Funding, poor value addition, low quality flagged as constraints to Nigeria’s export boom
Inadequate funding, poor value addition practices and low quality of products have been identified as major obstacles, constraining Nigeria’s plan to have a thriving and diversified export industry.
This was discussed at an Exporters funding webinar hosted by the Lagos Chamber of Commerce and Industry ( LCCI) themed funding support initiative for exporters by the federal government through the NEPC.
Olusegun Awolowo, chief executive officer, Nigerian Exports Promotion Council (NEPC) said that providing funding for exporters over the years has been very challenging especially for small and medium players in the industry, adding that the average size of trade finance gap in Africa is estimated to be $81 billion.
“Participation of banks in trade finance decreased by 21 percent, while SME trade finance applications being rejected by banks have increased by 20 percent from 2013 to 2019, the main reason for the declined trade finance request are client creditworthiness and insufficient collateral,” he said.
Highlighting available funding programs for exporters to tap from, Awolowo mentioned the Export Development Fund which is a N5 billion fund under the Nigeria economic sustainability plan which will support and prepare exporters for the global market while facilitating trade activities.
He also mentioned the Export Expansion Facility Program (EEFP), a one year program under the economic sustainability plan managed by the NEPC and the ministry of trade and investment.
“It is designed to alleviate the impact of the COVID-19 pandemic on export businesses and accelerate the growth of the sector through market development, capacity building, trade facilitation and cost reduction through export aggregation,” he said.
Awolowo said that the NEPC tries to support exporters beyond funding through various programs like trainings and enabling policies, he revealed that plans are underway to establish an export trading company that will purchase items in large quantity to ease the burden of producers. He said part of the organization’s program to boost non- oil export is the Zero oil plan which aims to diversify the country’s export portfolio and such that 20 percent of the GDP is attributed to non-oil exports with targets to attain $30 billion by 2025.
Toki Mabogunje, president, LCCI in her address noted that over the years the Nigerian government and all relevant stakeholders have been working towards diversifying the export base of the economy from crude oil, however the efforts have not produced desired outcomes as over 85 percent of its foreign exchange earnings still come from crude oil.
She added that the nonoil export sector has potentials to generate adequate foreign exchange earnings for the economy and strengthen the naira against major currencies, particularly when the products are processed.
“Nigeria is blessed with vast raw materials in the non-oil sector which can be leveraged to increase our exports and improve our trade balance, however, the non-oil export is dominated by raw material and primary product, we can generate much more in foreign exchange earnings if those raw materials are processed into value-added commodities before exportation,” she said. Mabogunje who was represented by Abimbola Olashore, treasurer, LCCI noted that beyond the country’s poor value addition culture, Nigerian non-oil products often face high risk of rejection in the export market due to the inability to meet global requirement which is taking a toll on the performance of non-oil exports.
She added that without addressing these major challenges, it will be increasingly difficult for the economy to leverage the recent exchange rate depreciation of the naira to enhance global competitiveness and correct its external imbalance.
“We need to target specific industries in the nonoil sector, preferably commodities where Nigeria has comparative advantage, support players with incentives to help them achieve economies of scale, while ensuring those products are competitive in terms of cost and quality,
Fiscal and monetary policy authorities need to provide a supportive operating environment for non-oil exporters to boost export and value-adding activities,” She advised.