Headwinds take bigger toll on Nigeria’s non-oil exports

Various indices have shown that economic headwinds are making bigger impacts on Nigeria’s non-oil exports. The Central Bank of Nigeria’s (CBN) Economic Report for January shows that compared with the December 2014, earnings from Nigeria’s non-oil exports fell 24 percent to $767.54 million in January 2015.

Exporters in the productive sector might have been worse-off during the period as the report shows that there was 89.7 percent crash in export receipts from finished products.

A sector-by-sector breakdown shows that earnings from industrial and manufactured products were $658.52 million and $61.99 million, respectively, within the month.

Similarly, receipts from agriculture, food products and minerals sub-sectors stood at $36.75 million, $5.42 million and $4.86 million, respectively.

“The shares of industrial, manufactured, agriculture, food products and minerals sub-sectors in non-oil export proceeds were 85.8, 8.1, 4.8, 0.7, and 0.6 percent, respectively,” says the apex bank.

Similar to this is the 2014 non-oil exports data compiled by Cobalt International Services and released to Real Sector Watch. The data show that non-oil exports declined 18 percent to $2.43 billion in 2014, from $2.97 billion recorded in 2013.

Some of the reasons adduced by exporters and analysts for the continuous decline of the country’s non-oil exports include global headwinds such as fall in the international prices of some commodities, high cost of funds in the economy and poor power supply, especially to industrial zones. Others are transportation challenges across Africa, high cost of importing raw materials due to the closure of the official exchange rate market as well as the suspension of the Export Expansion Grant (EEG) scheme in August 2013, which had been the only government incentive for exporters.

“This cannot be distanced from near paralysis of the EEG scheme,” Ede Dafinone, CEO of Sapele Integrated Industries, who is also an exporter, told BusinessDay.

“The EEG has been largely successful in the last 10 years as exports have grown significantly. But the Negotiable Duty Credit Certificates (instruments of EEG) have not been honoured at the ports for over a year. So, I would expect such decline in 2014,” Dafinone said.

In Nigeria today, no bank has deemed it fit to have an export desk. Exporters say Nigerian banks prefer to finance imports rather than exports.

Also, high cost of funds has been a problem for exporters, as banks charge between 20 percent and 35 percent interest rates. The average lending rate banks charged manufacturers in 2014 was 22 percent, according to the Manufacturers Association of Nigeria (MAN).

“How do you expect Nigerian exporters to compete with the Chinese and the other Asians when the latter obtain credit facilities in their countries at a single-digit rates?” asked John Isemede, immediate past director-general, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), in an earlier interview with BusinessDay

More so, prices of some products in the international market have been falling consistently. Rubber prices have fallen by about 50 percent in the last 10 months, owing to declining international prices for cars.

ODINAKA ANUDU