Nigeria has not considerably increased its foreign exchange non-oil exports in the last five years despite efforts to increase dollar inflows.
The country’s non-oil exports fell by 5.65 percent over the year, from 15.30 percent in 2020 to 9.65 percent of total exports in H1 (half year) of 2024, according to the National Bureau of Statistics (NBS).
According to Odiri Erewa-Meggison, chairperson of the Manufacturers Association of Nigeria Export Promotion Group (MANEG), the country’s non-oil export contribution has been low due to some factors. She noted that manufacturing exporters operate at a high cost of production.
“Some of the major issues limiting our non-oil export potential are high borrowing costs, inflation, depleting infrastructure, anti-business regulations by ministries, departments, and agencies (MDAs) whose purview covers the manufacturing and export value chain, and high electricity tariff,” Meggison said in response to questions.
She went on to say that other issues reducing non-oil exports include the rising cost of logistics due to rising petrol and PMS prices, widespread instability, and delays in issuing incentives.
According to Uchenna Uzo, a marketing professor at Lagos Business School, Pan-Atlantic University, an underdeveloped regulatory environment impedes the expansion of non-oil exports. She also cites insufficient tax laws and regulations on non-oil commerce as other significant impediments.
He went on to say that another factor impeding the growth of non-oil exports is non-oil exporters’ ignorance of the networks and information needed to succeed in exporting.
Uzo, a consumer specialist, stated that “many of the laws governing trade and exports for non-oil products are not fully developed yet in terms of tax policies, legal requirements, and trade arrangements and agreements.”
He pointed out that despite the difficulties, Nigeria’s non-oil exports are in high demand throughout the West African region because of their decreased value due to devaluation.
Despite the recent devaluation of the naira, non-oil exports have accounted for a small portion of Nigeria’s overall exports over the past five years.
From N964.2 billion in 2020 to N3.7 trillion in 2024, the country’s non-oil exports look to have expanded by 283.7 percent. However, this does not imply that export volumes rose during that time because of the depreciation of the naira.
“We aren’t reaping the possible naira devaluation gains because of our low non-oil exports. The country is meant to gain from the Central Bank of Nigeria’s currency float, but that is not the case right now,” Obiora Madu, CEO of Multimix Group, stated.
“Countries occasionally choose to purposefully devalue their currencies in order to boost exports, but our products are not competitive, so we are not benefiting from the recent devaluation,” Madu added.
He claims that Nigerian commodities are more expensive than those of other countries on the global market because local exporters and producers continually battle with inadequate infrastructure, which drives up the cost of their goods relative to competitors worldwide.
One of the main factors affecting every nation’s industrial sector’s success or failure is the availability of suitable infrastructure. However, Nigeria lacks the infrastructure companies require to expand, particularly sophisticated transportation networks like highways and railroads that link to the country’s seaports.
The Central Bank of Nigeria (CBN) governor, Olayemi Cardoso, stated that in order to have a more robust exchange rate system, the nation needs to improve the fundamentals, diversify its economy, and promote import substitution.
“Until the fundamentals are fixed and in place, you will continue to under-optimise. Non-oil exports — and I spoke about the unfortunate circumstance that we, as Nigerians, face today — in which we are a monolithic economy,” he stated following a recent Monetary Policy Meeting (MPC).
“The obstacles to having the strong exchange rate that we all want will remain in place as long as we have a monolithic economy.”
“We need to diversify our economy. There’s only so much that the central bank can do. Without the fundamentals in the right position, we will continue to support and optimise. Again, as Nigerians, we must look for ways of import substitution. It cannot all be about import, import, import. Our taste for foreign goods also must be calibrated accordingly.”
