Addressing Nigeria’s Trade Deficit with it’s Trading Partners

In this exclusive article, Dr. Isemede discusses several issues hampering the development of non-oil exports in Nigeria.
14 Sep 2018
Trade deficit IEOM
Dr. John Isemede

Dr. John Isemede is the immediate past Director-General and the CEO (2010 to 2015) of the National Chamber of Commerce, Industry, mines and Agriculture (NACCIMA) in Nigeria.

He currently consults with Export promotion bodies and higher institutions across the globe on organized private sector (OPS) matters. He has also consulted with the United Nations International Development Organization (UNIDO) on value chain Development (Export Development on the Quality Infrastructure in Nigeria).

A widely recognized speaker and commentator on matters and international trade, Dr. Isemede is a full member of the Institute of Export and International Trade, Peterborough, UK. He is also a Fellow in Nigeria and a Faculty member of the Institute of Export and Shipping Management of Ghana.

Dr. John Isemede is a member of the editorial board of the Export Brief magazine.

Topics

Trade deficits

There are two sides to International Trade – import and export – and despite popular opinion, Nigeria has been very active on the international trading scene. However, the results have been largely disappointing. This might not seem obvious to casual observers reading figures thrown about by government agencies. A critical look at the numbers however will reveal that Nigeria’s involvement in international trade is tilted heavily in favor of imports. On the export side, over 90% of trade is directly related to crude oil (a single product) from a country previously known as a major exporter of agricultural produce (grains, cocoa, palm oil, nuts, etc) and boasting large quantities of various solid minerals across the land.

The deficit obviously, is on the export side and this has been the case since the collapse of the commodity boards, back in 1986. Every effort to correct this situation has remained a mirage - successive regimes have set up more than ten agencies including Standards Organization of Nigeria, (SON), National Food and Drug Administration Commission (NAFDAC), Raw Materials Research & Development Council (RMRDC), Nigeria Export Promotion Council (NEPC), Nigeria Export-Import Bank (NEXIM), Bank of Industry (BoI), etc, to support non-oil exports. However, more than two decades later, there are no signs of co-ordination between the regulators and stakeholders.

Committees have been set up to proffer recommendations and solutions to this anomaly, most notably, the Oronsaye committee, but the reports from these committees remained unattended.

Despite numerous forms of support and assistance from the government and various incentives for exporters and efforts by donor agencies, our share of international trade is still below expectation. The business environment continues to be tough because the nation’s policies are more focused on imports.

Additionally, Nigerians are more attracted to imports as it presents lesser risk and the support structures for export are almost non-existent. Independent studies show that the export side is still very weak and this is not unconnected to the incentives at home, lack of effective linkage between the stakeholders and the agencies at home and abroad promoting the business.

Other challenges include poor manpower in the non-oil sectors and dearth of information to support beginners across the country.

THE CURRENT SITUATION IN NIGERIA

Before we move on to addressing the non-oil exports deficit, it is important to clearly spell out what export is all about. Firstly, let me clarify that the export business is not an extension of the usual local sales as most managing directors or managers are wont to think. In that context, there is a very wide information gap in this nation which needs urgent addressing.

In my consulting work in Nigeria, I’ve come across bank managers who could not differentiate import documents from export documentation, papers or processes. One bank manager in particular, believed that Form M is the same as the NXP Form. When asked what an L/C was, in his words, “If you bring L/C, we will use it to process loans for you”. A major problem in Nigeria is information or more precisely, the dearth of it – the institutions which are supposed to develop human capacity, to train people to take advantage of the opportunities in international trade and business either are non-existent or too few to make a real impact across the nation.

SO, WHAT IS EXPORT?

The sale of home-made goods and services which could be either produce, raw materials, spare parts, semi-finished or finished goods or consulting services from your home base into foreign markets resulting in the in-flow of money – called export proceeds – is what is known as exporting.

Exporting, as I’ve already mentioned at the start of this article, is one half of what is known as international trading. The problem with Nigeria is that too much focus has been on developing structures to support the other half (importing) at the expense of exporting.

IN NIGERIA, BARRIERS TO BE ADDRESSED

In export, it is important to note that there are rules and issues an exporter must pay attention to including but not limited to the rules of origin, payments in an agreed currency, distance, language, INCOTERMS, Letter of Credit (L/C) with validity dates, Country of origin, mode of transport etc.

All too often, we blame our export deficits on external factors but it is important to address the barriers to exports in Nigeria, as well as our own inability to develop sustainable routes to foreign markets over the decades.

The reasons for the country’s deficits in non-oil exports can essentially be summarized under three sub-headings: (i) emphasis on produce trade, (ii) poor educational support and (iii) poor co-ordination between government agencies.

Over the years and through to today, institutional efforts to increase non-oil exports from Nigeria has continued to emphasize exports of primary commodities (raw materials, unprocessed agricultural produce, unprocessed crude oil, etc) and little to no emphasis on adding value to these produce before exports.

On the part of academic institutions, there is a significant disconnect between what these universities pass of as agricultural education and what is obtainable in the real world. With over 200 institutions of higher learning in the country (universities, polytechnics, colleges of  education, etc), very little investment in research & development (R/D) and the linkages to industry and innovation are missing. The need to upgrade the curriculum to reflect current trends and market demands cannot be overstated.

On the part of government - ministries, departments and agencies (MDAs) – are working at cross-purposes with too much emphasis on revenue generation as an indicator of success. Sadly, most of the revenue targets focus on imports and too little on exports.

Ambassadors are not educated to act as effective promoters of Nigerian products and the government does very little to create linkages between the Nigerian producers and Nigerians in diaspora who ought to play the role of  marketing managers of “made in Nigeria” goods like the “China-town” concept across the country.

These are some of the barriers to the growth of non-oil exports in Nigeria and these are the principal reasons why Nigeria is still unable to take advantage of trade agreements like AGOA, ECOWAS, D8, WTO among others. These are self-inflicted, home-grown trade barriers and without addressing these issues, we will continue to perform poorly in exports, regardless of the number of free trade agreements we sign.

TRADE DEFICITS EVEN WITH OUR NEIGHBORS

Perhaps, the worst of this situation is that even with our closest neighbors, we manage to perform poorly in trade. Within the ECOWAS sub-region, Nigeria as the largest economy continues to struggle against the likes of Cote d’Ivoire and Benin. Nigeria’s neighbors are cashing in on our free import economy to push goods and contra-bands into the country.

To address this situation, Nigeria must first look to become a global player and revisit some of the past agreements on the free movement of goods and services in the sub-region.

Secondly, there is a need to invest massively on research and development, and strategic use of ambassadors to promote Nigerian products. Finally, there is the need for a strong organized private sector (OPS). 

Other measures include putting in place measures to combat environmental threats and respond to various business prospects. Signing agreements and organizing seminars cannot be a priority at this moment in time for this country.

There also has to be a drive to increase the effectiveness and relevance of the managerial cadres in this country with respect to exports – business managers in Nigeria must develop their knowledge and understanding of exports.

This article is culled from the Export Brief magazine Vol. 1, No. 3. The full article is available in the print version