Nigeria has failed to leverage various duty-free bilateral and multilateral trade agreements reached with many countries and regions to boost non-oil exports and earn foreign exchange, as a poor operating environment hurts the competitiveness of local companies.
Nigeria is part of a number of multilateral and bilateral trade agreements, which guarantee free trade for most non-oil products.
Apart from the African Growth and Opportunities Act (AGOA) entered into with the US, Nigeria is part of the ECOWAS Trade Liberalisation Scheme (ETLS), World Trade Organisation (WTO) agreements, Common External Tariff (CET) and a number of bilateral agreements with a lot of countries.
Yet, its non-exports in 2015 was only $1.10 billion, dropping 59 percent from 2014 figures.
“Our products are not competitive,” Frank Udemba Jacobs, president, Manufacturers Association of Nigeria (MAN) told BusinessDay.
“Regarding AGOA and other agreements, One major reason why manufacturers are not taking advantage of them is the operating environment. Secondly, we used to have the Export Expansion Grant (EEG), which was cushioning the effect of poor operating environment. But this has been suspended since 2013, meaning we cannot export our finished products. We can only export raw agro products, which is part of the problem,” Jacobs said.
After 15 yrs of AGOA, which allows 6,000 products to be exported to the US duty-free till 2025, Nigeria is yet to raise its export substantially to the world’s biggest economy.
In 2014, Africa’s biggest economy exported goods worth $2.6 million to the US, while South Africa exported in excess of $1.2 billion dollars.
“There are so many opportunities that Nigeria companies should take advantage of, which they haven’t been doing over the years. Nigeria didn’t take advantage of the first 15 yrs of AGOA existence, but some others have,” said Olabintan Famutimi, president, Nigerian-American Chamber of Commerce in Lagos.
The ECOWAS Trade Liberalisation Scheme allows Nigeria and other 14 countries to export freely to the West African region, but Nigeria’s total exports to the region were worth $154.47 million in 2015, falling from $350.86 million the previous year.
Olam Nigeria Limited’s exports dropped 66 percent in 2015, while Bolawole Enterprise Nigeria Limited had its export value drop 52 percent when compared with 2014’s, according to data from Cobalt International Services, Nigeria’s non-oil calculator.
The British American Tobacco Nigeria Limited exports fell 59 percent in 2015 year-on-year, as AIS Trades and Industries Limited fell 36 percent.
Fata Tanning Limited exports fell 42 percent year-on-year, whereas Mamuda Industries Nigeria Limited’s export valuation dropped 73 percent in 2015.
“We signed the ETLS, but we have not been able to overrun the West African market because of issues of power, logistics cost and other reasons that make us un-competitive,” said Muda Yusuf, director-general, Lagos Chamber of Commerce and Industry (LCCI) on a telephone chat.
Yusuf said local products do not have a competitive edge as the environment remains tough.
Nigeria is the biggest critic of Europe’s Economic Partnership Agreement, which allows ECOWAS free access to the EU market, and failed to sign the pact owing to its poor state of competitiveness. The ongoing CET is hitting Nigerian drug makers who pay between five and 20 percent on tariff while importing raw and packaging materials, whereas importers of finished drugs into Nigeria pay no duty. Even the textile makers and other manufacturers are already calling for a review of the CET as downsides threaten few upsides.
Most trading partners rely more on Nigeria’s oil, rather than non-oil exports. Nigeria exports cocoa to the US, Netherlands, Spain and other European countries, while the country gets chocolates from them.
China, Italy and Spain buy Nigeria’s animal skins but export leather shoes to the country. The trade is mostly lopsided as most of these countries, especially China, see Nigeria as a dumping ground.
According to Babatunde Falake, south-west coordinator of the Nigerian Export Promotion Council (NEPC), the country’s exporters need to be ready by having their products at a reasonable quantity, good quality and packaging style.
Nigeria ranks 169 out of 189 in World Bank’s Doing Business Indices. Africa’s largest economy is rated 139 on starting a business, 175 on issues of construction permits, 59 on getting credit, 181 on paying taxes, 182 on trading across borders, 143 on enforcing contracts and 143 on resolving insolvency.
“The non-oil economy (of Nigeria) is vibrant, especially in the culture, entertainment and knowledge-based industries. To realise its full potential, the country now needs to achieve broad-based growth across sectors and regions, to create more jobs for its people,” said The Economist, in its latest report.
“Light infrastructure and port development are critical to support Nigeria’s commercial ecosystem, and should be prioritised at a time of fiscal consolidation. Nigeria has the ingredients for a vibrant solar energy market, including sunny climate and unmet consumer need,” said The Economist.
ODINAKA ANUDU
