‘Zero-Oil Plan Nigeria’s Comparative Advantage Lies Outside of Oil’

That Nigeria is officially in a recession is no longer news. Some have argued that the major reason that the nation has got itself into this predicament, is because of its over-dependence on a single export product, crude oil. The huge potential in non-oil exports that abound in Nigeria, are grossly under-explored and under-utilised. The Nigerian Export Promotion Council (NEPC) has scaled up its efforts to make the world a market place for Nigeria’s non-oil products. The Chief Executive Officer of the Council, Mr. Olusegun Awolowo explained in a chat with Onikepo Braithwaite, Jude Igbanoi and Tobi Soniyi his strategy to ensure that NEPC’s Zero-Oil Plan Strategy is pursued to its logical conclusion

You are a lawyer by profession. Have you ever engaged in the practice of law? Has your being a lawyer been of any advantage to you in your role as CEO of NEPC? 

Yes, I began my professional career in law. Prior to joining the Council in 2013 I held various positions both in and out of the Nigerian Public Sector. I was called to the Nigerian Bar in December of 1989 and began my legal career by working with Abayomi Sogbesan & Co. SAN and GOK Ajayi & Co. SAN. I then had the opportunity to serve in various positions in President Olusegun Obasanjo’s Administration, first as Special Assistant on Traditional Institutions then Legal Due Diligence and Legal Matters, during which I covered a wide range of legal issues for Mr. President. I also served as Secretary for Social Development and later Transport and Area Councils in the FCT. 
I knew from the start that the foundation of the Council was important. I abide from this quote from Robert Hienlein, “In the absence of clearly defined goals we become strangely loyal to performing daily trivia until ultimately we become enslaved by it”. I embarked on getting a strategic vision for the Council that was clearly articulated and understood by all relevant stakeholders. My goal is to transform the NEPC into a fully functioning export promotion agency in tune with best practices obtained all over the world. NEPC must be highly client-centric.

Do you believe that the sale of Nigeria’s national assets is the only way that the country can raise funds and increase its foreign reserves?

I think this question should be approached from a broader perspective. Nigeria today has over a US$35 billion annual shortfall in the supply of foreign exchange to its economy- this has been caused mainly by low oil prices, and also an absence of savings over the years. The real question therefore is not whether Nigeria should sell assets or not; but rather what are the tools available for Nigeria to increase foreign exchange supply to its people.

We have six primary ways of increasing foreign exchange supply, these are – to increase foreign currency borrowing, to attract foreign direct investments, to attract foreign portfolio investments, to boost remittances by the diaspora, to sell assets where it makes sense, and to radically increase exports. Countries all over the world have done a combination of these things to get their economies well-funded with foreign currency, and in reality, Nigeria too, may need to look at a combination of all of these options as well.

What we have seen though, through numerous studies, is that out of these six thrusts I mentioned, only a radical increase of exports has been proven to be the most sustainable supply of foreign exchange over the long term, and can best catalyse economic growth and job creation.

In 1980, Nigeria and China accounted for about 1% each of global exports. In 2011, while China accounted for about 11% of global exports, Nigeria’s share had dwindled to about 0.4%? Why?

The answer is simple: Over the past 36 years, the Chinese have increased the volumes and types of products they produce and export; while Nigeria has focused mainly on selling crude oil. For decades we did not prioritise non-oil exports as an economic philosophy, while the Chinese moved into new products and diversified their export basket. But we actually can also replicate a similar economic miracle here in Nigeria.

The Chinese in the 1980’s were largely agrarian, with low skills and technology, and not producing much to sell to the world. But they realised quickly that they needed a sustainable economic model to become rich. It is interesting to note, that the entire Chinese economy is built on two key principles – Investments and Exports. Everything else is done to complement these economic principles. The Chinese raise income from exports, they use this income by investing heavily in hard infrastructure, and the infrastructure also makes them even more competitive to export some more – such is the cycle of the Chinese economy. It is only recently, that they are now shifting to the next phase of their economic journey, by boosting local consumption. But the export focused engine has brought China very far, and was consistently pursued across all facets of state policy – foreign investors were encouraged to invest more in export oriented sectors; strategic financing made available to export companies; the rails and the roads were built to bring cargo from the hinterlands to ports primarily for exports; and so on. They also carefully selected the export areas to penetrate, gradually dominate, and from there further expand into new areas. For instance, the Chinese first built strong competencies in production that needed a lot of labor, or a lot of energy supply. There is no reason why Nigeria cannot follow a similar trajectory, as we also have a lot of affordable manpower and even potentially more energy than China.

