Currently the country’s 2025 budget is facing a major threat.
Nigeria’s benchmark oil price in the 2025 budget is $75, Brent Crude is presently trading below $65 per barrel. The oil output target was 2.06 million barrels per day, today the country is doing less than 1.5 million barrels per day.
The government had projected to earn 56 per cent, about N84.67 trillion (approximately $56.45 billion)
of the budget revenues from the export of crude oil and gas.
The budget deficit at the $75 per barrel price and 2.06 million barrels per day production level was a humongous N13 trillion, now it will widen.
For many decades Nigeria has been desperately trying to diversify its foreign exchange earnings through non-oil exports without much to show for it. Experts blame lack of political will on the part of the managers of the Nigerian economy to take what they described as decisive steps as responsible for the poor success in that direction.
Data from the National Bureau of Statistics shows that Non-oil exports’ share of total exports was highest at 30.8 per cent achieved in 2012. Ever since it has been a mix bag. For instance, in 2019 non-oil exports accounted for 11.97 per cent of total exports, it rose to 12.68 per cent in 2020 and fell to 11.35 per cent in 2021. In 2022 it fell further to 8.94 per cent, but rose to 9.17 per cent in 2023 and further up to 12.21 per cent in 2024.
Nigeria’s non-oil export products include cocoa beans, sesame seeds, cashew nuts, and various other agricultural products like rice, cassava flour, and palm kernel oil. Additionally, textiles, leather goods, and certain minerals like lithium are also significant non-oil export items.
In recent past following Nigeria’s quest to diversify its economy, the government has taken several steps to encourage export of non-oil products.
As far back as 1986, the Federal government introduced what it called the Export Expansion Grant (EEG). It was established to encourage non-oil exports and help exporters become more competitive in the global market. The scheme has been revised and re-introduced multiple times. However, the scheme has been marred with allegations of corruption against some government officials and a lack of due diligence by the Nigerian Export Promotion Council (NEPC) before sending the list for approval.
In fact, the chairman of the Manufacturers Association of Nigeria Export Promotion Group (MANEG), Ms. Odiri Erewa-Meggison, alleges that there are lots of backlogs of the grants running into billions of naira as far back as 2009 that have not been cleared despite being approved by NEPC.
The Central Bank of Nigeria (CBN) under Godwin Emefiele in collaboration with the Bankers’ Committee, launched a series of sectoral intervention programmes to stimulate economic growth.
In February 2022, the Bank unveiled a programme to boost non-oil exports and reparation of their proceeds. The programme tagged: RT 200 Non-Oil Exports Proceeds Repatriation Programme (RT200 for short), was to raise $200 billion in FX earnings from non-oil proceeds over a three to five years period. It was implemented in close collaboration with the commercial banks.
At the core of the programme was a rebate scheme designed to incentivise non-oil exporters to repatriate their FX earnings and sell such earnings in the FX market. So, for every dollar repatriated and sold in the I&E (investors and exporters) window to third parties, the exporter shall receive N65 and for every dollar repatriated and sold into the I&E for own use, the exporter receives N35. The idea is for the country to earn more stable and sustainable FX inflows in order to insulate the economy from shocks and FX shortages.
However, that effort has done little to raise the share of non-oil exports in Nigeria’s total foreign trade.
The question remain, what are the constraints? Experts believe the reason is a combination of issues, including poor structure and the high cost of production, high cost of borrowing, inflation, depleting infrastructure, anti-business regulations by ministries, departments and agencies whose purview covers the manufacturing and export value chain, and high electricity tariff.
Others include the rising logistics cost, due to high diesel and petrol prices, widespread insecurity and delays in administering export incentives.
The World Bank estimates that poor transportation infrastructure costs Nigeria 2% in GDP loss, which is equivalent to $10 billion, and because of increased transportation costs, Nigerian goods are less competitive in the international markets. Delays in deliveries lead to missed delivery deadlines and lost sales. There is also the issue of poor sanitation. It leads to quality issues, risks of damage/spoilage and reduced market value. According to the United Nations poor sanitation costs Nigeria $3 billion annually.
The present administration has made substantial efforts towards stabilising the foreign exchange market, one of the major drawbacks in attracting investments and encouraging non-oil exports.
Chief Economist for Africa and the Middle East at Standard Chartered, Razia Khan attested to this at a recent meeting with foreign investors in New York also attended by the CBN. She said that Nigeria’s recent reforms, especially around FX, have created a platform for reduced dependence on oil.
According to her, “Nigeria is finally at a point where it might be able to break free from the oil cycle.
“We now have a more competitive exchange rate and a structure that could support real wealth creation outside oil.”
She added that investor concerns about repatriation and macroeconomic stability are being addressed through FX reform and monetary tightening, but urged policymakers to stay the course.
“Structural reforms take time. Nigeria is only just at the beginning of a credible path toward diversification,” she said.
Lead Director, Centre for Social Justice (CSJ), Barr. Eze Onyekpere said economic diversification has been a mantra of every succeeding government, but none has taken a bold step towards moving the needle in its direction.
He said before talking about diversification, Nigeria has not even expounded the frontiers of the oil and gas economy through the products of petrochemical complexes and value addition in oil and gas. “We are still importing refined petroleum and NNPC has foot-dragged in incentivising local refining,” he said, adding that Nigeria is still doing contract oil, sharing her crude oil resources with multi nationals instead of the developmental oil approach that hires technical expertise for a fee while the ownership and major income remains with the nation.
He said what Nigeria needs now is value addition in agriculture. “Increased production and value addition in cocoa, palm produce, rubber, groundnut, beniseed, sesame, root crops and tubers, cattle, etc., will provide sufficient employment, foreign exchange and taxes to boost economic governance,” he said.
In the area of solid minerals, Barr. Onyekpere said despite the mapping of available solid minerals, Nigeria is yet to invest enough (or attract private investment) in exploration in the sector. “Now, there are hopes of investments in lithium and other solid minerals, a roadmap for beneficiation to process them into finished products rather than selling them raw is needed.”
He noted that another important area is investments in human capital, in the capacity for digitization, artificial intelligence, medicine, energy, advanced actionable legalism, etc., and harnessing those competencies in Nigeria instead of allowing them to be lost to other countries through brain drain.
He also suggests investment in intellectual property in the business side of music, films and other arts, considering the excellent performance of Nigerians in the sector.
On his part, a professor of Accounting and Financial Development at Lead City University, Ibadan, Professor Godwin Oyedokun said Nigeria has significant potential in agriculture, manufacturing, solid minerals, and services, and can boost non-oil exports by implementing several key strategies including, enhancing production capacity; improving export infrastructure and logistics; increasing access to finance for exporters; improving product quality and standards; expanding market access; promoting value addition; and ensuring policy consistency and stability.
“While some of these steps have been taken, such as the establishment of the Nigerian Export Promotion Council (NEPC) and the development of export promotion programmes, more needs to be done, “ he said.
Professor Oyedokun noted that key areas for improvement include: effective policy implementation; better coordination among stakeholders; increased funding; diversification of export products beyond traditional agricultural commodities; and enhanced competitiveness.
Professor Jonathan Aremu, an economic analyst said the only way Nigeria can boost its foreign exchange earnings from non-oil exports is for the country to move from talking to action, and from mere activity to productivity.