Post by Trade facilitator on Nov 29, 2012 9:53:15 GMT 1
The promptings given to the non-oil sector in the last one decade appear to have made a significant impact on the economy, especially in the area of the Export Expansion Grant. LAYI ADELOYE highlights its potential in the face of policy impediments, and other challenges.
Notwithstanding the serious challenges, especially in form of policy somersaults, it still faces, the non-oil export sub-sector has achieved a significant growth in Nigeria in recent years. Stakeholders beleive that , in spite of the high potential it has, unless the challenges are addressed urgently, the sub-sector’s contribution to the economy may remain little, with potential to attract irreversible consequences.
Substantially, Nigerian non-oil export sector has deep agro-allied linkages, as Nigeria’s export basket consists of semi-processed and processed agricultural products, such as cocoa, cashew, sesame, ginger, gum arabic, shrimps, cotton and rubber.
Nigeria is a major exporter of finished leather, which has direct linkage to livestock growers. By providing market linkages to agricultural produce, export sector has boosted the incomes of over ten million farmers in rural areas across the length and breadth of the country. It must be noted that during the global financial crisis, Nigeria’s non-oil sector continued to grow and helped to absorb the shock caused by the sharp fall in oil revenue.
However, in spite of the vast potential and opportunities provided by the export sub-sector, the various policies reeled out by the Federal Government from time to time have had different impacts on the fortunes of the products and the sub-sector in terms of how they fared at the international markets, their productive process and the commitment of stakeholders. In this wise, the impact of government policy on the fortunes of exports cannot be over-emphasised.
Ordinarily, government policies are aimed at encouraging diversification of the economy. To achieve this, several incentive policies were put in place. In this sub-sector, however, none has been as effective as the Export Expansion Grant scheme, which operates under the legal context provided under the Export (Incentives and Miscellaneous Provisions) Act 1986. The EEG policy, as a fiscal policy instrument, is implemented under the guidelines issued by the Federal Ministry of Finance. Nigerian Export Promotion Council is the apex agency responsible for the administration of the policy, in conjunction with other key implementation agencies, such as the Central Bank of Nigeria and Nigeria Customs Service. The export grant is given to exporters to cushion the impact of infrastructural disadvantages faced by Nigerian exporters and make our exports competitive in the international market.
Coincidentally, the present EEG Policy underwent a clinical reform in 2006 during the first term of Dr. Ngozi Okonjo-Iwela, as the Minister of Finance. With technical assistance from international consultants, PriceWaterHouseCoopers, the scheme was streamlined to make it more effective by categorising export products according to their degree of value addition and processing and rewarding those companies which generat higher export growth and new investment in export capacity building.
Export incentive claims are subject to 100 per cent pre-shipment inspection, factory inspection and audit of all transactions to ensure transparency and prevent abuse. Today, informed industry position put it that the growth in non-oil exports from $1bn in 2006 to $2.3bn in 2010. Although current figures are still awaiting final collation, the available figure attests to the strict policy compliance criteria and due process introduced during Okonjo-Iwela’s first term as finance minister.
As a result of the government policy, which encourages value addition, exporting companies embarked on forward integration and made heavy investment in plant and machinery to add value to indigenous commodities. There has been a clear shift towards export of processed and value added products. From an exporter of raw cocoa about a decade ago, Nigeria now exports cocoa products, such as cocoa cake, cocoa liquor, cocoa butter and cocoa powder. The country banned the export of wet blue (leather in semi-finished stage) almost a decade ago also, which led to huge investment in tanneries to export finished leather and recently, articles of leather. From an exporter of raw cashew, Nigeria now exports processed cashew. The industrial trawling industry invested in highly capital intensive trawlers for on-board processing of wild shrimps and cold chain to embark on export of highly perishable products.
Funding intervention, through a deliberate push for value addition to products, has also helped the sub-sector’s transformation. For instance, through the Bank of Industry’s intervention in the textile industry, the remaining textile mills have embarked on re-tooling of their equipment.
Accordingly, some companies, apart from accessing funds for machinery refurbishment and upgrading, have been going in for industrial or technical skills upgrade to have some competitive edge.
