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Sunday, March 6, 2016

Appraising non-oil commodities’ foreign exchange potential for the nation’s economy


Appraising non-oil commodities’ foreign exchange potential for the nation’s economy

Appraising non-oil commodities’ foreign exchange potential for the nation’s economy

The dwindling price of crude oil, a major revenue earner for Nigeria in the international market has adversely affected the nation’s economy in such a way that compelled the President Buhari-led administration to specifically unveiled policy measures targeted at bridging revenue gap occasioned by the slumping oil prices by exploring non-oil sector’s opportunities. In this analysis, Udo Onyeka, takes a critical look at what promises commodities such as cocoa, palm oil and solid minerals hold for the future of the economy in terms of their revenue generation potential, if their potential is fully explored.
Many stakeholders and Nigerians in general have received the plan of the Federal Government to focus on non oil commodities with joy since it portends to be a step in the right direction in view of the crashing oil prices in the international oil market and the associated risks to Nigeria’s macroeconomic stability. Like many other commodity exporting countries faced with shrinking foreign exchange earnings over the months, Nigeria’s search for alternative investments and revenue generation opportunities to close the fiscal gap associated with the current crash of oil prices is well justified.
To frontally tackle the fiscal challenges, the Nigerian government is adopting new policy measures aimed at developing key non-oil sector areas, particularly commodity agriculture and solid minerals, to mitigate the negative effects of the global oil market whirlwinds on the domestic economy. For instance, a report by a commission set up by the Federal Government to ascertain possible alternatives to oil and gas had listed agriculture, solid minerals and manufacturing as alternatives.
President Buhari since assumption of office in 2015, has consistently harped on the imperative of opening the non-oil sector for development by attracting more investments to the nation’s agricultural and mining sectors. According to him, the problem facing the country was due to the fact that the nation’s manufacturing, agricultural and mining sectors were abandoned by the past administrations. “We are doing our utmost best to encourage diversification into these sectors of the economy, which can employ a lot of people” Business Courage gathered that government was already thinking of huge investments into agriculture, solid minerals, among other sectors.
Noting that diversification is the only key to stem the tide of possible economic woes, many experts have said the early Nigeria goes back to agriculture as a major source of revenue generation the better for the country. According to an economic analyst, Dr Eugene Ekeh unless urgent steps are taken by the states and Federal Government to reverse the growing economic trend, Nigeria might be heading for serious recession, hence oil, the major foreign exchange earnings is gradually dwindling. Speaking on the growing need for diver¬sifi cation of the economy as only viable option to achieving fiscal efficiency and macroeconomic stability in the country, a university don, Professor Chineyere Okunna, who spoke during a programme of the United Nations Development Programme in Ibadan, Oyo state said unless Nigeria di¬versifi es to other viable sectors, the “We have been depending on oil alone for too long.
We must as a matter of urgency, veer into nonoil sectors of the economy. Solid mineral is there, the industrial sector. We must try to make those ar¬eas attractive while making oil sector unat¬tractive. “Long before now, Nigeria was doing very well in agriculture, we had boom¬ing palm oil sector, we had cocoa, we had groundnut pyramid and they were servic¬ing the nation’s economy, but suddenly, we left those areas and concentrated on oil, which is presenting affecting us. We have no choice now, but to diversify to solid min¬erals as well as other sectors of the nation’s economy”, Okunna said. According to her, beyond that real estate also has the potential to increase the rev¬enue base of the country over time, saying return on investments is very encouraging. While urging the Federal Government to quickly diversify to other sectors, she noted that a country with fast growing population like Nigeria could earn extraordinary income from non-oil sector.
Corroborating Okunna, another academic and Profes¬sor of Economics, Professor Sarah Anyanwu, supported the urgent move to diversify the Nation’s economy as a strategic option of tackling the current fi scal problems of the government. According to her, the nation’s economic activities have not been optimal due to the dwindling revenue accruals from crude oil export, pointing out that the need to diversify the economy is more imperative now than ever before. Anyanwu, who is the Head of Economics Department at University of Abuja, specifi ¬cally listed agriculture, mining, functional tourist centres and manufacturing sectors as sources that can be explored to create job op¬portunities and reduce poverty. “We need to come back to reality and not cast all our eggs in one basket. This problem has multiplier effects, as the poverty level is rising, standard of living generally is falling and unemployment is on the increase. “The productivity of workers who have not been paid will fall.
So we need to diversify our economy in order to solve the problem at hand,’’ the university don said. President, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, Alhaji Mohammed Abubakar, said that diversifying the economy was the pathway to achieving economic stability and would help the nation to realise its longterm socio-economic development goals. He however said that an improved collaboration between the public and private sectors and government’s sincerity in facilitating a private sector-led economy, would enable the country to maximally utilise its abundant resources. “Government should provide a climate for a profi table and fl ourishing business enterprise. In this regard, the fi rst and most critical area of attention is to intensify its transformation agenda on infrastructure. With this, cost of production will reduce, unit prices will reduce and our goods will be able to compete internationally,” he said. He added that in boosting non-oil export, the government needed to address other areas that have raise the cost of doing business.
