Market News

 By : JOSEPH CHIBUEZ

The recent reversal in the oil revenue outlook makes non-oil export growth a matter of national necessity for Nigeria, making the recent town hall meetings held by the Central Bank of Nigeria (CBN) and the Bankers’ Committee with stakeholders in the export value chain not only timely but also critical. Beyond the meeting, JOSEPH CHIBUEZE examines the broader prospect of unlocking non-oil foreign exchange (FX) earnings.

This year, Nigeria aspires to double its non-oil exports – a target driven by an urgent need assessment on how to mobilise sufficient capital to fund the N55-trillion budget and stabilise the foreign exchange market. When the target was set, the international oil market was stable with a barrel of crude trading around $75, which is incidentally the benchmark of oil revenue projection.

Sadly, the tariff war has triggered a major disruption in oil trading, far less than the benchmark. This raises worry and calls for action across the board to rethink the non-oil component of the country’s exports, which has historically been low. Data from the National Bureau of Statistics (NBS) show that non-oil exports’ share of total exports was at their highest (30.8) per cent in 2012. In recent years, the ratio has rallied around 100 per cent. In 2019, it was 11.97 per cent; it rose to 12.68 per cent in 2020 and fell to 11.35 per cent in 2021. In 2022, it fell further to 8.94 per cent but rose to 9.17 per cent in 2023 and further up to 12.21 per cent last year.

But experts at a recent town hall meeting organised by the Central Bank of Nigeria (CBN) and Bankers’ Committee said even the 30.8 per cent achieved in 2012 underestimates the country’s potential and that the country can do much more with better coordination, incentives and funding. At the meeting, the CBN said it is taking strategic measures to support businesses in enhancing their competitiveness through capacity building, investment in technology, stronger collaboration with the regulators and policymakers to identify and dismantle barriers to the growth of non-oil exports. The apex bank also advocated the standardisation of Nigerian processed commodities.

A more robust non-oil export performance is required to sustain the growth of the external reserves, which are currently about $38 billion, and market confidence. Nigeria loses billions of dollars yearly to the rejection of exports, a challenge caused by non-compliance with international standards, among other reasons. Hence, an engagement with the exporters on standardisation is expected to expand the market for Nigerian products and boost foreign exchange (FX) earnings, which is expected to lead to price stability.

Speaking during the CBN/Bankers’ Committee town hall meeting in Lagos, the Director of Consumer Protection and Financial Department, CBN, Dr Aisha Olatinwo, rationalised the urgent need to boost non-oil FX earnings and explained the relationship between growth and price stability. She noted several constraints to made-in-Nigeria products, which collaboration is required to remove.

Olatinwo, who was represented by the Deputy Director of the Consumer Protection and Financial Department, Nelson Amuwa, said the CBN is working to address the constraints, especially as they relate to quality, packaging, branding and market. She noted that with the ongoing support from the apex bank and commercial banks, local businesses will improve their potential to thrive in the global markets, which will translate to higher FX earnings. This, she said, will have huge impacts on both business performance and macroeconomic stability.

“The CBN has put in place a lot of measures to attract FX into the country to sustain the stability of the market. But product and service exports remain a quick win. We need to raise the global competitiveness of our exports,” she said.

Other measures listed were boosting diaspora remittances. In line with this, she said, the CBN recently granted licences to new international money transfer operators (IMTOs) to advance the effort to double official remittance receipts in one year and implemented a willing buyer-willing seller FX model. These were done, she said, to simplify FX transactions and remove market rigidities.

The CBN’s initiatives have supported continued growth in these inflows, aligning with the institution’s objective of doubling formal remittance receipts within a year.

On the new efforts, the Director of Trading at Verto, Charlie Bird, said dollar liquidity dynamics are now more balanced, with foreign investors and airlines able to repatriate funds without the previous hassles. Speaking at Cordros Asset Management seminar, he insisted that Nigeria is now the darling of foreign investors because of improved dollar liquidity.

Echoing Olatinwo’s position, the Executive Chairman of the Lagos State Internal Revenue Service (LIRS), Ayodele Subair, acknowledged that the financial sector has a role to play in ensuring the continuous survival of businesses.

“The Bankers’ Committee plays a vital role in facilitating financial inclusion and driving Made-in-Nigeria products. By working together, stakeholders can unlock the full potential of Nigeria’s financial system and promote export diversification and support local businesses,” Subair noted.

In his keynote, Dr. Bamidele Ayemibo said manufacturers need to adopt product quality, packaging and product branding to gain more international recognition. These, he emphasised, would ensure the competitiveness of Nigerian products in both regional and global markets.

