Correcting structural defects in Nigeria’s non-oil exports

Cobalt International Services Limited is the Federal Government of Nigeria-appointed agency that inspects and calculates non-oil exports pre-shipment. Its 2013 exports data, the latest on the series, reveal that earnings from cocoa and its preparations amounted to $758.64 million, making up 26 percent of the total non-oil exports within the year. This also represents 36 percent accretion from $556.8 million reported in 2012.

Coming after cocoa are sheep, goat skins and leather, which turned in $549.8 million within the year. This represents 19 percent of the total non-oil export and 6 percent jump from $517.4 million recorded in the previous year.

Sesame seeds posted $344.2 million, representing 12 percent of the total non-oil exports in 2013, and 35 percent rise from $254.4 million recorded in 2012.

Other two commodities in the top 10 category are aluminium (and articles), which recorded $144.6 million, accounting for 5 percent of the total while representing 33 percent spike from the figure obtained in 2012; and cotton, yarns and woven fabrics (considered as a unit), accounting for paltry three percent of non-oil exports within the year. This incidentally reported -32 percent from $121.7 million posted in 2012.

In the top 10 are also tobacco products, cashew nuts (and edible fruits), prawns, shrimps, fish and crustaceans (considered as a unit), copper and rubber.

The data show that the Netherlands was Nigeria’s topmost non-oil importer in 2013, sharing 20 percent ($583m) of the total non-oil exports, representing 72 percent leap from $339.2 million posted in 2012. The main commodity exported to the Netherlands was cocoa, which took 81 percent share of the total exports.

Next is Italy, which recorded $375 million, representing 13 percent of the total non-oil exports. Out of Italy’s total exports, sheep, goat skins and leather amounted to $356 million, which meant 95 percent of the total non-oil exports.

Third is Japan with $186 million worth of non-oil exports, representing 6 percent of the total.

Furthermore, out of $185,926,873 total non-oil exports to Japan, sesame seeds shared $79,652,336, representing 43 percent of the total.

Turkey was Nigeria’s sixth non-oil importer within the year. Its non-oil exports from Nigeria in 2013 totalled $119 million. However, sesame seeds returned $109 million, representing 92 percent of Nigeria’s non-oil exports to the country.

The challenge of Nigeria’s non-oil exports is, therefore, that most of these exports are agricultural products which serve as raw materials for industries of other economies where they are taken to.

Cocoa, for instance, is used in many beverage companies in the production of soft and alcoholic drinks, chocolates and in soap manufacture (potash from cocoa pod husk), findings reveal.

On the other hand, Manitoba Goat Association, Canada, revealed that goat skin can be used as leather for shoes and bags manufacturing. Findings have also shown that sesame oil is produced from sesame seeds. It often serves as cooking oil and flavour enhancer in Asian countries, particularly South-East Asia.

Analysts say rather than keep exporting these raw materials, now is the time to add value to them or leave them for local industries that consistently search for raw materials from other countries. They say the country’s non-oil export data expose its weak manufacturing sector, 53 percent capacity utilisation of the country’s manufacturing sector is still discouraging.

“It is needful to process our raw materials and add value to them to boost export of non-oil products,” Ibikunle Amosun, Ogun State governor, told Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), in a visit to his office last week.

“This means that these raw materials should also serve local industries,’’ he said.

Other analysts believe that remedying the situation involves strengthening the manufacturing sector, especially now that crude oil, which the country has heavily relied on over the years, is beginning to show declension in the international market. They add that giving stimulus to manufacturing has become critical at the moment when naira has just been devalued by the central bank to save the economy.

“This is the time to provide packaging incentives for manufacturing exporters, whose cost of raw materials (mainly imported ) will likely rise on the back of devaluation,” said Tunde Oyelola, chairman, Manufacturers Association of Nigeria Export Group (MANEG), in an exclusive interview in Lagos.

“The suspended Export Expansion Grant should also be reversed,” he said.

Muda Yusuf, director-general, Lagos Chamber of Commerce and Industry (LCCI), told Real Sector Watch that making finished manufactured goods greater part of the non-oil exports data would require addressing issues such as poor local raw materials sourcing, incessant power outages that lead to high energy costs, port gridlocks and double-digit interest rates, among others.