The latest monthly Economic Report from the CBN puts non-oil exports provisionally at USD230m in January '21, indicating a decrease of 36% m/m. The second wave of the COVID-19 pandemic significantly undermined Nigeria's non-oil exports. The sectoral breakdown shows that export receipts from electricity export, re-exports, and other non-oil export declined by 4.0%, 49.1%, and 19.7% to USD7m, USD100m and USD120m respectively, compared with the levels recorded in December 2020. These data are compiled on a customs basis.
Although a m/m decline was recorded in non-oil exports in January, the CBN's commentary shows that prices of most agricultural export commodities maintained an upward trend in January '21. The increase was largely due to a significant rise in the prices of rubber, soya beans, and palm oil, which rose by 12.9%, 6.1% and 4.1% respectively.
The price increase in rubber was attributed to demand shocks, as the automobile industry continued to stabilise from the impact of restrictions put in place to curtail the impact of the spread of the pandemic. Meanwhile, the price increase in soya beans and palm oil was mainly due to increased demand from China, as it recovered from the effects of the pandemic, as well as supply rigidity in major palm oil producing countries.
As at January '21, the CBN had disbursed a total of NGN44bn through its Non-oil Export Stimulation Facility (NESF) since its launch in 2017. The Facility is expected to expedite the growth and development of the non-oil export sector primarily through export financing. Furthermore, so far NGN50bn has been disbursed through the Export Development Fund which is driven by the Nigerian Export Promotion Council (NEPC).
The underperformance of the country's non-oil export segment has contributed to the wide deficit in the balance of trade. The FGN has reiterated its commitment to boost non-oil exports through payment of the export expansion grant (EEG) to exporters of non-oil produce through payment of the export expansion grant (EEG). The payment backlog of the EEG covers about ten years. However, we note that NGN194bn of the outstanding EEG has been settled via promissory notes from the Debt Management Office. We understand that the approval and settlement of the remaining NGN156bn is still pending.
The major ports, Apapa and Tin Can are responsible for processing the bulk of trading activities in the country. However, infrastructure and logistics challenges continue to limit export activities.
On a separate note, the NEPC recently designated the Edo Dry Port as an export warehouse. That is, it would serve as a center where surplus non-oil products could be aggregated, stored and transported in suitable condition to any port of shipment.
Non-oil exports continue to struggle primarily due to structural challenges. There is also the issue of standardization around non-oil export products from Nigeria. The Federal Executive Council has ratified Nigeria's membership of the African Continental Free Trade Area (AfCFTA), and the underlying agreement came into force on 01 January â€˜21. The area's single market eliminates tariffs on 90% of goods produced on the continent.
To maximize the benefits of the agreement, the FGN needs to direct its efforts into strengthening domestic value chains and developing an efficient land border system for exports. Furthermore, local manufacturers need to significantly improve their service delivery and product standards if they are to be competitive in a burgeoning intra-continental marketplace.