Boosting Demand for Nigeria’s Exports Through Value Addition

James Emejo writes that beyond raw materials exports, government must commit itself to promoting value addition to increase quality of exports to make the country’s trade more profitable.

 No doubt, Nigeria’s foreign trade may appear huge in terms of volume, and size but it is not often favourable to the country, especially in terms of the balance of payment in recent times.

This is partly a result of the underlying challenges in the country’s economic structure, especially its over-reliance on crude oil revenues over time and the inability to properly diversify the economic base.

Nigeria’s foreign trade is perpetually in deficit as the value of its imports appear to outweigh exports – but the real issue remains in the continuous export of raw materials without value addition.

Merchandise statistics

The National Bureau of Statistics (NBS) in its second quarter 2022 foreign trade report, indicated that Nigeria’s total merchandise trade dropped slightly by 1.23 per cent to N12.84 trillion in the second quarter of the year (Q2 2022) compared to N13 trillion in the preceding quarter,

The performance showed an increase of 32.22 per cent higher compared to the N9.71 trillion recorded in the corresponding quarter of 2021.

According to report, export trade rose by 4.31 per cent to N7.40 trillion compared to N7.10 trillion in Q1 while the share of exports in total trade stood at 57.68 per cent in the review period while the value of re-exports decreased by 91.68 per cent to N9.63 billion in Q2 compared to N115.80 billion in the preceding quarter.

On the other hand, total imports decreased by 7.89 per cent when compared to the N5.90 trillion in Q1 and grew by 15.83 per cent when compared to the N4.69 trillion recorded in Q1 2021.

 However, a decline in imports resulted in an improved trade balance of N1.97 trillion in the review quarter.

But, exports trade was largely dominated by crude oil exports valued at N5.91 trillion, representing 79.77 per cent of total exports while non-crude oil exports value stood at N1.49 trillion or 20.23 per cent of total exports of which non-oil products contributed N675.08 billion representing 9.11 per cent of total exports.

Furthermore, the export component of trade showed that Nigeria exported most goods valued at N3.28 trillion or 44.29 per cent to Europe.

This was followed by exports to Asia valued at N2.42 trillion or 32.77 per cent of total exports while America accounted for N1.19 trillion or 16.14 per cent of total exports. Also, exports to Africa stood at N465.28billion or 6.28 per cent of total exports of which N357.29billion worth of goods were exported to ECOWAS countries.

The report also showed that India, which accounted for N1.09 trillion or 14.85 per cent of exports, remained the top export destination for Nigeria during the quarter under review. This was followed by Spain, The Netherlands, The United States of America and Indonesia and with goods valued at N1.03 trillion, or 13.98 per cent, N914.46billion or 12.35 per cent, N661.19billion or 8.93 per cent, and N625.65 billion or 8.45 per cent, respectively.

Conversely, Nigeria’s imported goods were mainly from Asia, valued at N2.58 trillion or 47.63 per cent of total imports. This was followed by Europe N1.97 trillion or 36.42 per cent, America N590.62 billion or 10.87 per cent, Africa with N244.86 billion or 4.51 per cent and Oceania with N31.49 billion or 0.58 per cent. Imports from ECOWAS countries accounted for N34.92billion, or 0.64 per cent of the value of total imports.

Imported goods originated mainly from China and were valued at N1.41 trillion, representing 26.10 of total imports.

This was followed by Belgium with N465.19 billion, representing 8.56 per cent of total imports, India N459.20 billion or 8.45 per cent, The Netherlands 430.90 billion or 7.93 per cent, and the United States of America with N362.92billion or 6.68 per cent of total imports.

Value addition plagued Trade

Although experts believed that the country’s trade woes were partly a result of a lack of an effective trade policy, the inability of the country to add value to its raw material exports has been described a bigger obstacle.

 It is believed that the current practice of exporting raw material inputs and importing finished products in turn is the greatest undoing for the Nigerian economy as this amounts to the export of job opportunities as well as worsening the country’s foreign exchange crisis as an import-dependent economy.

 Earlier in March 2021, the Director General, World Trade Organisation (WTO), Dr. Ngozi Okonjo-Iweala, while on a working visit to the country, said although agriculture could boost Nigeria’s share of African trade, currently at about 19 per cent, and help to fix the economy, trade could play a crucial role towards the country’s economic liberation particularly through value addition to products to make them exportable.

The WTO DG particularly challenged Nigerian entrepreneurs to be innovative in product packaging, and quality assurance among others in order to access the global market.

Specifically, Okonjo-Iweala said Nigeria really needed to focus on adding value to products and repositioning the economy. 

She said, “We are an oil and gas-based economy which has sustained us for some time, and still, maybe for a couple of decades more.

“But the world is moving away from fossil fuel. Before we know it everywhere will be electric cars. So, not only because of trade but its existential for us as a country that we begin to think about what we have.

“And we have good news because in agriculture we have a lot we can do. There is an example I am going to be quoting everywhere of how we just help a cooperative of mainly women to process shea butter, WTO provided the technical assistance to connect them to markets and to help them improve the quality of their products.

“What happened was that they were able to produce 200 metric tons of shea butter, with an order for another 500bmetric tons.”

She said if agriculture is taken seriously, it could offer immense economic potential to reset the economy.

Technical, infrastructural gaps

Analysts have variously criticised the government for not doing enough to support entrepreneurs in terms of value addition to their raw materials, noting that the business landscape is still marred by policy gaps and bureaucracies even amidst efforts to reform the system and improve the ease of doing business.

But the WTO had offered some sort of succour: Okonjo-Iweala, during her visit, vowed that the organisation would work with Nigeria to help deliver resources in the areas of technical assistance, training and quality upgrade as well as with other institutions in unlocking some of the bottlenecks that confront the businesses landscape.

Processed raw material export

There’s no gainsaying the fact that if properly harnessed, value addition to raw material exports could significantly tilt the country’s foreign trade to its favour.

According to the President, African Cashew Alliance (ACA), Mr. Tola Faseru, processing raw materials for exports remained critical for economic diversification, pointing out that value addition in the sub-sector could help the country earn the much-needed foreign exchange, and create the much-desired employment opportunities.

 Faseru insisted Nigeria must change the narrative by adding value to its raw cashew exports in order to benefit significantly from the activities, and hopefully stop job exports to other countries.

 According to the NBS data, the value cashew nuts in shell exports in Q2 stood at N41.26 billion, Sesamum seeds N25.04 billion, superior quality cocoa beans N22.51 billion, cashew nuts shelled N11.89 billion, and natural cocoa butter N5.62 billion among others.

 There is no doubt that investment in value addition can go a long way in promoting economic diversification but the government’s support is crucial in this regard. The government must take advantage of the window of opportunity offered by the WTO to boost the country’s raw material export going forward.