ABUJA: The suspension of the export expansion grant (EEG) is stifling non-oil export growth, as numbers released by the Central Bank of Nigeria (CBN) showed that non-oil exports have continued to decline since 2013.
The EEG, aimed at encouraging exporters of non-oil products, by reducing cost of production and increasing competitiveness of Nigerian-made products in the global market, has assisted in boosting exports.
However, the suspension of the scheme is holding back non-oil export growth, according to the latest release by the CBN.
Former Co-ordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, had in 2013 announced that the scheme was under review, as the previous regime was unsustainable.
However, latest monthly Economic Report from the CBN puts non-oil exports provisionally at $513 million in February this year. This marks an increase of 20 per cent from the level recorded in the corresponding period in 2014.
But when compared to the previous month (January) it declined by 33 per cent. This was particularly due to a sharp decline of 44 per cent in export receipts from the industrial sector.
Proceeds from the industrial, agriculture, manufacturing sectors stood at $369 million, $84 million and $37 million respectively.
The essence of the grant was to reduce production, distribution and logistics costs for non-oil exporters so as to enable them compete effectively in the international market. The understanding of the initiators of the scheme was that allowing non-oil exporters to bear the brunt of the costs would make their products uncompetitive in the international market, as goods from other countries, where governments provide different grants, would sell cheaper than those exported from Nigeria.
THISDAY findings revealed that between 2005 and 2013, the scheme, which was managed by the Nigeria Customs Service (NCS), was suspended eight times. The final lap of the suspension was done in August 2013, when the NCS stopped honouring NDCCs from non-oil exporters.
As against what is obtainable today, THISDAY investigation revealed that after the introduction of the EEG scheme, Nigerian non-oil exports grew from $600 million to $2 billion between 2006 and 2012.
There was also remarkable increase in value chain expansion in terms of processing/manufacturing capacities, leading to new investments and job creation.
Commenting on the development, experts at FBN Capital Limited stated that the drop in oil prices has reinforced the need to diversify the economy, which would inherently increase non-oil exports.
They noted, “Recently, the Nigerian Export Promotion Council (NEPC) devised a strategy aimed at promoting non-oil exports. This involves encouraging States to concentrate on products in which they have comparative advantage.
“In Q1 2015, the Nigeria Export-Import Bank (NEXIM) supported non-oil exporters with N5.73bn (US$28.6m). The agric sector received N912.37 million, 56 per cent of the total amount, while manufacturing received N327.73 million, equivalent to 20 per cent of the sum total.
“The previous administration tried recorded some successes in trying to boost non-oil exports. However, the latest statistics show that much work still needs to be done before the economy reaches a point of diversification where it can withstand external pressures as the one currently being experienced.”
