Wednesday, 30 March 2016

NIGERIA’S PROBLEM IS NOT OIL PRICE BUT FAILURE TO EXPORT

Oil is down! Pressure on the Naira! Slowing growth! What will Nigeria’s response be? This is the chatter all across the country on shop floors, in markets, within business circles, and in classrooms. But a close look reveals we may be focusing on the symptoms and not the cause. Nigeria does not have an oil price problem, Nigeria has a “failure to ex­port” problem! We have little control over the ups and downs in global crude oil markets; what we do control however is what Nigeria chooses to export, and where we choose to make money internation­ally.


Unfortunately, our country for decades has pri­marily exported one product, crude oil, which re­ally is a perishing asset. It is for this reason that the government prioritizes Nigeria’s economic di­versification. In line with this, a new agenda – the Zero Oil plan – has been put together to envision a Nigerian economy without oil. What else could we export? Who would buy? How much could we make? These are the questions answered under this roadmap to change this age-old dependence on one single export commodity. Yet as noble as the idea is, it would take hard work for the objective to be realised. Still, it can be done.


As His Excellency, President Muhammadu Bu­hari (GCFR) said to a delegation of manufacturers in 2015, “…Nigeria must begin to behave as if we have no more oil”. These are the words which shape our Zero Oil economic agenda, and are essential to build a strong Nigerian economy for the future. For years Nigeria has imported thousands of goods worth over US$50 billion a year, which we pay for mainly with crude oil proceeds of over US$70 bil­lion each year. Our fears have now materialized, in the past 2 years crude oil prices have fallen 60% and Nigeria’s earnings have likewise fallen by at least US$35 billion, inevitably leaving a financial hole in the economy. The pressing question now is how to fill this funding gap – and the answer is simple: Ni­geria must find new things (not oil) to export quick­ly, in large commercial scale. If Nigeria broadens and grows its export basket, a positive chain reac­tion ricochets throughout the economy. The logic follows – when you grow exports, national output (agriculture, industry, solid minerals) will also grow; local businesses will grow; supporting infra­structure will expand; and jobs and investments will definitely follow. The overall macro impacts result in growing foreign reserves (from export forex) and a more resilient economy.

We are not the only nation in history to have ever faced this challenge. When India, the 2nd largest country in the world faced similar hardships under its founding father, Jawaharlal Nehru, his clarion call was simple, “India must Export or Perish”. Nehru’s mantra changed the thrust of his coun­try’s economic policy and today India exports over US$300 billion of non-oil goods each year. More importantly, India made sure that no single product, not even oil (if they had it) would hold the people to ransom. Other countries have similarly done well in exports, for instance Brazil does over US$200 bil­lion of non-oil exports and Malaysia over US$250 billion.

In the case of Nigeria’s story however, there is cause to pause. Despite our population of 170 million people, and being the 7th most populous country in the world, we make only US$5 billion in non-oil exports. To put this in perspective, if Ni­geria did not have crude oil, our exports will ac­count for one-third of the total exports of Trinidad and Tobago… a country that is 1% of Nigeria’s population, and far less endowed. This is a cause for worry.

We are not starry-eyed optimists, as moving to a Nigeria with Zero Oil will not be easy. But we should remember that we once had a coun­try that was Zero Oil. The questions to ask are: What happened to our proud history in Palm Oil, Cocoa, Ground Nuts, Cotton? We were the toast of the world, where are these products now? We know in good days Nigeria typically makes over US$70 billion annually from crude oil exports, but the world is bigger than oil.

Only 3 of the top 20 exporters in the World de­pend heavily on oil exports, and today even those 3 are fast diversifying. Indonesia makes over US$18 billion from only Palm Oil exports (we understand the Indonesians took their first Palm seed from Nigeria over 50 years ago); Brazil makes US$17 billion from Soybeans; Saudi Arabia makes over US$30 billion from Petrochemicals, and Bangla­desh makes US$5 billion from T-shirts.

Let’s also look at the Chinese economic miracle – simply an export miracle. In 1980, both China and Nigeria each accounted for 1% of global world exports, so in a sense “then we were equals”. How­ever by 2011 China accounted for 11% of global exports (all non-oil), while Nigeria was less than 0.4% and shrinking. China has grown richer and its currency, the Yuan, is even considered an alter­native reserve currency. Like the Chinese the only way to strengthen the Naira is to increase produc­tivity, increase capacity, and focus on export ori­entation.

The Nigerian Export Promotion Council (NEPC) anchors the Zero Oil agenda. A few tar­gets to note on Nigeria’s proposed journey to Zero Oil. First, we set a long-term goal of earning over US$100 billion from non-oil exports (i.e. 20% of today’s GDP). When compared with Export to GDP ratios of other emerging market coun­tries, this is reasonable – China’s is 24%, Brazil 12%, South Africa 31%, and Malaysia 76%. Nigeria’s long term goal is however further bro­ken down into two midterm targets – which is to grow non-oil exports from US$5 billion today, to US$18 billion by 2019, and US$30 billion in non-oil exports by 2025. Growing non-oil ex­ports 6 fold in 9 years will be a feat indeed, but then again these are extraordinary times, and we need extraordinary economic action.

In implementing the plan, hundreds of thou­sands of new jobs will be created every year from numerous initiatives. The sort of scale needed to take it seriously. The Zero Oil plan identifies 21 priority countries as markets for Nigerian products (termed “Export 21”) and 11 strategic export products with high financial val­ue to replace oil, these include Petrochemicals, Palm Oil, Cocoa, Soybeans, Rubber, to name a few. To achieve this Nigeria must scale up do­mestic production to levels unprecedented, and create competitive channels to move cargo and get goods into foreign markets. The plan envis­ages increases in total non-oil export volumes in Nigeria which should grow by 70 million tons, clearly a logistical challenge that would require upgrades on major transport corridors to get goods from Nigeria’s hinterlands in every single State of the Federation, to ports in Lagos, Port Harcourt, and Calabar.

The plan facilitates export aggregators to source products from millions of micro, small, and medium-sized enterprises, which ensures our grass roots, youths, and households also feel the economic impact of exports. The 36 States and FCT are also expected to play a leadership role by selecting at least one priority export product under the One-State-One product pro­gramme.

Plainly put, with the Zero Oil plan, Nige­ria will be a very different place in the next 5 years. We are a resourceful people, this is the time to dig deep and create an economy to work for us today, as well as last for generations to come. Taking a cue from Roberto Azevedo (Di­rector General, World Trade Organisation) “… Nigeria’s economic growth has to happen inde­pendent of oil exports”.

As everyone talks about the crash in crude oil prices, From Saudi Arabia to Venezuela, and from Russia to the United States; for Nigeria we seek to go beyond oil. One of Nigeria’s re­sponses is to restructure and drive our economy through non-oil exports. Many emerging market countries have walked this road successfully and thrived. The Zero Oil plan sets our country on this path as well. Now we need the conviction to execute, and the courage to stay the course. Time to Export, Export, and Export! (Sun)