How export of primary products stifles Nigeria’s manufacturing sector
Available evidence shows that Nigeria, Africa’s largest economy, is chasing shadows in its bid to drive industrialisation.
One key reason for this is that the country has, over the years, concentrated on exporting primary products, which serve as raw materials for European, Asian and the United States’ companies.
Incidentally, these primary products, exported without value addition, are also raw materials needed in Nigerian factories.
The 2013 non-oil exports data, collated by Cobalt International Services, obtained from the Nigerian Export Promotion Council (NEPC), show that the total earnings by the end of 2013 were $2.97 billion. Of this, cocoa and its preparations occupied $758.64 million, amounting to 26 percent of the total non-oil exports value within the year.
NEPC data revealed that this was followed by sheep, goat skin and leather, sesame seeds, aluminium, rubber, tobacco products, cotton yarn and woven fabrics. Also on the list were copper, cashew nuts, edible nuts, prawns, shrimps, fish and crustaceans.
In 2013, the Netherlands became Nigeria’s largest non-oil trade partner, followed by Italy, Japan, India, Spain, Turkey and Germany in a descending order.
Data show that while the Netherlands bought sheep, goat skins and leather worth $622,407, Italy, known widely as producer of quality shoes and leather products, spent $355.63 million buying these commodities from Nigeria.
Also, Spain bought the commodities worth $51.67 million while India spent $24 million buying them from Africa’s largest economy. In a similar fashion, China, world’s fastest-growing country, bought Nigeria’s leather worth $93.8 million. Incidentally, this was the only major non-oil product bought by China from Nigeria, according to data.
Evidence shows that Italian and Spanish leather products, regarded as superior to Nigerian counterparts, are in various Nigerian markets and are often patronised by the rich class as they are expensive and durable. Most of the leather inputs used in making these foreign leather products come from Nigeria’s North, according to research.
But Nnabugwu Osondu, secretary, Abia State Shoe, Bag, Belt and Trunk Box Association, told Real Sector Watch that players in the state could no longer buy animal skins from Northern Nigeria as traders in the region now prefer to sell same to Europeans and Asians where they make hard currency.
“Animal skins from the North are often very good. But where we can no longer get them, we have now resolved to source them from other West African countries,” Osondu said.
“But the problem we also have is that even though we export leather to these foreign countries, getting their adhesives is not possible. We often resort to buying Chinese adhesives which are not as good as those of Europe,” he pointed out.
Apart from leather, the Netherlands bought cocoa worth $472.3 million, just as Germany’s purchase amounted to $49.1 million. Spain bought the commodities worth $40.1 million from Nigeria.
Similarly, the 2014 data show that the $2.43 billion export value by end of the year was mostly made up of cocoa, raw hides, skin and leather, oil seeds, grains, plants, tobacco, aluminium, edible fruits and nuts, among others.
Nigeria prides itself as one of the world’s largest exporters of cocoa, but the commodity is often used in producing confectionery products, soft and alcoholic drinks as well as soap at the factories of other countries.
“These finished products are then imported into Nigeria,” said Ikechukwu Ibeabuchi, managing director of MD Services Limited, in an interview.
Over 50 percent of raw materials used in Nigerian manufacturing sector are imported. This informs why manufacturers were among the worst hit when the Central Bank of Nigeria, in a bid to save the economy, closed official foreign exchange windows and subsequently restricted 41 items from accessing local forex markets.
“We have seen in the last few months that many companies source their foreign exchange from the parallel market,” said Paul Gbededo, CEO, Flour Mills of Nigeria plc and chairman of Food, Beverages and Tobacco Group of the Manufacturers Association of Nigeria, during this year’s annual general meeting (AGM) held in Lagos.
Analysts wonder why Nigeria exports what it needs at factories or why some value is still not added to some of the export products.
“Nigeria has spent so much time supplying primary products such as cocoa and rubber to the world,” said Imo Itsueli, former chairman of the Nigerian National Petroleum Corporation (NNPC), at a foreign policy dialogue organised by Lagos Chamber of Commerce and Industry last Thursday.
“This is even replicated on the oil sector, where attention is focused on crude. If we focus our energy on refined products, our impact on international trade policy will change,” Itsueli said.
Experts say Nigeria’s bargaining power in the international market is low owing to its poor global trade contribution, caused by infinitesimal capacity of its local manufacturing. They add that manufacturers rush to obtain raw materials from abroad owing to issues regarding shortage and poor quality. They, however, say the Federal Government must pay attention to the domestic industrial sector for the country to spike its productive capacity.
‘Nigeria can quite enjoy a more visible profile internationally if and only if it can get its acts together by strengthening its industrial production base, spiral its power generation capacity, enhance its transmission and distribution, improve its education and health care delivery and close the gap between material production and consumption,” said Akin Oyebode, professor of international law and jurisprudence, at the foreign policy dialogue.
ODINAKA ANUDU