Raising some posers, Ayemibo said: “From manufacturing to fashion, to technology and the industry, our ability to compete depends on how well we can align to embrace productivity and deliver consistent, high-quality products that command respect in global markets.

“By deepening these partnerships, we can identify and dismantle barriers to growth, encourage innovation, and scale up the support structures that enable enterprises to thrive in competitive environments. The Nigerian banking sector remains a critical industrial foundation to build Nigerian products, opportunity-building initiatives, and investment technology. Banks are well-positioned to support businesses in enhancing their competitive opportunities,” he stressed.

Nigerian manufacturers, he advised, should ensure that the products are attractive and suitable for specific markets. He added: “And utilise packaging as a branding tool. Packaging can serve as a critical component of branding. Nigeria should design packaging that not only protects the product but also tells the story and resonates with the consumer.”

At the event, the President of the Manufacturers Association of Nigeria (MAN), Otunba Francis Meshioye, who described the town hall meeting as timely, lamented that the manufacturing environment has been anything but friendly. According to him, manufacturers spent a whopping N1.3 trillion on the cost of funds in 2024, even as a 35 to 37 per cent interest rate was a disincentive to businesses.

He charged the CBN and the Bankers Committee to come up with long-term financing options for manufacturers at favourable terms. This, he noted, would drive and not strangulate businesses.

“It is critical at this point for the CBN and the Bankers Committee to fund production at cheaper rates, and also fund backward integration, amongst others. That is only to cut down the excess amount expended on the cost of funds, which is adversely affecting production in the country,” Meshioye said.

Nigeria’s non-oil export products include cocoa beans, sesame seeds, cashew nuts, and various other agricultural products like rice, cassava flour, and palm kernel oil. Textiles, leather goods and certain minerals like lithium are significant non-oil export items. In the past, following Nigeria’s quest to diversify its FX earnings, the government took several steps to encourage the export of non-oil products, with institutional frameworks created.

As far back as 1986, the Federal government introduced what it called the Export Expansion Grant (EEG). It was established to encourage non-oil exports and help exporters become more competitive in the global market. The scheme has been revised and reintroduced multiple times. However, it has been marred with allegations of corruption against some government officials and a lack of due diligence by the Nigerian Export Promotion Council (NEPC) before sending the list for approval.

In recent times, there have been countless grants and financial incentives. The Chairman of the Manufacturers Association of Nigeria Export Promotion Group (MANEG), Odiri Erewa-Meggison, said there are lots of backlogs of grants running into billions of naira as far back as 2009 that have not been cleared despite being approved by the Nigerian Export Promotion Council (NEPC).

The CBN had also, in collaboration with the Bankers’ Committee, launched a series of sectoral intervention programmes to stimulate economic growth. In February 2022, the Bank unveiled a programme to boost non-oil exports and repatriation of their proceeds. The programme tagged ‘RT 200 Non-Oil Exports Proceeds Repatriation Programme’ (RT200), was to raise $200 billion in FX earnings from non-oil proceeds over three to five years. It was implemented in close collaboration with the commercial banks.

At the core of the programme was a rebate scheme designed to incentivise non-oil exporters to repatriate their FX earnings and sell such earnings in the FX market. So, for every dollar repatriated and sold in the I&E (investors and exporters) window to third parties, the exporter received N65, and for every dollar repatriated and sold into the I&E for their use, the exporter received N35. But experts said much success was not recorded because the incentives were still lower than the premium on black market trading.

Experts believe the challenge before non-oil export is a combination of issues, including poor structure, the high cost of production, the high cost of borrowing, depleting infrastructure, anti-business regulations by ministries, departments and agencies whose purview covers the manufacturing and export value chain, as well as high electricity tariffs.

Others include the rising logistics cost, due to high diesel and petrol prices, widespread insecurity and delays in administering export incentives.The current administration has made substantial efforts towards clearing FX rigidities foreign exchange market, one of the major drawbacks in attracting investments and encouraging non-oil exports. Attesting to this, Chief Economist for Africa and the Middle East at Standard Chartered, Razia Khan, said Nigeria’s recent reforms, especially around FX, have created a platform for reduced dependence on oil.

“Nigeria is finally at a point where it might be able to break free from the oil cycle. We now have a more competitive exchange rate and a structure that could support real wealth creation outside oil.”

She added that investor concerns about repatriation and macroeconomic stability are being addressed through FX reform and monetary tightening but urged policymakers to stay the course. Structural reforms take time. Nigeria is only just at the beginning of a credible path toward diversification,” she said at a meeting with foreign investors held by the CBN in New York last week.