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How non-oil exports drive economy

AT a time when the country’s earnings from its major revenue source, oil, is dipping as a result of instability in the world market occasioned by oscillating prices, there is a consensus of opinion that the non-oil export sector holds a lot of promise as a ready cash cow. But the irony, however, is that the sector, promising as it is, has suffered serious setbacks, chief among which is the inconsistency in government policies.

 Potentials of non-oil sector
From available information, the Nigerian non-oil export sector has deep agro-allied linkages made up of semi-processed and processed agricultural products such as cocoa, cashew, sesame seed, ginger, gum Arabic, shrimps, cotton and rubber. The country is also a major exporter of finished leather which has direct linkage to the livestock growers.

Expectedly, the export sector has helped in no small measure to boost the incomes of over ten million farmers in rural areas across the length and breadth of the country.

A case in point is that during the global financial crisis, Nigeria’s non-oil sector not only soared high but helped absorb the shock caused by sharp fall in oil revenues.

Giving an insight into the benefit of the non-oil sector on the economy, Dr. Gbadebo Odudaru, in his book, titled: “Nigeria-U.S. Trade Relations in the Non-Oil Sector”, he said the country had received respectable earnings from non-oil sector, a fact, made manifest in the rising GDP growth.
“The Central Bank of Nigeria Economic report for the third quarter of 2007, was estimated at 6.05 per cent compared with 5.73 per cent in the second quarter. The growth was driven by major agriculture activities in the non-oil sector such as yam, Irish and sweet potatoes, groundnuts and maize, which was estimated at 9.47 per cent.”

Impact of government policy
The Federal Government in its determination to drive growth in the non-oil sector has put in place certain policy frameworks such as the Export Expansion Grant (EEG) scheme which operates under the legal context provided under the Export (Incentives and Miscellaneous Provisions) Act 1986.
The policy which is a fiscal policy instrument is implemented under the guidelines issued by the Federal Ministry of Finance and enforced by the Nigerian Export Promotion Council (NEPC), the apex agency responsible for the administration of the policy in conjunction with other key implementation agencies such as the CBN and Nigeria Customs.

The export grant is given to exporters to cushion the impact of infrastructural disadvantages faced by Nigerian exporters and make our exports competitive in the international market.

The fund is only available to exporters who have repatriated in full the proceeds from their export transactions, which must be certified by the CBN as eligible.

Interestingly, the present EEG Policy underwent clinical reform in 2006 during the first term of Dr. Ngozi Okonjo-Iweala, the then Finance minister. With technical assistance from international consultants PriceWaterHouseCoopers (PWC), the scheme was streamlined to make it more effective by categorizing the export products according to degree of value addition and processing and rewarding those companies which generated higher export growth and new investment in export capacity building.

Besides the EEG, the Export Adjustment Scheme (EAS), Export Processing Zone, the Nigeria Import Export Bank (NEXIM), among other instruments have been put in place to ensure a hitch-free export trade.
Investment profile of non-oil export.

According to export market analysts, the growth in non-oil exports in the last few years has been enormous, rising from $1 billion in 2006 to $2.3 billion in 2010, a development, they attributed to the favourable policy matrix of government made possible during Okonjo-Iweala’s first term as finance minister.

It is also instructive to note that the Bank of Industry’s intervention in the sector may have also impacted positively.
Analysts easily point to the almost comatose Nigerian textile industry. With the lifeline from the BOI, some of the remaining textile mills have embarked on re-tooling of their equipment. Some companies are even going in for industrial or technical textiles to have a competitive edge.

Market diversification
It’s interesting to observe how persistent efforts of Nigerian exporting companies have led to the acceptance of their products in some of the highly quality conscious customers and markets. Consider a few examples.
Ten years after AGOA (African Growth & Opportunity Act) was passed by USA to allow duty free access to products from sub-Saharan Africa, Nigerian exports seem to have achieved a breakthrough.

Today, Nigerian products such as cocoa beans and butter, dried-split ginger, leather, woven sacks and technically specified rubber (TSR) are being exported to the US. Hibiscus flowers are also being exported to USA.
Available information from the NEPC indicates that EU accounts for 56% market share of Nigeria’s non-oil exports, followed by the regional ECOWAS with 11% share.

Employment generation
There are over two hundred exporting companies in Nigeria. CBN publishes the list of top 100 export companies. According to industry experts, the direct employment in the non-oil export companies is estimated at about 200,000 while indirect employment in the agriculture sector which gains from the market linkages provided by the exporting companies is estimated over ten million. A large cashew processing plant set up in Kwara State directly employs 1500 people, mostly rural women. The cashew kernels are processed and packed, direct for shipment to developed countries such as USA and Europe.

Cluster development
A very positive fall out of the non-oil export expansion has been the emergence of export processing clusters.Challawa industrial estate in Kano has emerged as a major export cluster with modern tanneries situated in this zone.

Annual exports from this industrial zone which also has an integrated textile mills are estimated over $700 million. Likewise,cocoa processing clusters have emerged in south Western part of the country,rubber processing in Sapele in Delta state and large scale shrimp processing in Lagos. The private companies located in these clusters have invested in plant and machinery and infrastructure, almost substituting the role of the government, to meet international quality standards and provide employment to hundreds of thousands directly and indirectly.

Boosting foreign exchange earnings
Boosting export earnings becomes even more pertinent today in view of weakening exchange rate of Naira and shrinking foreign exchange reserves. According to an NEPC official who is familiar with the past export trends, “a positive feature of the EEG scheme has been the tendency on the part of exporters to operate through official channels which compliments CBN efforts to discourage the unofficial forex market in Nigeria”.

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