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Neglected for decades in favour of crude oil as the major revenue earner for the country, hope is now rising as the non-oil sector is receiving new impetus to drive economic growth and make the country less dependent on oil. Undoubtedly, this is the path to go, with the Central Bank of Nigeria (CBN) charting the way forward for non-export revenue with the recent unveiling of “RT200FX Programme.”
With a capital outlay of $200billion, the aim of the new imitative is to drive non-oil revenue for the next five years. The policy is hinged on five major planks: Value-adding export facility, non-oil commodities export facility, non-oil foreign exchange rebate scheme, dedicated non-oil export terminal and biannual non-oil export summit. Each of the components is designed to boost local production that will add value to non-oil natural resources that abound in many states of the country. These include gold, zinc, bauxite, copper, cocoa, cashew, sesame seed, lead, palm oil, sorghum, peanuts, cassava, millet, among others. For instance, the Non-oil FX Rebate scheme, is a special local currency rebate plan for non-oil exporters of semi-finished and finished produce who show verifiable evidence of exports proceeds repatriation sold directly into the Import & Export (I &E) window to boost liquidity in the market. Nigeria was once a net exporter of these products, but the discovery of oil in commercial quantity resulted in the neglect of the agricultural sector.
It is a welcome development that the Federal Government, through the CBN, is repositioning the nation’s non-oil sector through the implementation of various programmes on Export Expansion Facility Programme (EEFP) and policies. These programmes are expected to raise the volume of non-oil exports in the country. It is commendable that the new initiative came on the heels of the launch of the Economic Community of West African States (ECOWAS) Trade Promotion Organisations (TPOs). Between 2016 and 2020, the total non-oil exports averaged $5.17billion annually, with about 42 per cent contribution to the Gross Domestic Product (GDP). However, for these programmes to succeed, the structural bottlenecks at the nation’s ports that undermine the competitiveness of Nigeria’s non-oil exports in the global market should be removed.
This will boost government’s diversification drive and improve Nigeria’s terms of trade, which had fallen by over three per cent since 2019, according to the National Bureau of Statistics (NBS) Commodity Price Index. Terms of Trade (ToT) are the ratio between a country’s export prices and its import prices. The decline was as a result of decreases recorded in the prices of trade with the rest of Africa and Europe in recent years. The effort to explore non-oil revenue could not have come at a better time than now. With the increasing need to expand intra-regional trade in the ECOWAS sub-region, there will be unlimited opportunities already created by the African Continental Free Trade Agreement (AfCFTA), which Nigerian exporters can leverage on. The reliance on oil has become a drawback on the economy and made it difficult for the government to effectively plan budgets and measure their outcomes. The mainstay of the economy remains agriculture where the country has competitive advantage.
Nigeria’s over-reliance on oil for government’s revenue and foreign exchange earnings stands at about 87 per cent. This is in contrast to the sector’s contribution of 8.33 per cent of the country’s Gross Domestic Product (GDP). The resultant effect is that Nigeria’s GDP growth declined significantly by 6.1 per cent and 3.6 per cent, respectively in the second and third quarters of 2020. That requires building strong partnership across the broad spectrum of the economy and intervention by financial institutions to drive Nigeria’s exports across the African continent and beyond.
Therefore, Nigerian banks should invest in non-oil exports. The CBN’s drive in the palm oil sector, rice, cocoa, cashew, are also very glaring. These financing solutions will help facilitate the movement of these businesses up the production value-chain through the financing of forward integrated components to facilitate transition from primary production to value-added products that will add significant value to the nation’s GDP. Besides, it will provide the much-needed employment opportunities. On their part, state governments should explore and exploit solid minerals and other non-oil resources in their domains in line with existing laws and regulations.
To achieve the objectives of boosting export and generate foreign exchange earnings, the government should address the problems that hamper the manufacturing and agric business in the country. These include the Ease of Doing Business (EoDB), exchange rate regime, power supply; insecurity linked to farmers/herders clashes that have affected food production across the country, multiple taxes, among other challenges. Nigeria’s terms of trade can only improve if export aggregation and inclusion, trade facilitation and market development are strengthened.
Besides, the relevant government agencies should conduct an intense, hands-on export management programmes designed to equip Nigerian exporters, regulators, financiers and policymakers with the practical knowledge and business skills required to compete effectively in the global export market. It is hoped that the renewed efforts in non-oil sector will diversify the economy and make it less dependent on oil.
