What Nigeria can gain by optimizing value addition for economic benefits

Despite the abundance of solid minerals and raw materials, Nigeria loses billions of naira annually on the back of poor value addition culture in its production and export process, as focus is placed more on the instant profits received from exporting raw materials alone.

Beyond improving the export profile, it is important for local manufacturers to incorporate improved value addition into their production and export process in order to significantly impact the economy, improve FOREX and reduce reliance on oil.

The 2018 global economy business and economic data for manufacturing value added ranks Nigeria 40th out of 153 countries with 38.32 percent, which is below the average mark of 50 percent signifying that more efforts need to be made in growing the value addition culture.

According to the Nigerian Export Promotion Council (NEPC), Nigeria is the fourth largest producer of cocoa worldwide, responsible for 6.5 percent share of global production with cocoa beans accounting for almost 90 percent of the $804 million cocoa exports by Nigeria.

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However, data from the Nigerian Export- Import Bank (NEXIM) shows that the low level of value addition is causing Nigeria to lose out in the bigger global cocoa and chocolate market. The global value of raw cocoa export is $10 billion while the total value of all finished goods from cocoa annually is $200 billion with chocolates alone having $100 billion.

This means that despite providing 73 percent of global cocoa production, Africa (Nigeria inclusive) is simply scratching the surface in terms of profits as it enjoys less than 5 percent of the wealth gotten from the value addition process.

Similarly, Nigeria has a large leather industry with Italy and Spain as the largest destinations of Nigerian leather, covering over 71 percent of total Nigerian exports, In 2013, Italy, known widely as a producer of quality shoes and leather products, spent $355.63 million on purchasing sheep and goat skins from Nigeria. However, Leathermag International revealed that Nigeria imports around $500 million worth of leather products every year, including 80 million pairs of shoes.

Experts are of the opinion that including value additions to exports in the country will contribute to the country’s economic development and GDP, it will generate more income and also provide jobs, thereby reducing the high unemployment rate.

Speaking at a trade forum held recently, Ebenezer Onyeagwu, GMD/CEO, Zenith Bank, advised that it is necessary for manufacturers and farmers as well to incorporate value addition into the export process in order to fully utilize and enjoy the substantial benefits.

“We need to improve our primary production so we can increase and expand the value chain. We are not generating enough income from exports, and we need to explore research and incorporate value addition in our export in order to effectively utilize it. We also need to change our taste buds,” Onyeagwu said.

He noted that beyond processing cassava for cassava flakes, other products like starch, glucose, sorbitol can be exported for more income.

Similarly, Oluwasegun Osidipe, director, Economics & Statistics department, MAN told Businessday in 2019 that the country’s uncompetitive production environment, poor value addition culture and low capacity utilization will push Nigeria to an unfavorable position in the African Continental Free Trade Area (AFCFTA).

“Nigerian manufacturers need to be innovative and different by incorporating a high level of value addition because many of the countries involved in the trade agreement have the same products and resources,” he said.