Reactivating Nigeria's Non Oil Export

[Richard Akindele]

Since crude oil was discovered in Nigeria about four decades ago, the country's non oil export has gradually declined.

This is primarily due to its overdependence on oil revenue which has over the years become the primary source of national income. The industrial and agricultural sectors of the economy which are supposed to be the major revenue earners outside the oil sector have not grown significantly enough to make meaningful contributions to improving the foreign exchange earnings of the country.

According to the economic report for the first quarter of 2006 which was recently released by the Central Bank of Nigeria (CBN), Nigeria's non oil export by top 100 exporters in the first three months of this year was only $171.49million (about N24 billion). "Non-oil export earnings by Nigeria's top 100 exporters in the first quarter of 2006 amounted to US$171.49 million, indicating an increase of 5.3 per cent over the preceding quarter's level. A breakdown of the proceeds in the quarter showed that proceeds in respect of the agricultural sub-sector, manufacturing sub-sector and "others" rose from US$97.56 million, US$58.88 and US$6.37 million in the preceding quarter to US$98.74 million, US$60.62 million and US$12.14 million, respectively.

The shares of agricultural, manufacturing and "others" sub-sectors in total non-oil export proceeds were 57.6, 35.3 and 7.1 per cent, respectively, compared with 59.9, 36.2 and 3.9 per cent, in the preceding quarter. The rise in the shares of agricultural and manufacturing sub-sectors was attributable largely to variations in the prices of the goods traded at the international market.

The top 100 exporters accounted for 99.7 per cent of all the non-oil export proceeds in the first quarter of 2006." Although the report shows an increase in non oil exports in the first quarter of 2006, as compared to the last quarter of 2005, the input it made to the country's foreign exchange earning is still insignificant com pared to the $7.09 billion the country made in foreign exchange, between January and March 2006. Some of the factors responsible for the low output in the industrial sector of the economy include inadequate infrastructure like power, water supply and transportation.

The agricultural sector on the other hand has been bedeviled with problems that range from high cost of farm inputs like fertilizer, improved seedlings and lack of modern farm implements. Weak economic policies have also led to the dearth of thousands local industries, especially in the northern part of the country where textiles have been badly devastated. In the last few years, more than 80 percent of textile firms have had to close shops because of unfavorable economic policies as well as increase in the activities of illegal importers of cheap foreign textiles.

Although Nigeria's position as the 6th largest oil exporter in the world, coupled with the high oil prices that have prevailed in recent years have gr eatly shot up the country's foreign exchange earnings, export in other sectors of the economy have continued to remain low. The $171 million earned from non-oil exports in the first quarter of the year represents only about 2 percent of the county's total foreign exchange earnings during the same period. In reaction to the continuous dependence on oil and poor attention to development of the non oil export sector, foreign trade experts have continuously blamed the country as being responsible for her inability to boost non- oil export, a sector that offers great opportunities for job creation and poverty alleviation.

They have persistently blamed Nigeria for not making good use of the opportunities created by the African Growth Opportunity Act (AGOA), a United States policy that seeks to allow sub-Saharan African countries duty-free access to its market for about 6,400 products. The purpose of AGOA is to use preferential trade access to the US market as a catalyst for econom ic growth in sub-Saharan Africa by encouraging governments to open their economies and build free markets. It amends the U.S. generalized system of preferences to grant duty-free treatment to specified products from eligible countries.

US Congress passed AGOA as part of the Trade and Development Act of 2000, and President Bill Clinton signed it into law on May 18, 2000. In August 2002, President George W. Bush signed amendments to AGOA that expanded preferential access for eligible sub-Saharan African counties. Two years later, President Bush signed the AGOA Acceleration Act of 2004, which extended preferential access for imports from eligible sub-Saharan African countries until September 30, 2015, and extended and clarified textile-related provisions in the Act.

As the law now stands, nearly all imports from eligible countries in sub-Saharan Africa enter the US duty-free through 2015. Since its inception in 2000, AGOA has helped increase U.S. two-way trade with sub-Saharan Africa by 115 percent. In 2005, U.S. total exports to sub-Saharan Africa rose 22 percent from 2004, to $10.3 billion. U.S. total imports from Africa increased by 40 percent to $50.3 billion. In 2005, over 98 percent of U.S. imports from AGOA-eligible countries entered the United States duty-free. In 2004, Nigeria only exported non oil products worth $2million to the USA, a performance that has been widely considered to be too poor for a nation like this. Besides AGOA, Nigeria needs to effectively devise polices that should begin to significantly boost non-oil export to not only diversify the economy, but also form a strong backbone for future developmental strategies.

The initiative of the present government's NEEDS agenda should be supported and sustained to encourage vibrant and aggressive development of the non-oil sector of the economy. Agriculture, tourism and industry could serve this purpose. For instance, the present drive to enhance industrial use of cassava as well as its export, boosting cocoa production are all steps in the right direction. Reviving the old groundnut pyramids of Kano as well as the popular hides and skin business in the north have all been prescribed by experts as some of the ways the country can boost its non-oil exports.

Daily Trust.