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Non-oil Sector as a Game Changer in Nigeria

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  • Non-oil Sector as a Game Changer in Nigeria

Nigeria’s export trade in the 1960s was fuelled by the agro-industry and constituted mainly of cocoa, groundnuts, rubber, palm oil, palm kernel, beniseed and copra. Nigeria also exported tin ore and columbite. Then agricultural exports were practically the country’s main sources of foreign exchange with the nation being a major exporter of the aforementioned produce. The agricultural sector was the bedrock of the nation’s economic growth and development at that time. There was also heavy dependence on revenue from taxes on those exports by government.

However, the 70s saw a persistent growth in oil export with a consequent decline in non-oil exports. This came to a height when a boom in the global price of oil brought tremendous fortunes for the nation. By 1986, the nation’s non-oil exports share had dropped below five per cent from about 65 per cent in the 60s, following the sector’s long period of neglect, even as revenues from oil plunged as a result of drop in global prices of the commodity. Then it became very clear to any discerning mind that Nigeria’s over-reliance on oil export as a major revenue earner was no longer sustainable.

Efforts geared towards diversifying the economy, reviving the agricultural sector and exploring the non-oil sector of the economy have been on for decades, since the fortunes of oil in the global market took a turn for the worse in the 80s. There have been schemes and programmes such as ‘Green Revolution’, ‘Operation Feed the Nation,’ and entrepreneurial drive through the creation of the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) as well as a number of development plans by successive administrations. Unfortunately, these lofty programmes failed to achieve the aim for which they were established and the programmes could not reverse the economic fortunes of the country.

The present economic realities, such as the tailspin in the global price of oil, scarce forex reserves and acute inflation have, more than ever before, made the Nigerian government and its citizens realise the need to stimulate the non-oil sector of the economy. Interestingly, this effort is not limited to only the agricultural exports but also other non-traditional exports.

Experts are of the opinion that government has a critical role to play in providing the enabling environment for all the stakeholders in the non-oil sector and for every Nigerian to galvanise their productive energies to address the current economic challenges. To this effect, the Federal Government recently made a number of reviews in its policies and legal frameworks of some economic activities in the non-oil sector as well as providing incentives for stakeholders. The Finance Minister, Mrs. Kemi Adeosun, September last year announced the planned re-introduction of the Export Expansion Grant (EEG) so as to stimulate exports and ultimately boost foreign exchange earnings. The scheme, which was introduced by the Federal Government in 1999 to encourage non-oil exports and cushion the effect of cost disadvantages faced by Nigerian exporters, was rested in 2014 following reports of its abuse. Another commendable incentive is the 10-year tenor export stimulation facility provided by the Central Bank of Nigeria (CBN) at nine per cent interest rate. It is designed to fast-track access to N500 billion Export Stimulation Facility (ESF) for companies in the export segment of the nation’s economy under the new guidelines released by the CBN. It is expected to increase funding support and stimulate investment in the non-oil sector.

Also, the Finance Ministry only a few months ago took measures to encourage import substitution by hiking import duties on products, particularly consumables, which the nation has the capacity for manufacturing locally, from 20% to 60%.

Some of the products listed are consumables like rice, sugar cane and salt; alcoholic spirit, beverages and tobacco. This policy can potentially boost local patronage and enhance value addition to the nation’s agricultural and mineral sectors, which provide the raw materials base for industries. Data released recently by the Manufacturers Association of Nigeria (MAN), indicated that the food, beverage and tobacco sub-sector sourced 67.5 per cent of its raw materials locally in the first six months of 2016 as against 64.73 per cent in the corresponding period of 2015. Therefore, if MAN can recommend the backward integration model of the British American Tobacco Nigeria (BATN) and few other multinationals incorporated in Nigeria for its members perhaps the percentage of locally sourced raw materials would rise above that.

Another economic activity which has huge potential for export and foreign exchange earnings is mining. In August 2016, the Federal Executive Council approved a roadmap for the mining sector which is aimed at boosting the contribution of mining to Nigeria’s GDP. At an Economic Summit last year, Minister of Solid Minerals, Dr. Kayode Fayemi, and the CBN Governor, Godwin Emefiele, observed that the potential in the solid minerals sector offers great prospect for diversification of the economy and foreign exchange earnings. Dr Fayemi assured that there was no legislation in Nigeria prohibiting state governments from engaging in mining activities, notwithstanding that it is in the exclusive list. He urged state governments to establish Special Purpose Vehicle (SPV) to apply for mining licences.

Interestingly, recent reports indicate that the reform in the mining sector has already elicited keen interest from multinationals in the industry.

There are at least 44 known minerals, mainly gold, iron ore, bitumen and others, which have been identified for commercial production. In 2015, a report by the Nigerian Extractive Industries and Transparency Initiative (NEITI) stated that there are about 40 kinds of solid minerals of various categories waiting to be exploited.

