In recent times, the diversification of the Nigerian economy is arguably one of the most popular locutions in our economic circles. It is every so often regurgitated by policy makers, politicians and analysts from different sectors. The fall in international crude oil prices and the attendant effect on the Nigeria economy has further amplified the unanimity on the need to diversify. Diversifying the economy simply means moving away from our reliance on crude oil for more than 90% of our earnings. Currently, crude oil exports account for nearly 96% of our foreign earnings. Indeed, there has been sufficient talk about this all-important national redirection. The question now is: has the unceasing vocalisation been matched by action? The answer to this is obviously not in the positive. Two things are paramount here. First is the capacity of the economy to produce sufficiently to meet local demands of goods and services otherwise imported. Second is the capacity of the economy to produce for export earnings in order to have a positive balance of payment. On both ends Nigeria’s performance has not been encouraging. Whilst we may be on the verge to attain local sufficiency in some areas, we are lagging behind in taking advantage of opportunities for foreign earnings.
Using the African Growth and Opportunity Act (AGOA) as a measure of our readiness to diversify our foreign earnings paints a gloomy picture of unpreparedness. AGOA is a United States Trade Act, enacted on 18 May 2000 under the administration of President George W. Bush. The legislation was enacted to enhance market access to the US for qualifying Sub-Saharan African (SSA) countries.The legislation allows 38 African countries including Nigeria to export 7,000 product lines tariff and quota free to the US market.The criteria for qualification are basically centeredon the promotion of democratic tenets and human rights. The Act originally covered an 8-year period from October 2000 to September 2008, but it has been reviewed repeatedly and currently runs till 2025.
An evaluation of Nigeria’s performance under the regime shows that the country has performed abysmally below expectations. Since inception, Nigeria’s exports under AGOA have increased from about $3.4 billion to $6 billion, but most of the growth recorded was in the oil sector. Petroleum products still account for the largest portion of the US AGOA imports with a 69 per cent share of overall AGOA imports in 2014. According to data from the Departmentof Economic and Regional Affairs, Nigeria accounted for a paltry volume of $9 million out of $2.7 billion agricultural exports recorded by the continent to the United States in 2017. The Acting Director of the department, Harry Sullivan, attributed this performance to the country’s over-dependence on oil. Comparatively, between 2016 and 2017, our neighbours, Ghana saw its exports under AGOA increased to more than $300million while we are celebrating an embarrassing sum of $9million.
The same garment, textile and leather industries that are currently moribund in Nigeria are the biggest earners for Ethiopia and Madagascar. The two countries took advantage of the market access granted for footwear and garments to record exports worth $152million and $92million respectively in the year 2017. Our textile industry that was once a major employer of labour is practically non-existent today. A country that was once the hub of textile manufacturing in Africa now imports all kinds of fabric. We can amplify the diversification reprise all we want but without deliberate actions to support local manufacturing and production, Nigeria will continue to rely dangerously on crude oil earnings.
The point to make is that opportunities abound everywhere, but they only respond to those who are deliberate and committed. The Chief Executive Officer of Nigerian Export Promotion Council, Mr.SegunAwolowo, clearly has a huge task ahead of him. Fairly, Nigeria may have recorded some improvements in recent years, but there are still many kilometres to cover in this long journey. The federal and state governments need to urgently intensify efforts aimed at encouraging local production for export. The starting point to changing the tide is to address the many infrastructural challenges bedevilling the country. The current stagnancy in agricultural exports is largely due to the dearth of infrastructure in the country. The whole value chain is characterised by weak infrastructure and lack of government support. Many of our farmers still deploy old farming techniques owingto the absence of modern technologies. And transporting their farm produce for storage, the farmers are confronted with bad roads and poor power supply. In the end if they are able to scale these hurdles, transporting their goods to the port for export becomes another struggle. The goods could be on the road for days and weeks due to the dilapidated roads and ensuing traffic gridlock.
Unless there is a coordinated effort to change the current situation, our dream of diversifying the Nigerian economy may not become a reality in the nearest future. Our performance with AGOA has shown that we are not ready for more opportunities.We are only good at singing the diversification chorus.