By Michael Onuoha
In recent weeks, Nigeria was enmeshed in a debate as to whether or not she should sell some of her assets to earn foreign exchange that can help the country come out of its current economic recession. The assets touted for sale included the Nigeria Liquefied Natural Gas company, some refineries as well as government’s stakes in joint venture operations and the Africa Finance Corporation, amongst others.
The debate was triggered by the recommendations of the National Economic Council to the Federal Government to carry out sales of the aforementioned assets. Perhaps, Nigerians might have let the issue alone but when a personality like Aliko Dangote threw his weight behind the sale proposal, many people sat up straight, knowing now, as the Igbo say, that “the handshake has passed the elbow”. Dangote is the wealthiest living African and among the richest in the world. His empire was built through astute business deals. So when he spoke in favour of the “sell our assets” proposal, the campaign was no longer to be ignored because any business idea from Dangote is not to be taken lightly and so gave a significant measure of credibility to the proponents of the idea.
Nevertheless, many Nigerians including labour, activists, public policy analysts among others vociferously expressed their opposition to the sale idea. Not only did the opposition perceive the campaign as serving the interests of the sale champions, it also believed the country would, by selling the mentioned assets, be mortgaging its future for the present. They also believed the proceeds of the asset sale would end up in the coffers of the high and mighty pushing for it as allegedly had happened in the past. Yes!! This is Nigeria.
I don’t intend to continue the debate here, however. My thinking and which is the focus of this piece is that the government should not be occupied by here and now measures for tackling the recession. It should get more creative and explore numerous other options to get the country out of the recession.
For instance, export promotion. At a time like this, the government should be most occupied with exploring how the country can produce more for export to earn the much-desired foreign exchange to ease the pressure on the naira. Here, I mean non-oil exports with particular emphasis on export of manufactured goods. I am not talking of export of raw materials and primary products that would return to us as much higher-priced finished products or export of mineral resources.
There is no point in lamenting, as has become the pastime activity in government quarters, the slide in price of crude oil and how it has dealt a big blow to the nation’s economic fortunes. The reality is that we must take our export agenda more seriously. Countries that have gone through recession had relied on export of manufactured goods as one of key measures to weather the storm.
That was the case in the United States of America. In his recent essay in The Economist titled. “The way forward”, President Barack Obama firmly acknowledged the role of export in pulling the US out of its recession. He stated, “Exports helped lead us out of the recession. American firms that export pay their workers up to 18 per cent more on average than companies that do not.” It will be recalled that the American economy was going through one of the country’s worst in economic recessions in history when President Obama came into office. Export of goods and services grew about 39 per cent since Obama took office. This has led to over 10 million jobs being added to the economy since Obama’s time in the Oval Office. To consolidate the gains of export in the US, President Obama is currently pursuing the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership with the EU to further open up the EU to American goods and services.
Over 90 per cent of Nigeria’s exports over the years are accounted for by petroleum and other mineral products. Sometimes and especially in the recent past, overall export appeared to be growing but in real terms they are not. For instance, the Foreign Trade Report Q2, 2016 released by the National Bureau of Statistics showed that value of exports grew by 63.3 per cent over Q1, 2016 figures. But the report was quick to point out that the growth was attributable to foreign exchange gains rather than to volume. Even then, export of manufactured products accounted for a paltry 0.9 per cent.
Nigeria has excess manufacturing capacity in a number of areas such as alcohol and non-alcoholic beverages, tobacco, pharmaceutical products and wood furniture, etc. Many companies producing these products are currently burdened by low capacity utilisation which should not be the case if the export environment is right. Additionally, there is nothing stopping the country from being a net exporter of finished products made from such agricultural produce such as cassava, cocoa, palm kernel and palm oil instead of exporting these products in their raw or primary form.
For a robust export economy focused on manufactured products to take root in the country, the government has to deal with the impediments on the way. Key among this is development of necessary infrastructure that can help to reduce the transactional cost of manufactured goods in the country. A former chairman of Ikeja branch of the Manufacturers Association of Nigeria a few years ago stated that private power generation by manufacturing companies in Nigeria accounted for 30 per cent of cost of production, for instance. There’s therefore no gainsaying that bad roads, poor rail network and unreliable electricity supply have important consequences for Nigeria’s export performance. High cost of manufactured goods in the country makes them uncompetitive outside the shores of this country and even against goods imported into the economy. The development of infrastructure must be accelerated to impact positively on the economic advancement of the country. Government must find ways to address the issue of foreign exchange availability to manufacturers to further reduce their cost of production.
In addition, the government should either revive past export incentives or put in place new ones. Over the years, successive governments in the country had introduced and implemented a number incentives geared towards promotion of exports and diversification of the economy. For instance in 1986, the government promulgated the Export (Incentives and Miscellaneous Provisions) Act, under which it introduced the Export Development Fund, the Export Expansion Grant (EEG) and the Export Adjustment Scheme Fund. The period between 1987 and 2012 marked the high point of Nigeria’s export of goods and services, thus attesting to the effectiveness of the afore-mentioned export incentives. However, all three incentives are at the moment. It is on record that the EEG was suspended and reactivated eight times since it was introduced. The last suspension was in January 2014 and since then has not been reactivated.
Nigeria has the potential to dominate the ECOWAS region with its manufactured products if only it can get its acts together. As the manufacturing engine room in the sub-region, Nigeria can take advantage of ECOWAS regional integration and its trade instruments such as the ECOWAS Trade Liberalisation Scheme to advance its export interests within the sub-region while developing new partnerships across the continent and globally for same objectives.
Onuoha is a public affairs and reputation management specialist based in Lagos