As we look ahead to coming decades, Nigeria will need an economic model that also sees non-oil exports (now looking beyond crude oil) as the means of raising the capital to also its socio-economic and infrastructural needs.

NEPC has a Zero-Oil Plan for Nigeria. We understand that the program is fashioned to boost Nigeria’s foreign exchange supply, grow the economy, reduce unemployment and consequently, reduce poverty. This is extremely timely, especially as Nigeria is presently facing a huge economic crisis. Could you explain the plan to us. Where do you see Nigeria in the next three years if the Zero-Oil Plan is implemented? Have any other countries adopted this type of plan? What kind of success was recorded, if any?

The Zero Oil Plan was actually inspired by President Muhammadu Buhari, when in 2015, with crude oil prices below US$30 a barrel, he met with leading manufacturers in Abuja and said Nigeria must now begin to behave and plan as if it has no more oil. This was clearly a challenge laid out by President Buhari, as a flagship economic intent of the government. At the NEPC we took on the charge put forward by the President, and defined what the Nigerian economy would look like, if we did not export a drop of oil. What else could we be selling to the world? Who would buy it? How much could we make annually? Many Nigerians at first think this is impossible (a Nigeria without oil), but from the review process we have gone through we know it is not only possible, but actually essential for Nigeria’s future survival.

Nigeria has only 40 years or so of oil production based on it’s known reserves. Even if we shared all the crude oil Nigeria has to its 170 million citizens, we get only about NGN5 million each, and nothing again forever. This is one of the lowest oil per capita levels in the world.

With the Zero Oil plan we have designed a Nigerian economy, without crude oil exports. The plan lays out the journey for us to make US$100 billion annually from non-oil exports, with a first milestone of reaching US$30 billion a year in non-oil exports. Today, Nigeria does less than US$5 billion of non-oil exports a year. This will inject foreign exchange supply into the economy, which is the primary economic problem we face in the country today. The plan identifies 11 key products where Nigeria will make the most money through exports, as well as other export sectors that have less financial impact, but are essential to employment. Under our One-State One Export product program, we tie Zero Oil into the existing assets and resources which can be mobilised within each of the 36 States of Nigeria. This links Federal Policy to State economic policy, and turns every State into a major export hub, based on their specific areas of export advantage.

Over the next 3 years, we should see results in product groups with short gestation periods. For instance, radically scaling up exports of Soya products are possible in 24 months cycle, while Palm or Cocoa are likely to take longer, due to harvest cycles. Most oil producing countries are already adopting ‘post-oil economic policies, like Saudi Arabia’s plan just announced in April this year which, focuses on turning them into a portfolio investment country and not an export oriented country like we have set out. Regarding achievements, at least 10 States in Nigeria have commenced implementation of Zero Oil initiatives to develop new ways to develop their States without Federal allocations.

Is the Zero-Oil Plan connected to the one state one export program that you spoke about at the 2015 Nigeria Economic Summit Group Seminar? Has any of the States started to export any products?

The One State One Product (OSOP) initiative is an essential part of the “Zero Oil” plan. The idea is to have all states of the Federation identify at least one strategic export product based on their comparative advantage, from which Nigeria can earn foreign exchange. It’s important to note though, that states are not limited to choosing only one item. For example, Enugu continues to successfully export pineapples into the European market, despite choosing other products for OSOP. Nigeria is a very blessed country and we want to encourage state governments to ramp up production, so we can meet export targets in areas where the states are naturally endowed. Sometimes this means states working together, which is something we highlight during advocacy visits. For example in the Northwest, Jigawa, Kaduna, Kano, and Katsina have realised the potential of revamping their cotton industries. By working together these states have the potential to earn US$ 2 – 2.5 billion annually from cotton and yarn exports by cultivating 2-3million hectares of land and bettering their yields. We would like to see this type of synergy and collaboration replicated throughout the country.

