Every year, Nigeria’s trade deficit increases, not only because of production problems, but mainly because of port infrastructure and limited access to ports due to bureaucracy and corruption. With the Central Bank of Nigeria (CBN) plans, through a new initiative to generate $200 billion in non-oil exports and boost foreign exchange reserves, traders hope the country’s structural challenges will not undermine the plans. writes FEMI ADEKOYA.
The National Bureau of Statistics (NBS) recently revealed that the country recorded a trade balance deficit of around N3.02 trillion in the third quarter of 2021, with the value of imports continuing to outweigh exports.
In its latest report on foreign trade in goods, the SNB revealed that total exports amounted to 5.13 trillion naira in the third quarter of 2021, which shows a growth of 1% compared to the second quarter of the same year and an increase of 71.38%. growth compared to the third quarter of 2020.
“Exports in the third quarter of 2021 were still dependent on oil,” the BES said.
Indeed, the expanding trade deficit has further raised concerns about how poor government policies, lack of non-oil export incentives, and high exchange rate, among others, continue to undermine oil production. locally produced products for the export sector in the country. .
The World Economic Forum has noted that delays at Nigerian ports are caused by inefficient border administration and appear to stem from general mismanagement, underdeveloped transport infrastructure and corruption. Commercial operators constantly complain about dealing with too many government agencies, arbitrary fees charged by some government officials, illegal customs clearance agents at ports, and poor infrastructure.
The Guardian, while monitoring activities on the Apapa Corridor, recently reported an increase in cases of extortion with serious consequences for the country’s exports. Last year alone, around 2,000 export shipments were stuck in traffic due to the two-week suspension imposed on export cargo containers entering Apapa ports.
Transport operators lament the growing wave of extortion at various checkpoints manned by security guards and thugs along port access roads, as is the number of checkpoints between the Liverpool roundabout and the Coconut bus stop along the Apapa-Oshodi highway has grown from four to eight in just two weeks.
Addressing Nigeria’s export challenges also means that the country must take into consideration the various structural issues that seem to have defied all common sense efforts.
The CBN, while unveiling its export program, noted that there was a need for accessible ports and urged state governments to play their part in ensuring a structured export terminal.
CBN Governor Godwin Emefiele while unveiling the initiative “Race to $200 Billion in Currency Repatriation Program (RT200FX)” said: “The RT200 program is not intended to be a solution miracle to all our economic problems, it is the first step in ensuring that the CBN can carry out its mandate effectively and efficiently, which guarantees the preservation of our rare common wealth and the stability of our national currencies, the naira and the stability of our exchange.
The group chairman, Manufacturers Association of Nigeria Export Promotion Group (MANEG), Ened Dafinone, recently lamented the challenges faced by the operators, noting that exporters are still groaning to survive under the government’s harsh economic policies and the effects of the pandemic.
He said that since the pandemic and the aftermath of land border closures, exporters are all but grappling with reduced international demand coupled with domestic challenges such as a high and rising exchange rate; high cost of energy; multiple levies and taxes; port congestion; Apapa’s endless stalemate; infrastructural deficiencies and smuggling, among others.
In recognition of ongoing congestion at existing ports, the CBN boss said, a dedicated non-oil export terminal would see the bankers’ committee work with state governments to build an alternative port facility that would facilitate the actualization of new objectives. .
He noted, “The Value-Added Export Facility will provide concessional and long-term financing to businessmen who wish to expand existing factories or build new ones for the sole purpose of adding significant value to our products. non-oil before exporting the same. . This is important because exporting unprocessed commodities does not earn much foreign exchange.
“In Nigeria today we produce about 770,000 metric tons of sesame, cashew nuts and cocoa. Of this number, approximately 12,000 metric tons are consumed locally and 758,000 metric tons are exported. Unfortunately, of the 758,000 metric tonnes exported annually, only 16.8% is processed. The rest is exported as raw sesame, raw cashew nuts and raw cocoa, giving Nigerian farmers an infinitesimal part of the value chain for these products. For example, the global chocolate industry is valued at around $130 billion. Of this amount, Côte d’Ivoire, Ghana and Nigeria account for more than 72% of world cocoa exports.
The apex bank is also considering another facility known as the non-oil commodity expansion facility. Emefiele revealed that it would be a concessional facility designed to significantly boost local production of exportable products and “ensure that expanded and new factories that are funded by the Value Addition Facility are not deprived of raw material inputs in their production cycle”.
“A massive increase in the production of these commodities will also help to mitigate/moderate the prices of these commodities so that the expected increase in demand does not become a pressure point for overall prices in the market. In order to To maximize the potential and impact of this facility, we would replicate what other successful export-based economies have done by prioritizing and targeting certain products first We would create a geographical prioritization of crops across the country to achieve production efficiencies through the development of special areas that will cater to specific products,” he added.
Despite the CBN’s efforts, CPPE Managing Director Dr. Muda Yusuf noted that a much deeper and robust I&E forex window would need to be in place before the CBN could consider ending its interventions in the market. Change market.
According to them, exporters are currently not encouraged to remit export earnings at the current official rate of N416/$.
The group stressed that the current pricing regime is a disincentive to investment, noting that such a policy penalizes exporters and contradicts the overall objectives of the program.
In addition, the group also highlighted the need for exporters in the economy to have access to their export earnings.
Specifically, the group argued that the current export revenue policy regime stifles and inhibits export initiatives, businesses and growth.
They highlighted the need for the apex bank to relax export earnings regulations and ensure that exporters can sell their earnings at a mutually agreed exchange rate to banks, importers or BDC, as applicable.
“The apex bank should institute a voluntary seller framework for export earnings. The CBN should expand the scope of its new strategies and incentives for the supply of foreign exchange to cover other sources of foreign exchange inflows into the economy.
“These sources include, foreign direct investment [FDI]foreign portfolio investment (FPI), diaspora remittances, diplomatic missions in the country, development partners, multilateral agencies, oil companies, international aid agencies and donor agencies.
“Flows from these sources should be fully liberalized through a market-driven I&E window. The current regulatory regime for entries is obstructive and inhibitive. Foreign exchange generating MDAs should be encouraged to sell their Forex at the I&E desk at an exchange rate reflecting the market,” he added.