All these have had multiplier effects of creating jobs and enhancing of revenue earning for the country. One of the most innovative stories has been the export of re-cycled polyester fiber produced in the most environmentally sustainable manner as a result of which Nigeria has become the largest exporter of polyester staple fiber in Africa, destined for European market. The re-cycling fiber plant in Lagos, according to the NEPC, provides direct and indirect employment to 2,000 Nigerians. Other Nigerian textile products, such as cotton textiles comprising wax prints, cotton yarn and fabrics are exported to West and Central Africa and EU.
An in-depth consideration of the value chain involved in the EEG was brought to bear in the market diversification generated through productive activities in the export-prone products and companies.
A renowned export expert with a bias for commodity exports, Dr. Orji Ugorji, comments on the market diversification potential of the EEG policy on commodity export in Nigeria, said, “It’s interesting to observe how persistent efforts of Nigerian exporting companies have led to the acceptance of their products in some of the highly quality conscious customers and markets.”
A few of the listed instances, which incidentally tallied with NEPC’s position, included happenings in the last 10 years.
The first area of assessment is the 10 years of the African Growth & Opportunity Act operation, as passed by the United States Government to allow duty free access to products from sub-Saharan Africa. The NEPC, and indeed, Ugorji’s verdict is that “Nigerian exports seem to have achieved a breakthrough.
“Today, Nigerian products, such as cocoa beans and butter, dried-split ginger, leather, woven sacks and technically specified rubber are being exported to the US. Hibiscus flowers are also being exported to US,” Ugorji said.
Besides, Nigerian de-hulled sesame seeds are now being exported to Japan. “Interestingly, Nigeria appeared on world sesame map only a decade ago, as a result of aggressive marketing efforts by Nigerian exporters, “an NEPC document said.
According to industry experts, the direct employment in the non-oil export companies is estimated at about 200,000 while indirect employment in the agriculture sector which gains from the market linkages provided by the exporting companies is estimated over ten million.
For instance, the President, National Cashew Association of Nigeria, Mr. Tola Faseru, had recently said, “A large cashew processing plant in Kwara State directly employs 1500 people, mostly rural women. The cashew kernels are processed and packed, direct for shipment to developed countries, such as US and Europe.”
In terms of boosting foreign exchange earnings,a top NEPC official, who is familiar with the past export trends, says, “a positive feature of the EEG scheme has been the tendency on the part of exporters to operate through official channels which compliments CBN efforts to discourage the unofficial forex market in Nigeria,” stressing that “boosting export earnings becomes even more pertinent today in view of weakening exchange rate of naira and the shrinking foreign exchange reserves.”
According to an NEPC official, who is familiar with the past export trends, “a positive feature of the EEG scheme has been the tendency on the part of exporters to operate through official channels, which compliments CBN efforts to discourage the unofficial forex market in Nigeria.
Notwithstanding the lofty achievements, stakeholders have yet to achieve total succour in the area of sub-sectoral competitiveness and dominance. For instance, it is still generally felt that the biggest impediment to achieving growth of investment in the export capacity building remains the key issues of policy somersault and a lack of compliance with due process by the government agencies.
Besides, despite the positive features of the EEG scheme, some encumbrances, including fiat decisions to suspend EEG by some administrations, have engendered the tendency on the part of exporters to neglect official modes. Another challenge has to do with forex sourcing, which operators said had not been easy, despite the Central bank of Nigeria’s efforts to discourage the unofficial forex market.
At a recent forum in Lagos, the Manufacturers Association of Nigeria lamented the failure of implementing agencies to accept the Negotiable Duty Credit Certificates issued by the Federal Ministry of Finance.
Also during a courtesy call on the Minister of Trade and Investment, Mr. Olusegun Aganga, when he was newly appointed, the President of MAN, Chief Kola Jamodu, listed several factors deemed to be affecting the performance of the real sector. As regards export development, he said non-acceptance of the NDCC export certificates was key, among others.
The MAN boss had presented a blue-print for the manufacturing sector to the new minister which lists various impediments that need to be addressed. He raised the alarm that unless policy constraints were addressed, unemployment problem among Nigerian youths might get worse.