In the Northeast leather can be a major export driver. Leather has the potential to earn US$500-US$750 million annually, from cow, sheep and goat hide, all of which Nigeria already has in abundance. In the North Central zone, Nigeria has the potential to earn US$4-5 billion annually by increasing our production of soya beans, meal and oil. We need approximately 5 to 6 million hectares of land cultivated for soya with necessary investments in milling and oil production as well. In the Southwest, cocoa remains incredibly valuable, as it has been historically. With the right associated investment, Nigeria can move away from exporting the raw product and begin producing cocoa powder, butter and liquor. We have the ability to earn US$2-2.5 billion annually from cocoa and its derivatives. In the Southeast, there is potential in gold. With one world-class gold mine, Nigeria can produce 1 million ounces of gold each year, earning US$1 billion annually. Finally, in the South South there is abundant potential in petrochemicals. Annually, the petrochemical industry is worth over US$150 billion internationally and Nigeria, an oil producing nation, is missing from this. With at least 5 world-class petrochemical complexes in the South South region, Nigeria has the potential to earn US$4-5 billion annually.

Of recent so much attention is now being focused on Made in Nigeria goods. Indeed, the ‘Buy Nigerian’ campaign has already started yielding some positive results. What is the road map for the NEPC to take this initiative beyond the shores of Nigeria?

Our vision at NEPC is to make the world a marketplace for Nigerian non-oil goods. We want to show the world the best of what Nigeria has to offer and this starts with getting all Nigerians involved, no matter where in the world they are. The World Bank estimates there are over 15 million Nigerians resident outside the country. The diaspora is our first contact in most international markets as they’re often the ones who buy Nigerian products. The Nigeria Diaspora Export Programme (NDEX) is the Council’s key initiative meant to leverage on this opportunity through commercial and cultural promotion, as well as social development of all things Nigeria. A key component of NDEX is the Nigerian Heritage City (NHC), a business and cultural enclave akin to Chinatown. We want to establish a carefully crafted setting abroad where we can project national cultural values in a positive light and providing an avenue where people can experience Nigerian goods and services. Another component of NDEX is the Nigerian Cuisine Beyond Borders (NCBB), which is the promotion of World class and internationally recognised and unified Nigerian Cuisine at restaurants located in key commercial centres around the world.

With the value of the Naira at such an all-time low, many have argued that this is actually a great opportunity for Nigerian exports. Do you share this view? If so how do you intend to cash-in on this opportunity? What opportunities do you see at this auspicious time?

Typical economic theory states that nations with lower value currencies, reap huge benefits, since they can export cheaper products and sell more goods overseas. But remember I started with the word ‘typical’, because in practice it’s not always that straight forward. A weak currency makes sense for exports, only if the exports you anticipated then truly happen. Otherwise, with a weak currency you then only import inflation, without boosting foreign exchange supply. Another way to view this concept – a weak currency is two sides of the same coin. On the first side, a weak currency makes imports expensive, which limits the demand of foreign exchange; however on the other side a weak currency, makes exports cheap which boosts supply of foreign exchange. Only when both of these faces are satisfied, do you get the true benefits of any currency adjustment. This is the careful balancing act that the government is trying to achieve.

The currency regime in Nigeria has unlocked significant opportunities for investors. I have been in touch with a number of international companies, who were evaluating specific export opportunities in Nigeria for a while, but could not enter the market because they said the assets were ‘too pricy’. However, with the recent currency corrections done by the Central Bank in June this year, the upfront costs in Naira for these investors have dropped significantly, and some of these export projects are now likely to kick off.

A weak currency regime however, does hurt many local investors. For instance it makes expansions difficult for local investors who have the bulk of their net worth in Naira, and need to procure equipment offshore in dollars which is then too expensive. As you can see there is no easy answer here, and the government has to carefully straddle between the needs of the various groups and stakeholders in this regard.

Now that oil prices are down globally and there is a crisis in the Niger- Delta Region, there definitely must be some pressure on the NEPC to perform at optimum level. What are your strategies for promoting non-oil exports?

While the “Zero Oil” plan is the Council’s main strategy for improving Nigeria’s non-oil exports, the promotion and development of Nigeria’s export trade is central to the work NEPC does everyday. We are an incentive organisation so it’s important that we constantly build consensus, advocate and regularly engage with potential exporters in the private sector. To do this, NEPC organises specific trainings for infant exporters through programmes such as our Export Clinic Initiative, which is targeted towards beginners, our Zero to Export programme, and the establishment of our AGOA Human Capital Development Centre in Apapa, Lagos. We also host training workshops on capacity building throughout the year and run a Youth Empowerment Export Skills Program (YEESAP) which is targeted at encouraging young people to enter non-oil exports.

