Stimulating export as economic diversification strategy

The Non-Oil Export Stimulation Facility (ESF) was established by the Central Bank of Nigeria (CBN) to diversify the economy away from oil and to expedite the growth and development of the non-oil export sector.

The recent fall in global prices of crude oil triggered a sharp decline in the country’s revenue and foreign exchange earnings. The facility is essentially designed to redress the declining export credit and reposition the sector to increase its contribution to revenue generation and economic development. It will improve export financing, increase access of exporters to low interest credit and offer additional opportunities for them to upgrade and expand their businesses in addition to improving their competiveness.

To implement the facility, CBN will invest in a N500 billion debenture to be issued by Nigerian Export-Import Bank (NEXIM) in line with section 31 of CBN Act. This Guideline describes and outlines the operational modalities of the ESF. The Objectives of the Facility are to improve access of exporters to concessionary finance to expand and diversify the non-oil export baskets, attract new investments and encourage re-investments in value-added non-oil exports production and non-traditional exports, Shore up non-oil export sector
productivity and create more jobs, Support export oriented companies to upgrade and expand their export operations as well as capabilities diversify and increase the level of contribution of non-oil exports revenue towards sustainable economic development; and broaden the scope of export financing instruments.

The Nigerian Export – Import Bank (NEXIM) is the managing agent of the Non-Oil Export Stimulation Facility. It is for the day-to-day administration of the Facility and rendition of periodic reports on the performance of ESF to CBN. “Facilities with a tenor of up to three (3) years would be granted at a maximum all-in interest rate of seven and half per cent (7.5%) per annum; Facilities with tenor of over three (3) years would be granted at a maximum all-in interest rate of nine per cent (9%) per annum.

“Export of goods wholly or partly processed or manufactured in Nigeria; Export of commodities and services, which are permissible and excluded under existing export prohibition list; Imports of plant and machinery, spare parts and packaging materials, required for export oriented production that cannot be produced locally; Export value chain support services such as transportation, warehousing and quality assurance infrastructure; Resuscitation, expansion, modernization and technology upgrade of non-oil exports industries and; Stocking Facility/Working capital,” the guidelines added.

