The manufacturing and export sectors are hard hit by the ongoing pandemic and the closure of Nigeria-Benin border. While border closure has prevented made-in-Nigerian products from reaching the West and Central African market, the pandemic has cut down manufacturers’ access to foreign exchange and raw materials.
“The resultant effect of border closure is the decline in export to many countries and significant losses for many exporters, as many have closed down some of their production lines since then,” Ede Dafinone, chairman, Manufacturers Association of Nigeria Export Group (MANEG), told BusinessDay recently.
The virus and the border closure had a strong impact on the non-oil exports within the quarter. Raw materials’ export fell by 56.2 percent in Q2 of 2020, compared with the level in Q1 of 2020. It represents a 52.4 percent slump in the second quarter of this year when compared with the same quarter in 2019.
Manufactured goods export slumped by 42.8 percent in Q2 of 2020 as against the level recorded in Q1 of 2020, but it represented an increase of 139.6 percent compared with the corresponding quarter in 2019. The value of manufactured goods in Q2 of 2020 stood at N3.040 trillion. Out of this, the export component accounted for N254.2 billion.
Similarly, agricultural goods export dropped 38.2 percent in Q2, 2020 compared to Q1 of 2020, but rose 6.3 percent year-on-year, the NBS said. Export of agricultural products fell to N78 billion compared with N126 billion in Q1 2020.
Total exports in the second quarter of 2020 was 45.64 percent lower than the first quarter (Q1,2020) and 51.73 percent lower than Q2 of 2019, according to the National Bureau of Statistics (NBS)’s recent Foreign Trade Statistics’ data. This, however, included crude oil and minerals.
Coronavirus pandemic hit Nigeria in late March, cutting global supplies and consumer spending. It has also done a big damage on the crude oil market, fuelling glut and more than 30 percent price slump. This has led to low foreign exchange inflows into Nigeria, forcing the central bank to come up with stringent policies to save Nigerian reserves. The manufacturers are at the receiving end as they say they are unable to even get 10 percent of their dollar needs.
The border between Nigeria and Benin has been shut for over a year now, hurting export, and FX that comes with it.
“We have shut down our export segment because of border closure,” said Okhai Ehimigbai, export manager at Aarti Steel.
Yinka Ademuwagun, research analyst at United Capital, said slump in export and manufacturing was to be expected given the outbreak of the COVID-19 pandemic, the ensuing global lockdown, crude oil market crash and the movement restrictions which slowed down manufacturing activities. He further said that the impact of the pandemic was more significant on exports due to the huge reliance on a wide range of imported items.
“Going forward, we expect the negative economic effects of the COVID-19 pandemic to have a significant impact on Nigeria’s trade position for the rest of the year. However, we anticipate an improvement on quarter to quarter basis in Q3 of 2020 following the gradual reopening of economies at the beginning of the quarter,” Ademuwagun said.
Similarly, Akinloye Ayorinde, equity analyst at CSL stockbrokers, said underlying issues as well as the lockdown imposed by the federal government affected the productivity of players in the sector.
“The key factor behind the steep deficit in manufactured goods was the lockdown implemented to curb the spread of the coronavirus. However, underlying issues remain such as decrepit infrastructure and poor backward integration across industries. Heavy reliance on imported raw materials was aggravated by the pandemic,” Ayorinde said.
One of the key challenges affecting manufacturing and export is poor infrastructure. The power sector is in a shambles, leading manufacturers into searching for solutions elsewhere. Gas supply is erratic, and rails are still at inchoate stage. Roads are poorly maintained, with insecurity still a major issue across the country.
“Going forward, with the country gradually adjusting to the pandemic, I expect to see a reduction in deficit levels. However, I believe tackling long-term concerns such as infrastructure would increase local manufacturing productivity and reduce dependence on imported brands,” Ayorinde recommended.
Muda Yusuf, director general, Lagos Chamber of Commerce and Industry (LCCI), said the sector is struggling with lack of productivity and competitiveness, which are critical factors in the balance of trade position.
“Without a high level of competitiveness, it is difficult to boost manufacturing exports. Cost and operating costs are extremely high in the domestic economy. There are also several regulatory, structural and institutional challenges which undermine the competitiveness of manufacturing firms. For the trade balance to improve, we need to address these constraints to productivity and competitiveness,” Yusuf explained.
Industry experts say that the government should implement enabling policies to boost the country’s exports. Toki Mabogunje, LCCI president, said at a breakfast meeting recently that boosting the country’s export profile requires some policy implementation from the government that would intensify local production in the real and service sectors.
“Government must lead from the front through assurances of continuity of policy and programmes, thereby giving impetus to the private sector and venture capitalists to make investment decision in priority intermediate and finished goods,” Mabogunje said.
Unemployment numbers released by the National Bureau of Statistics (NBS) recently showed the job rate has risen to 27.1 percent in the second quarter of 2020, from 23.1 percent in the third quarter of 2018. Jobs are created by firms such as manufacturers and exporters, but their margins are now badly hit by border closure, COVID-19 and inflation rate which was 12.56 percent in June 2020.
The AfCFTA seeks to liberalise trade among African countries. It is targeted at a ‘borderless’ Africa, with an eye on a single market for goods and services on the continent.
It is easily the largest trade agreement since the World Trade Organisation (WTO) in 1994 and a flagship project of Africa’s Agenda 2063, targeted at creating a single market for 1.2 billion people and exposing each country to a $3.4 trillion market opportunity on the continent.
Trade among West African countries is about 12 percent, which is relatively low when compared with other regions. On continental basis, trade among African countries is 16 percent, which is poor when compared with Europe’s 59 percent, Asia’s 51 percent, North America’s 37 percent, and Latin America’s 20 percent, data show.
The AfCFTA is beginning in January 2021 and there are concerns the pandemic and the border closure, including the poor treatment of Nigerians by Ghanaian authorities, could hurt it.
The Ghanaian Ministry of Trades recently demanded $1 million from each Nigerian trader for the Ghana Investment Promotion Council (GIPC) registration fee, locking up shops belonging to Nigerians who were unable to pay.