Internally, the Council has a Strategic Plan that has revamped our decision-making processes and brought them up to date. We recently concluded an Institutional and Functional Review by KPMG that restructured the Council by making it more in line with other successful export promoting agencies internationally. For example, our Export Development and Incentives Department houses a division dedicated to SME financing. We’ve also increased collaboration with sister agencies and stakeholders needed for success in the export space. We strive to have a synergy of goals and mutual collaboration with organisations such as NEXIM, NIPC, CBN, BOI, NIMASA, NCS, NBS, and others.

With the on-going efforts in the agro-allied sector, how soon do you see Nigeria exporting products like rice, smoked fish, shea butter, palm oil, cashew, cocoa, etc? We were shocked to discover that cocoa which used to be one of our major exports is now so low on the list, and Nigeria is still importing products like palm oil.

If we can ramp up the pace of our implementation of the Zero Oil plan, within 3 to 4 years Nigeria can be a top 10 global exporter in a number of critical high value products. In the case of rice, we are the 2nd largest importer of rice in the world, spending almost US$2 billion a year on it. Any increase in rice production will therefore, first be used to displace imports for a number of years, before the surplus production then starts going out of the country for exports. But this is still good, because if Nigeria becomes self-sufficient in rice, we save US$2 billion a year in foreign exchange – which is almost the same effect as exporting the same quantity.

There is a nuance to this topic though. It is not just about Nigeria’s imports; but WHAT Nigeria exports. In the good years, Nigeria made over US$70 billion every year, from crude oil exports. So as we look ahead, we should practically seek a basket of items that we can export to give us as much as, or more than, what we were making from crude oil. This takes careful design as we have laid out in our plan. Malaysia and Indonesia each make over US$16 billion a year from Palm Oil exports, while Nigeria is a net importer. This must change. But behind these numbers, did you know Indonesia cultivates 10.8 million hectares of land for Palm Oil? This is 5 times the size of Edo State. The point here is that, meeting certain non-oil export targets has implications on the resources that need to be mobilised in the country – how much land, assumed yields on farms, how many processing plants, the length of pipelines, total capital investments, bulk cargo capacity for exports, amongst others. These resources need to be mobilised to meet export targets, and they form the bedrock of the export policy and are essential for economic growth. This is the type of thinking that has gone into the Zero Oil plan for key products – Cocoa, Palm Oil, Leather, Petrochemicals, Soya, and so on.

Beyond the desire to promote Nigerian exports, how does NEPC deal with the issue of the quality of the products that are exported?

Rigorous quality control standards are imperative to being able to export goods abroad. Unfortunately, this is an area Nigeria struggles with and the country still lacks an internationally recognised quality infrastructure framework that ensures the safety of our products. There are 3 parts to the issue of quality and standards. The first part relates to knowledge and awareness. Understanding the standards requirements for specific products is a significant barrier for Nigerian exporters. Many of these requirements, especially for developed markets, are provided in lengthy volumes that cannot be easily parsed through by companies in less sophisticated markets. As part of the Zero Oil plan, the NEPC will be intensifying efforts to support Nigerian companies’ in navigating through the numerous levels of definitions and product specifications for key items going into priority markets. The second part of product standards, relates to meeting the specifications. Under this area, the NEPC is adopting a system of collaboration networks of best practice testing labs and packaging centres to support Nigerian companies. This will provide Nigerian companies with specific assets and service providers that they can call on to support them in meeting standards requirements for getting their products into target markets. Also on this point, for exports, quality sometimes starts from initial investment or even planting (for agriculture), and not too late in the process. If a company plans to export agro products for instance, even the types of fertiliser or insecticides used during the growing phase needs to be carefully selected with exports in mind. The third part relates to traceability, as a strong export country needs the capacity to trace all goods back to the very point of initial origination. This is essential to identify the poor quality products and quickly identify and isolate such producers from causing more harm to other companies that are meeting quality standards.

