The piece below was written in the twilight days of the immediate past administration in Nigeria.
These are definitely not the cheeriest of times for Nigeria’s economic visions, realities and fortunes. Within a spate of five weeks, the world market price of the mainstay of Nigeria’s economy, Crude Oil, has crashed from a four-year steady above-the-budget-benchmarks of over $100 per barrel to an unbelievable under-$80 per barrel. The worry that this has caused within Government framework can be seen in the recently-reeled out austerity measures. The Coordinating Minister of the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala did recently announce a few measures as Government’s response to the Oil worry. The measures, a combination of fiscal and monetary policy, which are meant to cushion the effect of the decline in Government’s revenue, include a N0.2 trillion slash in the 2015 budget, a reduction in the benchmark price of crude oil from $77 to $73 per barrel and a series of fiscal discipline measures to curtail unnecessary expenditure.
As we had always said, over the past twenty years or so, what appears to be a sudden occurrence today, has actually always been an accident waiting to happen. How could we have neglected the fact that Oil was a wasting resource on which we had absolutely no control. The deposits were divinely provided and, since we aborted the development of our domestic refining capacity, the prices were also determined elsewhere and shoved down our throats. Indeed, we were even denied the right of determining how much of it we sold via the OPEC-determined allocations of production quantity limits. To some of us therefore, the development is very welcome. At least, now we know that Nigerians can do without travelling abroad to acquire training on Leadership and Management, to the eternal detriment of our Public Service Institute of Nigeria and other world-beater institutions like ASCON (I almost said “of blessed memory”), Lagos Business School and Institute of Applied Economics, just to mention a random few. Our focus in this write-up however, is to contribute to, or rather complement the measures already enunciated by the very learned and articulate CME.
While we commend the fact that Government actually responded in a timeous manner, indicating that we are very much on top of our game, we were expecting that the appropriate authorities would see the imminent death of our oil economy as a an avenue to NOW radically, rapidly and responsibly develop our non-oil exports aggressively. The CME only fell short of getting there… “Even though the drop in oil price is a serious challenge, it is an opportunity for the country to focus on greater diversification and refocus efforts towards the non-oil sector,” she said.
With that type of encouraging “opening phrase” we were actually waiting with bated breath to hear the CME reel out a series of incentives that would catalysize the tripling of national revenue from non-oil exports. Again, we would need to retract a bit back in the nation’s economic history here. Faced with an identical situation way back in 1986, and forced to adopt a similarly austere Structural Adjustment Programme, SAP, the then Federal Military Government quickly enacted Decrees 64 and 65, to give legal teeth to the development of Nigeria’s non-oil exports through the strengthening of the (Nigeria Export Promotion Council (earlier created vide Decree 41 of 1976) and the promulgation of eighteen different incentives in support of export activity. Some of these incentives, sadly, never saw the light of day as they have never been activated. It is pertinent however, to relate the growth of non-oil exports with the relative smooth administration of the only one of the eighteen incentives that has worked – the Export Expansion Grant.
Statistically, every time that we have had a relative stable administration of the EEG, non-oil export’s contribution to national GDP has always been astronomical. Indeed from a meagre $0.7Bn in 2005, Nigeria’s non-oil exports grew by over 400% to $2.8Bn in 2011. It should be noted however that this growth was in spite of several unnecessary interruptions to the EEG scheme during the period. Indeed CBN annual Report (2010) acknowledged that:
“The value of non-oil exports increased by 37.1% attributed to improvement in production, processing and packaging of Nigeria‘s products………..
Despite this development the non-oil export subsector performed dismally accounting for only 3.6% of the total exports due to poor Infrastructure, policy slippages and volatility of commodity prices.”
The EEG has not operated at all for the better part of 2013 and 2014 as Government is said to be reviewing the scheme and planning to introduce new guidelines that would, hopefully, take off in 2015. But, if the planned review was completely devoid of any deliberate response to declining Crude Oil revenue, it is our sincere opinion that it needs to be re-reviewed before release. More importantly, Government needs to IMMEDIATELY dialogue with the exporters with a view to currying their collaboration in this now-common cause of diversifying the economic base. If necessary, both parties need to negotiate and ensure that all outstanding EEG already approved are redeemed, even if at a sacrificial discount by the exporters themselves. The reason is simple.
As I wrote in a recent article (see THIS DAY of Sunday 17th November, 2014 NOW THAT OIL IS DRYING) America’s response to the global economic recession in 2008-2009, was an aggressive drive to double America’s exports to the world, within five years. Apart from constituting an export Cabinet to drive the National Export Initiative, the Obama administration flooded the sector with several incentives to facilitate and ensure the achievement of that national goal. The NEI has been such a huge success that America is already concluding plans to inaugurate NEI/Next as can be seen in the report below:
“In May 2014, Secretary of Commerce Penny Pritzker announced the launch of NEI Next, using improved information and a customer-service strategy to help U.S. companies increase exports.
“The National Export Initiative has been a remarkable success,” said U.S. Secretary of Commerce Penny Pritzker. “NEI/NEXT is the next phase of this program and will help connect more of the 95% of consumers that live outside our borders. More and more American companies are seeing the value of selling their goods and services all over the world, but there are still many businesses that focus solely on the domestic market. They are missing out on potential opportunities for growth, and that is why we need NEI/NEXT to help spur every opportunity for these businesses to export.”
In 2013, U.S. exports hit an all-time record of $2.3 trillion and supported 11.3 million U.S. jobs. According to the most recent figures, almost 305,000 US firms now export, a record high and an increase of 28,000 from 2009.”
Since 2009, exports have driven nearly a third of economic growth and now account for nearly 14 percent of our economy.
Jobs supported by exports increased to 11.3 million in 2013, up 1.6 million since 2009. Of these 11.3 million jobs, 7.1 million were supported by goods exports, while services exports supported 4.2 million in 2013”
The reality of today’s world is that the global market place is a battle field. And every country is arming its economic foot-soldiers (exporters) with the most potent weaponry (incentives) to ensure that they match up to their competitors in the global market place.
A country like Australia has about thirty-four different incentives to support her exporters of goods and services to retain a fair share of the world market. Some of these would be termed “ridiculous” by Nigerian authorities who, unfortunately, even now, still view the EEG as a “dash” to the Nigerian exporter. And, on top of the 34 incentives, Australia has, for the past fifty years, consistently celebrated performing exporters through the annual Presidential Export Awards. India has developed its own basket of incentives in support of exports and are expectedly thriving in the export market.
It therefore remains our conviction that Nigeria’s response to the current oil crises cannot be limited to reduced spending and increased tax-revenue. Madam CME must relate with her Industry, Trade and Investment counterpart to structure a deal with the exporting private sector. NOW is the time to strike that deal with Nigerian exporters that would help in creating a non-oil export-driven economic base. Now is the time to set up that National Response Squad on non-oil exports. Now is the time to prepare a solid foundation for Nigeria’s economic future. NOW is the time to act.