These, he said, included excessive tax, high cost of compliance with government regulations and extortion and harassment of companies by regulatory agencies. Business Courage gathered that the Federal Government has already commenced plans to export commodities to France, United Kingdom, Netherlands and a host of other countries in a bid to diversify the economy. The Director-General, Nigerian Export Promotion Council, Mr. Olusegun Awolowo, who made the disclosure in an exclusive interview with our correspondent, said a number of products had been added to the nation’s export commodity list. He said some of the new products, which were added to the list last year, included soya meal, vegetable tanning extracts, brown beans, bill boards and slug catcher. Others are carbon dioxide gas, aluminum sulphate, palm juice, barite, Heineken beer and strawberry fi lling. Awolowo said that apart from France, Netherlands and the United Kingdom, other primary markets for the new products were Guinea, South Korea, Benin Republic, Ghana, Democratic Republic of Congo and Greece.
The NEPC had in 2013 introduced new products including educational books, robusta coffee, double-folded dust sheets, ice making machines, mica muscovite, leather furniture, highdensity polyethylene, aluminium ingots, reduced iron and iron pellets, garments and yam to the export list. The NEPC director-general noted that the country’s exports were no longer limited to the traditional markets of Europe, especially the UK, adding that there was a steady growth in non-oil exports. He said, “Diversifi cation through non-oil exports remains the new and only avenue for developing the economy and achieving prosperity as oil has become unreliable. It is in pursuit of this goal that the Federal Government has now marked out 13 National Strategic Export Products that are meant to replace oil and shore up the country’s foreign exchange earnings. “This is part of the spirited moves by the government towards reviving the dwindling national economy with emphasis on rapid growth of the nonoil sector for exports.
In this regards, 13 National Strategic Export Products in three categories are now in focus. These include agro industrial products such as palm oil, cocoa, cashew, sugar and rice; mining related products such as cement, iron ore and metals, auto parts and cars, aluminium and oil and gas; and industrial products including petroleum products, fertilizer and urea, petrochemical and methanol.” According to Awolowo, the country needs to join the league of other successful nations but with investment in the development of the non-oil sector. “The upswing in the United Arab Emirates’ economy and its transformation has been made possible through the investment of revenues derived from oil to other sectors of the economy,” he said. He listed some of activities that were critical to the successful diversifi cation of the economy as macro-economic stability, management of supply constraints, provision of adequate pre and post-export incentive, and the revitalisation of export processing zones which are already at various stages of implementation.
According to experts while Nigeria is one of the world’s largest producers of palm oil, it still remains a net importer of palm oil owing to the inability to produce enough palm oil to meet local demand. This offers the opportunity for increasing productivity. They said there is a need to share information on the sector, to refocus attention on the potential for palm oil production and highlight the potential for boosting the Nigerian economy by concentrating on the enterprise dynamics. Improving the local capacity of palm oil production in Nigeria would not only impact positively on food security and local economy, it also portends huge prospects for future exports that will advance Nigeria’s economy. A special assistant on Media and Strategy to former Minister of Agriculture and Rural Development, Dr. Olukayode Oyeleye said the prospects for job creation is high as palm oil production remains a major vocation in many communities, involving hundreds of thousands of poor producers and tens of thousands of poor processors.
“The oil palm industry represents one of the most effective avenues for poverty alleviation, food security, ensuring economic stability in Nigeria and providing income for many farmers and their dependants. It also has the prospects of providing employment for millions of unskilled and semi-skilled people. This means that an effi cient and strong palm oil sector in Nigeria will enable the poor to be part of the solution to poverty challenge through provision of employment and means of livelihood. “The reference to oil palm as a crop of multiple value underscores its economic importance. There are numerous ways in which oil palm production could be deployed to boost employment opportunities for the people. Middle men (traders) appeared to have benefi tted more from the palm oil business in Nigeria due to ineffi ciencies resulting from weak value chain coordination.
As demonstrated in other economies, with proper focus on production of commodities of large scale commercial values, improvement in the production of oil palm can effectively mitigate the poverty level in Nigeria where there has been limited transformation and uses of the primary or secondary products from oil palm for either food or non-food applications.”, he said. According to him in developed economies, however, palm oil is used in the manufacturing of many foodstuffs including many industrial applications. Agriculturists trace cocoa’s origin to the Aztec civilization in South America in the 14th and 15th centuries, though over the ages, its cultivation had spread to many parts of the globe, including Africa. In West Africa, Nigeria had ranked amongst the leading cocoa producers in the sub-region. In the 1960s in particular, long before the oil boom years of the 1970s, cocoa was a major export crop for the nation as it fetched a sizeable percentage of the nation’s foreign exchange earnings

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