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Non-oil Sector as a Game Changer in Nigeria

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agriculture
  • 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

FG Reduces Expenditure on JV Oil Assets by 62%

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NNPC

NNPC Lowers Spending on JV Oil Assets as Demand Drops

In a bid to reduce expenditure following a plunge in revenue generation, the federal government has cut down on spending on oil and gas assets currently being developed through a joint venture with private companies.

Federal Government lowered its expenses by 61.83 percent in the month of July, according to the latest report from the Nigerian National Petroleum Corporation.

The report showed NNPC, which has an obligation to make cash call payment for the development of the assets, only made $94.84 million or N34.14 billion cash call in July, down from $248.48 million or N89.45 billion in June.

The joint venture is managed by both the NNPC and private firms in proportion to their equity holdings and receives produced crude oil the same ratio.

This was largely due to the plunge in NNPC’s export receipt from $378.42 million in June to $122.44 million during the month under review.

“Of the export receipts, $67.45m was remitted to the Federation Account while $54.98m was remitted to fund the JV cost recovery for the month of July 2020 to guarantee current and future production,” it added.

In addition to the dollar allocation of $54.98 million to the JV cash call account, the naira portion of N14.35bn ($39.86m) was transferred to the account from domestic crude oil receipts in July, according to the NNPC.

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Economy

Nigeria: Bread Scarcity Rages As Bakers Strike in Lagos, Abuja Over Price Hikes

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Post Covid-19 Economy in Nigeria Sees Scarcity And Price hike in Bread Production

Residents of Abuja and Lagos are lamenting the increased scarcity in bread and a hike in its price as bakers went on strike to protest the hike in price of flour and other ingredients.

“I have asked around for bread but I can’t find any, and this is strange,” said Amos Idoko, a resident of Utako area in Abuja.

The strike affected roadside kiosk operations and families who rely on bread for a breakfast staple with many running out of bread last weekend across some communities surveyed in the FCT, Nasarawa and Niger state.

Some of the bakers said the strike started Friday and may end today, but there will be a hike in the price of bread.

A leader of the bakers group in the FCT and an official of Zuma Bread in Abuja, Abdullahi Muhammed, said the strike action was to protest the hike of flour and other ingredients for bread making.

Daily Trust reported exclusively recently that foreign-dominated flour millers have increased the price of flour for more than three times between March and August 2020, even with the COVID-19 pandemic.

“For instance, a bag of wheat flour sold between N10,000 and N12,000 last year now sells for N14,000,” he said

“Bag of sugar sold for about N11,000 last year now sells at N18,000. A 25-litre cooking oil previously N8,000 is now N15,000,” he said.

A dealer in wheat flour and baking ingredients in Kubwa – Abuja, Shehu Lawan, said dealers now rely on the parallel market to source for forex instead of the Central bank of Nigeria (CBN), making it difficult for them to maintain previous prices.

Lawan also said other issues that affect cost in bakery commodities, include government tax increment, cost of transport, among others.

In Lagos, Mr Ajao Ismail, who works at Royal Bite bakery in Palm Avenue of Mushin, said there was an earlier scarcity of bread in Lagos but that most bakers have resumed operations as of Sunday evening but with the bread price increasing.

“The market is dull at the moment because we have lots of bread that we have not sold. When there was scarcity, the demand was higher than the supply, now that most of the bakers are no longer on strike, there is more bread. People are reacting to the price.”

Ajao explained that the price of bread can return to how it was pre-COVID provided the government intervenes.

“If the government can work towards ensuring the price of flour, sugar, milk and butter is reduced to what it was in January 2020, we promise to reverse the price of bread to what it was.

“Bread now sold for N300/350 will return to N250 and the one sold for N500 will return to N400,” she noted.

The bakers had shut down for a number of days last week in Lagos. Premium Bread makers Association of Nigeria (PBAN) and Association of Master Bakers and Caterers Association of Nigeria (AMBAN) in briefing said the prices of ingredients

The spokesperson of PBAN, Emmanuel Onuoha, confirmed the scarcity. “If we don’t do this, people will think it is their right to buy cheap bread,” he said, adding that bakers now run at a loss even as most of them could no longer meet their loan repayment obligations.

It was also learnt that other states might also embark on the temporary cessation of production in response to the high cost of baking ingredients comprising flour, sugar, margarine, among others.

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Economy

FG Spends N10 Trillion on Petrol Subsidy in 14 Years – NNPC

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petrol Oil

NNPC Says FG Has Spent N10 Trillion on Petrol Subsidy in the Last 14 years

The Nigerian National Petroleum Corporation said the Federal Government spent a total sum of N10 trillion on petrol subsidy between 2006 and 2020.

This was disclosed on Saturday by Mele Kyari, the Group Managing Director, NNPC, during an interview on Liberty FM, Kaduna.

According to the NNPC boss, the federal government removed petrol subsidy because of the fraud perpetrated by some cabals in the oil industry.

He said the beneficiaries of petrol subsidies were marketers who smuggled federal government subsidised product into neighbouring countries for bigger gains.

The NNPC boss said these marketers made more profits by producing fake documents to collect subsidy for fuel they never imported or sold.

He said, “The crude oil is a global commodity and its price is not hidden. Everyone can calculate and know how much the cost of every final product from the crude at international market is.

“Since the inception of the country, the government has been paying subsidy on petrol to make it cheaper for Nigerians to buy below the cost price.

“This subsidy is designed to assist the masses of Nigeria; that is the intention, but in reality, the masses are not the beneficiaries. First, the masses are not the owners of the exotic cars buying fuel, owning the filling stations and doing the oil business.

“This subsidy that the government has been paying over the years is the root of all the atrocities and fraud committed in this country.

“If you look at it from 2006 till 2020, we have spent over N10tn on fuel subsidy. Apart from that, there is also subsidy on foreign currencies. Everybody knows how much is dollar in the market, but government is also subsidising it. So, this and the fuel subsidy within this period is around N14tn to N15tn.

“What was happening with the subsidy is that, some marketers were smuggling fuel to other neighbouring countries because it was cheaper in Nigeria due to the subsidy.

“Another one is those who use fake documents and bring to government to collect subsidy for fuel they never imported and the previous government was paying them.

“So, it was not the masses of Nigeria that were enjoying this subsidy except some cabals, who are rich and powerful.”

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