Nigeria’s homegrown film sector, Nollywood, stands as a shining example of an industry that was grown and nurtured from the scratch by individual creativity and hard work. In 2014, it was identified as one of the key industries which boosted the country’s GDP to $510 billion, accounting for about 1.4 percent of the revised GDP figures and making it Africa’s largest economy after it was rebased.

As policymakers continue to think outside the box on how to review and strengthen existing business policies and regulatory frameworks in order to stimulate the non-oil sector, boost the nation’s GDP and increase employment opportunities for the citizenry, it is important for government to first of all invest in critical infrastructure such as power, the hub around which every modern-day industry revolves. No doubt, it has become more evident now than ever that the non-oil sector holds great promise in helping Nigeria emerge from its current economic malaise and grow sustainably.

Ogunniyi is an agriculture expert based in Lagos.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Economy

COVID-19 Vaccine: Crude Oil Extends Gain to $48 Per Barrel on Wednesday

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Oil prices rose further on Wednesday as hope for an effective COVID-19 vaccine and the news that the United States of America’s President-elect, Joe Biden has begun transition to the White House bolstered crude oil demand.

Brent crude oil, a Nigerian type of oil, gained 1.63 percent or 78 cents to $48.64 per barrel at 11:50 am Nigerian time on Wednesday.

The United States West Texas Intermediate (WTI) crude oil rose by 1.36 percent or 61 cents to $45.52 per barrel.

OPEC Basket surged the most in terms of gain, adding 3.16 percent or $1.37 to $44.75 per barrel.

This was after AstraZeneca, Moderna and Pfizer-BioNTech announced the positive results of their trials.

Moderna and Pfizer had claimed over 90 percent effective rate in trials while AstraZeneca said its COVID-19 vaccine was 70 percent effective in trials but could hit 90 percent going forward.

The possibility of having a vaccine next year increases the odds that we’re going to see demand return in the new year,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.

Also, the decision of President-elect Joe Biden to bring Janet Yellen, the former Chair of Federal Reserve, back as a Treasury Secretary of the United States is fueling demand and strong confidence across global financial markets.

President-elect Biden’s cabinet choices, particularly Janet Yellen’s Treasury Secretary position, are adding to upside momentum across a broad space of asset classes,” said Jim Ritterbusch of Ritterbusch and Associates.

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Economy

Seyi Makinde Proposes N266.6 Billion Budget for Oyo State in 2021

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The Executive Governor of Oyo State, Seyi Makinde, has presented the Oyo State Budget Proposal for the 2021 Fiscal Year to the Oyo State House of Assembly on Monday.

The proposed budget titled “Budget of Continued Consolidation” was said to be prepared with input from stakeholders in all seven geopolitical zones of Oyo state.

Governor Makinde disclosed this via his official Twitter handle @seyiamakinde.

According to the governor, the proposed recurrent expenditure stood at N136,262,990,009.41 while the proposed capital expenditure was N130,381,283,295.63. Bringing the total proposed budget to N266,6444,273,305.04.

The administration aimed to implement at least 70 percent of the proposed budget if approved.

He said “The total budgeted sum is ₦266,644,273,305.04. The Recurrent Expenditure is ₦136,262,990,009.41 while the Capital Expenditure is ₦130,381,283,295.63. We are again, aiming for at least 70% implementation of the budget.”

He added that “It was my honour to present the Oyo State Budget Proposal for the 2021 Fiscal Year to the Oyo State House of Assembly, today. This Budget of Continued Consolidation was prepared with input from stakeholders in all seven geopolitical zones of our state.”

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Economy

World Bank Expects Nigeria’s Per Capita Income to Dip to 40 Years Low in 2020

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The World Bank has raised concern about Nigeria’s rising debt service cost, saying it could incapacitate the nation from necessary infrastructure development and growth.

The multilateral financial institution said the nation’s per capita income could plunge to 40 years low in 2020.

According to Mr. Shubham Chaudhuri, Country Director for World Bank in Nigeria, the decline in global oil prices had impacted government finances, remittances from the diaspora and the balance of payments.

Chaudhuri, who spoke during the 26th Nigerian Economic Summit organised by the Nigerian Economic Summit Group and the Federal Government, said while the nation’s debt is between 20 to 30 percent, rising debt service remains the bane of its numerous financial issues and growth.

Nigeria’s problem is that the debt service takes a big part of the government revenue,” he said.

He said, “Crisis like this is often what it takes to bring a nation together to have that consensus within the political, business, government, military, civil society to say, ‘We have to do something that departs from business as usual.’

“And for Nigeria, this is a critical juncture. With the contraction in GDP that could happen this year, Nigeria’s per capita income could be around what it was in 1980 – four decades ago.”

Nigeria’s per capita income stood at $847.40 in 1980, according to data from the World Bank. It rose to $3,222.69 in 2014 before falling to $2,229.9 in 2019.

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