New minister faces task of reversing declining non-oil export fortunes
Okechukwu Enelamah, new minister of industry, trade and investment, faces an onerous task of reversing non-oil export earnings, which have continued to nosedive at a point oil price is seeing a free fall.
Non-oil exports declined significantly to $2.43 billion in 2014, from $2.97 billion recorded by the end of 2013, data compiled by Cobalt International Services and released by the Nigerian Export Promotion Council (NEPC) earlier in the year show.
Olusegun Awolowo, chief executive officer, the Nigerian Export Promotion Council (NEPC), recently disclosed that the country’s earnings from non-oil exports dropped by $261million (N52.2billion) in the second quarter of this year.
According to Awolowo, the country’s non-oil export nosedived to $391m (N78.2billion) in the second quarter of 2015, from $652m (N130.4billion) recorded in the second quarter of 2014, representing 39.25 percent crash.
This is particularly bad news for Africa’s largest economy, which has enormous non-oil potential capable of bringing in huge foreign exchange earnings and reducing the pressure on the naira.
Though the task of reversing this trend also rests on Audu Ogbeh, minister of agriculture, and Fayemi Kayode, minister of solid minerals, the buck basically stops at the table of Enelamah for obvious reasons, which will now be examined.
Available data show that most of Nigeria’s non-oil exports are primary products, mainly agricultural commodities and solid minerals.
The 2013 non-oil exports data, for example, show that of the $2.97 billion earnings, cocoa and its preparations shared $758.64 million, amounting to 26 percent.
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, tin, coal, prawns, shrimps, fish and crustaceans. This situation also remained the same in 2014.
In fact, Real Sector Watch recently calculated Nigeria’s non-oil exports using the International Trade Centre (ITC)’s data. The data, which covered 2010 and 2014, revealed that the best non-oil export was rubber, which occupied less than four percent of the total.
Findings show that most of these primary products end up at the factories in European, American and Asian economies and are then imported into Africa’s largest economy as finished beverages, packaged foods and tyres, among others.
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.
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 Nigeria’s sheep and animal skins within the year.
Also, Spain bought sheep, goat skins and leather commodities worth $51.67 million while India spent $24 million buying the commodities from Nigeria. In a similar fashion, China bought Nigeria’s leather worth $93.8 million, which turned out to be the only major non-oil product bought by China from Nigeria.
According to Obiora Madu, chairman, Export Group of the Lagos Chamber of Commerce and Industry (LCCI), the problem with the export of raw materials is that the exporting country earns peanuts. According to an analyst, animal skins which sell at $10 in the international market could be used to produce shoes or bags that could go for $75 in the same market.
Some experts have observed that it is counter-productive and anti–development to consistently export raw materials needed at factories by local manufacturers.
Shehu Sani, president, Miners Association of Nigeria, recently told Real Sector Watch that some industries that need these minerals are also involved in their exports.
Experts are of the opinion that the new minister of industry, trade and investment should continue to advocate value-addition, which will see more people employed in the value chain, have increased monetary value and then bring in foreign exchange to reduce current shocks in the economy.
Tunde Oyelola, chairman, Manufacturers Association of Nigeria (MAN), told Real Sector Watch that reversing the declining trend in non-oil fortunes means increasing manufacturing non-oil export.
According to Oyelola, this will require restoring the suspended Export Expansion Grant (EEG) and ensuring that the backlog of over N100 billion owed non-oil exporters is paid.
“You cannot talk about diversification by neglecting this sector. Export business requires planning and certainty. The EEG has been suspended six times since 2005, which is not good for an economy like ours,” Oyelola said.
“EEG is not free money. You are using it to subsidise cost for exporters to ensure that they compete with Asian and American businesspeople price-wise in the global market. If this is quickly reviewed and reinstated, foreign exchange comes in and that means more jobs,” he added.
ODINAKA ANUDU