In addition to the Zero Oil plan, NEPC is also one of the government agencies actively participating with the EU and UNIDO on the National Quality Infrastructure Project (NQIP). NQIP aims to improve the quality, safety, integrity and marketability of Nigerian goods and services, especially those produced by small and medium enterprises. Quality control capacity building programs are held throughout Nigeria and exporters are actively encouraged to participate. NQIP has hosted Food Assessment Risk Trainings, Monitoring and Evaluation Workshops, Laboratory Trainings, Quality in industry and Trade workshops and Quality and Standards system improvement trainings specifically for exporters of beans and melon seed.

NEPC also spearheaded the formation of a technical committee to address the recurring issue of rejection of Nigerian food items and agricultural commodities at the international market, particularly the rejection of Nigerian beans into the European Union earlier this year. The committee was comprised of 20 private and public sector organisation representatives such as, Customs, SON, NAFDAC, NAQS, NACCIMA and FACAN, who discovered the ban was a result of the high usage of chemicals in the preservation of dried beans products by farmers and traders in storage. The strategies and recommendations put forth by the committee at the completion of their assessment were later adopted at the Federal level as a national strategy.

What are the greatest challenges of being the CEO of NEPC? Are you able to overcome them? What methods do you adopt to carry out the mandate of the council? How effective are they?

The greatest challenges I face being CEO of NEPC is of course the opposition to structural transformation in the reform process. But with focus and clarity of goals, one continues to drive on. “You will never reach your destination if you stop and throw stones at every dog that barks”. Winston Churchill said this and I believe it to be true. While at NEPC, I have embarked on a holistic transformation reform process which includes implementation of 1) A strategic plan, 2) An institutional and functional review, 3) A training needs assessment followed by capacity training across all staff levels, I have also developed a robust monitoring and evaluation system. I am pragmatic about what is needed to succeed.

Attracting investors to an economy in recession must really be a daunting task, how is the NEPC weathering the storm? In the course of your work, you interact with prospective investors. What are their major concerns and considerations about the Nigerian investment climate?

Interestingly the inquiries I get from investors are not really about the current downturn, as most investors do take a long term view on the country. The key concern from Investors is whether the Nigerian growth story which has been sold globally since 1999 is over. My response to them is that the fundamentals which will make Nigeria one of the largest economies in the world are still there. We are still the 7th most populous country in the world; We are still one of the youngest countries in the world, with our median age of 18 years; We are still one of the most energy endowed countries in the world with such large hydrocarbon resources; and we are almost perfectly located with commercial proximity to the Americas, Europe, and Africa. So the cycles of currencies or inflation may change, but the fundamentals that will make Nigeria one of the best economies to reckon with, has not changed.

When looking at exports though, companies need to be even more competitive than they would need to be, if they were only thinking domestic markets. The NEPC’s view is that Nigeria will succeed primarily in areas where it can produce and export in the bottom 30th Percentile of the respective global cost curve. The steps being taken by government to address concerns of energy supply, freight costs, costs of financing, overlapping regulations, are therefore well received by investors focused on exports. Within this context, the NEPC’s role is to continuously situate exports within the national economic discourse, because it is a key means of raising sustainable funding to invest in public goods which improve the investment climate.

Nigeria is in competition with other countries for investments. What unique advantages does Nigeria have as a country that can give it an edge?

Nigeria is a country teeming with unique advantages that give us an edge over many other nations. To begin we have a large domestic market of over 170 million educated English speakers. More importantly we are strategically positioned within the ECOWAS region to grant access to an even larger market of 300 million people. Our population is young which means we have a powerful workforce with over 70% of Nigerians under the age of 30 this also provides us with cheap and effective labour. Nigeria has the 7th largest gas reserves in the world and over 90% of our large land size is arable. The country already leads the world in the production of 7 agricultural products. We also have an abundance of raw materials, 44 Solid minerals available in commercial quantities e.g. our iron ore reserves are the 12th largest in the world. This all means Nigeria’s comparative advantage lies outside of oil. Most importantly, investors want to see continuation of government policy and this government, by the adoption of the Nigerian Industrial Revolution Plan (NIRP) is demonstrating this.

Can you tell us some major achievements of the NEPC during your watch?

My goal is to develop NEPC into a fully functioning export promotion agency that is grounded on great clarity about exporters needs, with a clear appreciation and understanding of the expectations of our target markets. To build a performance, learning and dynamic organisation that is highly client-centric.

The report card cannot be written by myself.