Wednesday, December 29, 2021 / 09:22 AM / by FBNQuest Research / Header Image
Credit: Daily News
This year, crude oil prices recovered strongly from 2020's decline as efforts by OPEC+ to restore the supply-demand balance paid off. However, Nigeria's ability to benefit from better prices were hurt by output challenges. Underlining this point, last week, Royal Dutch Shell yet again halted crude shipments from the 200,000 barrels per day Forcados export terminal after a malfunctioning barge obstructed tanker path. This comes only a month after the company restored flow from its Bonny Island facility. As the world shifts its attention to non-fossil energy sources, it is important that Nigeria gets its non-oil economic strategy right. We examine the Nigerian Export Promotion Council's (NEPC) roadmap to achieve the country's zero oil plan.
In a recent report, Opportunities in the Export Market, published by the NEPC, the Council highlighted 22 products, divided into two categories, that can help the country meet non-oil ambitions. Broadly speaking, the non-oil export targets are quite ambitious with a goal of USD30bn in value and 20% of GDP by 2025, as well as half a million additional jobs created annually. Currently, non-oil exports average around USD5bn per annum and accounted for 8% of national GDP in 2020. This excludes transhipment from Nigeria to other West African countries.
The first category includes, petrochemicals & methanol, gold, nitrogenous fertilisers & ammonia, hides & leather and cash crops such as soybeans, cotton, palm oil, rubber and cocoa. According to the report, the export target for this category is approximately USD28bn or around 7% of global trade. Over the past decade, the Dangote Group, Nigerian Sovereign Investment Authority (NSIA) and Indorama have all developed interests in petrochemicals, fertilisers and ammonia capacity. Indorama is ahead of the group, exporting fertiliser from its Eleme plants. Dangote Fertiliser commissioned its three million tonnes per annum facility in Lekki this year.
In Q1 2021, the NSIA signed agreements with OCP Africa, Akwa Ibom State and other partners for the creation of a multipurpose industrial platform (MPI). Under this agreement, during the first phase, the MPI is expected to produce 1.5 million tonnes of ammonia with c.70% exported to Morocco. For gold, we believe the industry has significant potential with national policy now better aligned with capital interests. However, insecurity is a significant headwind.
The second category under the NEPC's plan comprises of cement and clinker, fresh and processed tomato, banana, plantains, cashew, sesame seeds, cassava, oranges, spices, ginger, shea butter and cow pea.
To promote the zero-oil plan, the NEPC is focusing on quick interventions such as providing shared processing facilities for businesses exporting agricultural produce, decongesting the Apapa ports, cold room facilities for those seeking to export perishable items such as vegetables and developing field-to-export transport corridors which would match infrastructural investments to key FG goals. Ultimately, a lot depends on the country's ability to achieve these targets and successfully diversify its revenue streams from oil.