Source: www.punchng.com/business/industry/non-oil-exports-role-of-incentives-and-challenges/
Notwithstanding the serious challenges, especially in form of policy somersaults, it still faces, the non-oil export sub-sector has achieved a significant growth in Nigeria in recent years. Stakeholders beleive that , in spite of the high potential it has, unless the challenges are addressed urgently, the sub-sector’s contribution to the economy may remain little, with potential to attract irreversible consequences.
Substantially, Nigerian non-oil export sector has deep agro-allied linkages, as Nigeria’s export basket consists of semi-processed and processed agricultural products, such as cocoa, cashew, sesame, ginger, gum arabic, shrimps, cotton and rubber.
Nigeria is a major exporter of finished leather, which has direct linkage to livestock growers. By providing market linkages to agricultural produce, export sector has boosted the incomes of over ten million farmers in rural areas across the length and breadth of the country. It must be noted that during the global financial crisis, Nigeria’s non-oil sector continued to grow and helped to absorb the shock caused by the sharp fall in oil revenue.
However, in spite of the vast potential and opportunities provided by the export sub-sector, the various policies reeled out by the Federal Government from time to time have had different impacts on the fortunes of the products and the sub-sector in terms of how they fared at the international markets, their productive process and the commitment of stakeholders. In this wise, the impact of government policy on the fortunes of exports cannot be over-emphasised.
Ordinarily, government policies are aimed at encouraging diversification of the economy. To achieve this, several incentive policies were put in place. In this sub-sector, however, none has been as effective as the Export Expansion Grant scheme, which operates under the legal context provided under the Export (Incentives and Miscellaneous Provisions) Act 1986. The EEG policy, as a fiscal policy instrument, is implemented under the guidelines issued by the Federal Ministry of Finance. Nigerian Export Promotion Council is the apex agency responsible for the administration of the policy, in conjunction with other key implementation agencies, such as the Central Bank of Nigeria and Nigeria Customs Service. The export grant is given to exporters to cushion the impact of infrastructural disadvantages faced by Nigerian exporters and make our exports competitive in the international market.
Coincidentally, the present EEG Policy underwent a clinical reform in 2006 during the first term of Dr. Ngozi Okonjo-Iwela, as the Minister of Finance. With technical assistance from international consultants, PriceWaterHouseCoopers, the scheme was streamlined to make it more effective by categorising export products according to their degree of value addition and processing and rewarding those companies which generat higher export growth and new investment in export capacity building.
Export incentive claims are subject to 100 per cent pre-shipment inspection, factory inspection and audit of all transactions to ensure transparency and prevent abuse. Today, informed industry position put it that the growth in non-oil exports from $1bn in 2006 to $2.3bn in 2010. Although current figures are still awaiting final collation, the available figure attests to the strict policy compliance criteria and due process introduced during Okonjo-Iwela’s first term as finance minister.
As a result of the government policy, which encourages value addition, exporting companies embarked on forward integration and made heavy investment in plant and machinery to add value to indigenous commodities. There has been a clear shift towards export of processed and value added products. From an exporter of raw cocoa about a decade ago, Nigeria now exports cocoa products, such as cocoa cake, cocoa liquor, cocoa butter and cocoa powder. The country banned the export of wet blue (leather in semi-finished stage) almost a decade ago also, which led to huge investment in tanneries to export finished leather and recently, articles of leather. From an exporter of raw cashew, Nigeria now exports processed cashew. The industrial trawling industry invested in highly capital intensive trawlers for on-board processing of wild shrimps and cold chain to embark on export of highly perishable products.
Funding intervention, through a deliberate push for value addition to products, has also helped the sub-sector’s transformation. For instance, through the Bank of Industry’s intervention in the textile industry, the remaining textile mills have embarked on re-tooling of their equipment.
Accordingly, some companies, apart from accessing funds for machinery refurbishment and upgrading, have been going in for industrial or technical skills upgrade to have some competitive edge.