While this facility has what it takes to strengthen Nigeria export to earn foreign currency at this time that the federal government is preaching diversification keen observers pinpointed the absence of articulate sustainable non-oil export strategy that will address the challenges stalling the growth of the sub-sector as well as the continued suspension of the Export Expansion Grant.
Immediate past managing director of the Nigerian Ports Authority(NPA), Habib Abdullahi said few months before he exited office that the management of the organisation did an analysis of port capacity as catalyst  to economic development through export commodities but that the analysis revealed that about 90 per cent of container traffic left the shores of Nigeria empty.
According to him, this position was communicated to the Nigerian Export Promotion Council (NEPC) by the NPA Management.
He highlighted the need to sensitise Nigerians on the necessity to fill the vacuum through export commodities, especially Mines and Agro-allied products.
The issues affecting non-oil exports are generally fundamental – infrastructure deficit, high cost of doing business and regulatory bottlenecks. Findings also revealed that access to finance is yet another issue affecting the non-oil export business in the country.
Experts believe that the issues affecting the sector are not limited to finance. There are issues of quality and standard which the ESF will address eventually.
It could be recalled that the suspension of export grant came about when dried beans from Nigeria were found to have contained high level of pesticides considered dangerous to human health.
While the suspension lasted, relevant agencies including National Agency for Food, Drugs Administration and Control (NAFDAC) and the Standard Organisation of Nigeria (SON), had assured at various times that the suspension would be lifted which never was.
Exports from Nigeria to other countries of the world are very lucrative and can build the country’s economy overnight.
Many have wondered why Nigerians are not massively exporting its products to other countries.  Investigations show that there are a lot agricultural produce  that could be exported. It is even said that there are far too many other made in Nigeria goods that could be yielding more than enough foreign exchanges to the country.
The exportable produce from Nigeria includes ginger, one of the most traded spices in the world which Nigeria happens to be among the largest producers.
Palm Kernel Oil: This is the oil extracted from the pulp of palm fruit which is different from palm oil. Palm Kernel Oil is used for the manufacturing of various cosmetics, pharmaceutical products and confectioneries. The uses of this oil are broad and the mineral contents are said to be rich in protein for various uses.
Cocoa Butter: This is the real sources of chocolates of all types. The fruits of Cocoa are the end products of various skin care products, health products, and pharmaceutical products. The demands of Cocoa are very high in both America and UK and that is why cocoa farming is very essential on its own.
Presently, over one million pairs of shoes are reportedly exported every day from Aba, south East Nigeria, reaching an estimated 51 million pairs annually. The shoes are said to be purchased by traders from African countries, mostly Cameroun and Congo Democratic Republic.
Other leather items such as bags and belts are also exported from Aba and other places informally on a weekly basis to other African countries with Cameroun as the major transit market.
However an export consultant and Chief Executive Officer of MultiMix Academy, Mr. Obiora Madu, said the rush for non-oil exports as a delicate situation for Nigeria, which must be handled carefully.
He said, “Government and its agencies must get ready to checkmate fraudulent people who in this race for forex are going to export rubbish out of Nigeria and worsen the situation.
“It will get worse; every one you meet now – transporters, freight forwarders – is asking for information on non-oil export. As an export consultant I get these calls very often.”
He listed one of the basic factors for the success of non-oil export trade as building capacity. To him, building capacity is a specialised activity, which involves both holding seminars and practical demonstrations on the field.
He said everyone in the non-oil export value chain right from the farms or mines up until the point of exports would have to be sensitised to international standards.
Although he acknowledged the efforts of the Nigeria Export Promotion Council in the development of non-oil exports, he added that the council was unable to build capacity as it had no structure for it.
“If we want to take non-oil exports seriously, we need to review the entire process and policies. It is not solely the business of NEPC and Ministry of Trade and Investment. But it also includes the Ministry of Agriculture, Immigration and Foreign Affairs; all these people have something to do with exports. When government agencies are working in different directions, you can’t get a positive result.”
Recently President, Miners Association of Nigeria, Alhaji Sani Shehu, gave some of the factors be believes are militating against the sector as lack of adequate funds and inadequate mining equipment.
He accused commercial banks of frustrating indigenous miners in their quest to access the Small and Medium Enterprise intervention fund.
“Normal commercial lending conditions should not be applied to the SMEs fund. Most commercial banks prolong the process and the miner gets frustrated after three or four months of chasing a loan facility. The intervention fund is meant to be a solution and so we should access it. We are competing in a disturbing scenario; other miners from Asia get their loans at two per cent with over 20 years to repay.
“We are happy to have it at nine per cent but at least let us have access to it. Presently, only about 10 per cent of the miners in the country have accessed that fund,” Shehu said.
He had also called for the restriction on the importation of solid minerals used as raw materials by industries in the country.
Shehu said, “In many cases, we have the industrial minerals that can be used as raw materials for our industries, which are still imported. We appreciate the fact that we do not have the capacity to give the industries 100 per cent of what they need.

“However, we are advocating that government compels the industries to source for their raw materials from us and only purchase the amount that will bridge the gap of what we are unable to satisfy. Allowing these industries to import minerals only leads to job creation overseas while we battle unemployment here.”
The federal government recently expressed its preparedness to tackle impediments confronting the export sector of the nation’s economy.
The Minister of Budget and National Planning, Senator Udoma Udo Udoma, who gave the assurance when members of the Organised Private Sector Exporters Association met with him in his office and enumerated some challenges confronting Nigerian exporters, said the present administration would address exporters’ plight.
“We understand all issues your association has raised, like difficulties in securing foreign exchange, decline in Nigerian export, inadequate export incentive and export grant.  Government is working towards reviewing our economy and business environment, we will soon provide a clear and properly coordinated policies that will increase local production of goods, especially Nigerian exports goods.
“Importantly, your association as non-oil sector is an economic diversification vital pillar fully required by this administration and must be fully supported,” a statement issued by the Director (Information), Ministry of Budget and National Planning, Mr. Charles Dafe,  quoted Udoma to have said.

 

 

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