250B in revenue yearly, thereby leading to an increase in foreign inflow.

Despite the global economic recession, Nigeria’s non-oil export hit $2.6b in the first half of 2022 alone. These impressive statistics show the EPTS will further enhance Nigeria’s economic outlook and boost intra-African trade. The EPTs, through their improved logistic operations, will lead to an increase in export activities. As export activities increase, it creates more opportunities for foreign exchange earnings and foreign direct investment. Another dynamic effect on the host economy is adopting technology to ease export processes.

Boost non-oil exports

According to the 2022 Q3 trade report by the National Bureau of Statistics, Nigeria recorded a negative trade balance quarter-on-quarter. Exports declined by 19.8 per cent to 5.93 trillion in the third quarter of 2022 from N7.4 trillion in the second quarter. However, data from the Nigerian Export Promotion Council (NEPC) reveals Nigeria’s non-oil sector hit $2.593 billion in the first half of 2022, representing a 62.37 percent increase from the $1.59 billion exported within the same period in 2021. These data show that non-oil export contribution to the economy is still less significant than oil export. However, with concerted efforts and a continuous improvement of the supply chain, non-oil exports will contribute significantly to Nigeria’s economy soon.

The new EPTs will ensure value addition to export goods by processing raw exports into semi-finished products and sorting and certifying them to meet international standards. The overall effect of value addition will not only open access to new markets but also remove restrictions on some of Nigeria’s agricultural products blacklisted in the international markets due to the proliferation of substandard products and residue of agrochemicals.

A commitment to value addition and standardisation of products by the government and relevant stakeholders will increase Agro-exports’ contribution to the economy.

Read also: Agro exports: Nigeria needs new strategy

Improve Port’s Logistic Bottleneck

Port congestion is a significant issue affecting Nigeria’s maritime sector. Operations at the EPTs will bridge the shortfall in logistics previously experienced in accessing the port and sea-going vessels. According to the operational procedure of the EPTs, the Nigeria Customs Service will only attend to export cargo coming from the EPTs to reduce the pressure on the Apapa and Tin-Can Island port terminals in Lagos. In the past, the Apapa and Tin-Can Island ports served double functions of processing centres and ports for export.

The operationalisation of the EPTs will boost the country’s maritime profile and change its ratings on the global logistics performance index. An efficient port system will increase the confidence of both exporters, importers, and investors to continue to do business in/with Nigeria(n). Moreso, it will promote intra-African trade through export and help Nigeria optimise the benefits of the African Continental Free Trade Agreement (AfCFTA).

Economic Prosperity for all

One of the key agendas of the AfCFTA is lifting millions of Africans from poverty. The EPTs create an immense value chain that offers various opportunities for all. Export activities at the EPTs will generate millions of naira for the government in export taxes and revenues, which will further enable the government to build capacities to enhance trade. The day-to-day running of the terminals will open up employment opportunities for people across different age groups. Its efficiency will increase trade activities for exporters and importers and their value chains.

Undoubtedly, many of the challenges facing export in Nigeria persist, mainly in terms of logistics, cargo clearance, and exorbitant demurrage fees. However, the establishment of export processing terminals is the first step in the right direction to address these challenges. Nigeria already boasts Africa’s busiest port in the Apapa and Tin-Can Island port terminals in Lagos. Full operationalisation of these terminals will further enhance the government to maximise these advantages for economic benefits.

Ojo is a writing fellow at the African Liberty.