Hurdles to Nigeria’s $30bn non-oil target

Segun Awolowo

As the economic recession wanes, notwithstanding high food prices, industry stakeholders have warned of another crisis that may be triggered by unstable commodity prices, low export capacity and little commitment to non-oil economy by the federal and state governments. 

According to some of them, Nigeria’s $30 billion non-oil revenue target within the next 10 years under the zero oil plan is currently being undermined by the nation’s renewed focus on oil revenue as crude prices rise.

While the non-oil commodities appear to have a stable outlook in the future, operators in the sector note that global glut of major agriculture commodities and the possibility of manufacturers mopping up certain crops as part of measures to explore alternatives to imported raw materials, may likely affect the projected non-oil revenue by government.

With many developed economies outpacing frontier markets like Nigeria with technology in agriculture production and also seeking new markets for their commodities, potential earnings from the non-oil sector may become threatened as commodities outlook reflect potential glut and crowding out of smaller players.

Currently, the global Commodity Agricultural Raw Materials Index remains on a negative 5.39 per cent based on a year-to-date analysis, according to index mundi statistics.

The Chief Executive Officer, Nigerian Export Promotion Council (NEPC), Segun Awolowo, had said the zero oil export policy of the council was already shifting the attention of Nigerians from oil. 

He added that the volatility in the market had made it imperative for the government to look inwards, especially as the country could no longer depend mainly on oil economy for the implementation of its programme.

Although oil sentiments are often revised by regulators and cartels like the Organisation of the Petroleum Exporting Countries (OPEC), the non-oil sector is left to market forces to determine with exceptions of trade treaties that had been signed.

According to the Chief Executive Officer, Economic Associates, Ayo Teriba, the outlook of commodity prices is bleak as the world economy is growing faster.

Teriba argued that Nigeria needed to look beyond exports as a source of external financing, and boost foreign investment inflows.

“The outlook of global exports is bleak, but it offers cheap liquidity through investments.

Nigeria is currently very close to foreign investment as many large infrastructure sectors that could be major investment destinations remain under government monopoly.

“A glut is expected in almost every segment. There is a supply glut that will affect commodity prices. It goes beyond oil.

There is no cartel in the agric commodities sector like what OPEC does in the oil sector. This means that export income cannot grow beyond world requirements.

“Trade reforms, such as export promotion or import substitution, take five years or much more to yield results.

In contrast, foreign investment reforms, such as Eurobond issuance, diaspora bond issuance, brownfield/greenfield foreign direct investment inflows into infrastructure sectors that are currently under government monopoly, begin to yield results within a year.

Nigeria’s experiences with FDI inflows into telecoms and the recent $1 billion Eurobond issue show that capital can flow in shortly after necessary steps are taken,” he added.

On his part, the Deputy Director-General, Partnerships and Capacity Building, ‎International Institute of Tropical Agriculture (IITA), Dashiell Kenton, said that things were improving, but all depended on the consistency of government’s policies because investors need to be assured of the future of where they are investing their money.

“If government’s policies help to promote agriculture, then businesses can thrive, but if government changes policies then all the development will collapse. That is very important.

Nigeria has the weather, soil and the technologies are available not only to IITA, but in many other organisations,” Kenton said. On the rejection of exports from Nigeria in global markets, Kenton said the presence of toxins like the Afro toxins in export commodities was responsible. He said solutions had been developed to address this concern.

The Chairman, Manufacturers Association of Nigeria (MAN) Export Group, Ede Dafinone, confirmed that the nation’s export capacity was still low, but said efforts were being made to encourage other operators.

A social commentator, Greg Odogwu, advised that to avoid the failure of export initiatives for agricultural produce, the current administration needed to address the issue of access to credit at a single digit interest rate, access to market, security of lives and property and provision of accurate data on food production index.