All these have had multiplier effects of creating jobs and enhancing of revenue earning for the country. One of the most innovative stories has been the export of re-cycled polyester fiber produced in the most environmentally sustainable manner as a result of which Nigeria has become the largest exporter of polyester staple fiber in Africa, destined for European market. The re-cycling fiber plant in Lagos, according to the NEPC, provides direct and indirect employment to 2,000 Nigerians. Other Nigerian textile products, such as cotton textiles comprising wax prints, cotton yarn and fabrics are exported to West and Central Africa and EU.
An in-depth consideration of the value chain involved in the EEG was brought to bear in the market diversification generated through productive activities in the export-prone products and companies.
A renowned export expert with a bias for commodity exports, Dr. Orji Ugorji, comments on the market diversification potential of the EEG policy on commodity export in Nigeria, said, “It’s interesting to observe how persistent efforts of Nigerian exporting companies have led to the acceptance of their products in some of the highly quality conscious customers and markets.”
A few of the listed instances, which incidentally tallied with NEPC’s position, included happenings in the last 10 years.
The first area of assessment is the 10 years of the African Growth & Opportunity Act operation, as passed by the United States Government to allow duty free access to products from sub-Saharan Africa. The NEPC, and indeed, Ugorji’s verdict is that “Nigerian exports seem to have achieved a breakthrough.
“Today, Nigerian products, such as cocoa beans and butter, dried-split ginger, leather, woven sacks and technically specified rubber are being exported to the US. Hibiscus flowers are also being exported to US,” Ugorji said.
Besides, Nigerian de-hulled sesame seeds are now being exported to Japan. “Interestingly, Nigeria appeared on world sesame map only a decade ago, as a result of aggressive marketing efforts by Nigerian exporters, “an NEPC document said.
According to industry experts, the direct employment in the non-oil export companies is estimated at about 200,000 while indirect employment in the agriculture sector which gains from the market linkages provided by the exporting companies is estimated over ten million.
For instance, the President, National Cashew Association of Nigeria, Mr. Tola Faseru, had recently said, “A large cashew processing plant in Kwara State directly employs 1500 people, mostly rural women. The cashew kernels are processed and packed, direct for shipment to developed countries, such as US and Europe.”
In terms of boosting foreign exchange earnings,a top NEPC official, who is familiar with the past export trends, says, “a positive feature of the EEG scheme has been the tendency on the part of exporters to operate through official channels which compliments CBN efforts to discourage the unofficial forex market in Nigeria,” stressing that “boosting export earnings becomes even more pertinent today in view of weakening exchange rate of naira and the shrinking foreign exchange reserves.”
According to an NEPC official, who is familiar with the past export trends, “a positive feature of the EEG scheme has been the tendency on the part of exporters to operate through official channels, which compliments CBN efforts to discourage the unofficial forex market in Nigeria.
Notwithstanding the lofty achievements, stakeholders have yet to achieve total succour in the area of sub-sectoral competitiveness and dominance. For instance, it is still generally felt that the biggest impediment to achieving growth of investment in the export capacity building remains the key issues of policy somersault and a lack of compliance with due process by the government agencies.
Besides, despite the positive features of the EEG scheme, some encumbrances, including fiat decisions to suspend EEG by some administrations, have engendered the tendency on the part of exporters to neglect official modes. Another challenge has to do with forex sourcing, which operators said had not been easy, despite the Central bank of Nigeria’s efforts to discourage the unofficial forex market.
At a recent forum in Lagos, the Manufacturers Association of Nigeria lamented the failure of implementing agencies to accept the Negotiable Duty Credit Certificates issued by the Federal Ministry of Finance.
Also during a courtesy call on the Minister of Trade and Investment, Mr. Olusegun Aganga, when he was newly appointed, the President of MAN, Chief Kola Jamodu, listed several factors deemed to be affecting the performance of the real sector. As regards export development, he said non-acceptance of the NDCC export certificates was key, among others.
The MAN boss had presented a blue-print for the manufacturing sector to the new minister which lists various impediments that need to be addressed. He raised the alarm that unless policy constraints were addressed, unemployment problem among Nigerian youths might get worse.
Source: www.punchng.com/business/industry/non-oil-exports-role-of-incentives-and-challenges/
