December 06, 2021 / 08:58 AM / by FBNQuest Research / Header Image
Credit: Tehran Times
The latest monthly economic report from the CBN puts the provisional value of non-oil exports at USD0.46bn for July '21, indicating a growth of 12% m/m, and almost 43% y/y if we draw from data in the bank's quarterly statistical bulletin (QSB). The report does not provide a detailed breakdown of non-oil exports by product segment. However, it revealed that non-oil exports excluding electricity grew 13% m/m. While the surge in the y/y growth is clearly explained by the plunge in non-oil exports in 2020 due to the pandemic, the m/m growth was attributed to a marked rise in the export of agricultural products, particularly sesame seeds.
Despite Nigeria's vast export potential for agricultural commodities, non-oil exports still account for a small percentage of total export value. They accounted for just c.10% of overall exports in July. Based on the CBN's QSB which goes as far back as FY '08, we see that the share of non-exports to total peaked at c.16.1% (c.USD10.5bn) in FY '19.
Over the years, the federal government (FG) has implemented several initiatives targeted at increasing non-oil exports, including the export expansion grant, which reimburses exporters between 5% and 15% of their export value.
The grant, which is made through an export credit certificate, can be used by exporters to defray taxes, such as company income tax and VAT, and the purchase of FGN bonds amongst others.
More recently, the FG disclosed an ambitious plan to generate revenues of c.USD150bn from non-oil exports over the next 10 years.
Under the plan, the FG, in collaboration with the African Development Bank (AfDB), is establishing Special Agro-Industrial Processing Zones (SAPZs) across the federation, with pilot schemes due to begin this year in eight states.
The strategy appears to be part of the Nigerian Export Promotion Council's (NEPC) Zero-Oil initiative, which selected eleven strategic products for potential export to be exported to 22 priority markets.
To generate considerable revenue from non-oil exports, Nigeria and other African countries must shift away from exporting raw products and commodities toward exporting high-value finished goods.
For instance, studies conducted across the cocoa-chocolate value chain show that producers of finished chocolate products and retailers receive roughly 70% of the overall value and c.90% of the total profits generated along the chain.
For some context, according to Allied market research, the global cocoa market was valued at approximately USD12.9bn in FY '19. During the same period, the worldwide chocolate market was estimated to be worth around USD138bn.
Nigerian manufacturers should aim to take advantage of the opportunities provided by the African Continental Free Trade Area (AFCTA) to drive trade with other African countries.
That said, the FG still has a lot of work to do in terms of providing basic infrastructure, a favourable investment climate, and elimination of multiple taxes for manufacturers and investors to thrive.