1 week Ago By Guardian Nigeria
For several decades, Nigeria has struggled with raw material dependency, exporting raw materials while importing finished products at exorbitant costs, which has stifled industrialisation and weakened the real sector, TOBI AWODIPE reports. Over the years, Nigeria has depended on proceeds from crude oil to the detriment of agricultural and other mineral products, which were once the cornerstone of the economy. As against the oil and gas sector, which generates few direct employment opportunities, the agricultural sector has the potential to generate massive employment on a sustainable basis and stimulate the manufacturing sector as it provides the much-needed raw materials.
Between 1960 and 1966, the agricultural sector was a dominant force in Nigeria’s economy, contributing significantly to accounting for over 60 per cent and serving as a major source of exports and food production. The sector was so dominant that it contributed over 60 per cent to the nation’s Gross Domestic Product (GDP). Nigeria was a major exporter of agricultural products, particularly groundnut, cocoa, and palm produce, accounting for many of the country’s exports.
However, while agriculture was a major contributor to the economy in the 1960s, its share of the GDP began to decline in the following decades, partly due to the rise of the oil sector. This shift has now necessitated the urgent need for the country to explore other sources of income as the proceeds from crude oil suffered from volatility, among other factors. Agricultural products and natural mineral resources became the go-to as the country desperately sought to revive its once-vibrant agricultural sector.
Nigeria needs to go back to the agricultural sector, and there is no doubt that it must transcend from raw material exporter to the producer of finished goods to compete in the modern and sophisticated global arena. Value addition as new gold for Nigeria Experts believe exporting raw materials stifles industrialisation, limits job creation and weakens national growth. They pointed out that adding value to raw materials increases export earnings, strengthens local industries and reduces dependence on volatile commodity markets.
Data sourced from the Raw Materials Research and Development Council (RMRDC) shows that in the last decade, Nigeria improved its raw material value addition from 15.6 per cent in 2013 to 25.2 per cent in 2023.
However, this growth remains modest compared to its peers. South Africa grew from 63.2 per cent to 75.
6 per cent, Egypt from 51.1 per cent to 64.8 per cent and Brazil from 83.
4 per cent to 97.6 per cent within the same period. On average, Nigeria’s value addition over the decade was 20.
43 per cent, far below South Africa’s 69.4 per cent, Egypt’s 57.79 per cent and Brazil’s 89.
93 per cent. South Africa and Egypt, which have invested more in processing industries, enjoy higher industrial output, reflecting their ability to retain more value within their economies. In contrast, Nigeria’s weak industrial base and over-reliance on raw material exports leave the country vulnerable to external markets.
The low levels of value addition force Nigeria to re-import finished products at higher prices, limiting its industrial growth and deepening economic challenges. Without solid domestic industries, Nigeria lags far behind its peers in South Africa, which maintains a robust index above 0.6, showcasing the benefits of value-added production.
This comparison highlights the need for Nigeria to shift towards processing its raw materials locally to foster sustainable industrialisation. Furthermore, Nigeria’s total imports between April 2023 and June 2024 reveal that manufactured goods remain dominant with N27.3 trillion, far surpassing imports of raw materials (N5.
4 trillion), oil/energy (N16.7 trillion), agriculture (N3.6 trillion) and solid minerals (N314 billion).
Again, Nigeria’s poor performance in secondary raw material utilisation shows that the country is missing critical opportunities to advance sustainable development. In 2023, Nigeria’s secondary raw material utilisation stood at 4.8 per cent, a far cry behind South Africa (26.
2 per cent), Egypt (21 per cent) and Brazil (47.6 per cent), highlighting a significant gap in Nigeria’s ability to recycle, reuse and process waste materials into new products – activities that could complement its industrial efforts while promoting environmental sustainability. Speaking, the Director-General of the African Centre for Supply Chain and President of the Association of Outsourcing Professionals (AOPN), Dr Madu Obiora, said the major problem Nigeria and the manufacturing sector value chain are experiencing is a lack of competitiveness.
“The problem is the country itself, which trickles into every sector. Manufacturers cannot get light to produce. This is why Michelin, P & G, Sanofi, GSK and others left the country.
The environment is uncompetitive, and if we can fix this, I don’t need to tell you what will happen. Every time we complain to those in authority, they claim to be fixing infrastructure, but have they analysed properly the infrastructure that will allow the manufacturing sector to thrive and specifically invested in that direction?” he asked. He added that as long as logistics infrastructure remains decayed, local manufacturing would remain the way it is and struggle to add value.
“I do not know how those who are manufacturing are surviving in this country. Even if you do not want to go into full-time manufacturing and just want to do semi-processing of goods, you will suffer every single problem manufacturers are facing. Logistics cost is extremely draining, as is the cost of simply staying afloat.
The manufacturers that look like they are still in business are barely hanging on and have shut down some aspects of production or shifted to other countries to produce and ship back into Nigeria after production,” he added. He said fixing competitiveness in the real sector will attract people to add value to produce. “When we ship raw products out like that without any addition, we ship out local jobs, innovation, and many other numerous things.
Look at Nigeria’s position in the logistics performance index, we are currently ranked 88 out of 141 countries; this is an indicator of the sector’s performance as a whole. After seeing all these, who in their right mind would want to commit their resources and efforts into this sector?” he queried. In 1990, a loan came from the Africa Development Bank (ADB) called the ‘ADB Export Stimulation Loan’, which birthed about 41 export processing facilities.
Obiora said barely a decade later, they had all fizzled out into oblivion due to many issues. His words: “We all know adding value to our goods is the only way to grow the GDP and earn FX but we must create the environment for that value to be added. The only thing that cannot be exported raw by law now, is palm kernel; one can export palm kernel cake and oil but not palm kernel itself.
Some years back, raw cocoa export was banned. However, nobody told them to reverse it because we all quickly realised there were no facilities to process the cocoa for domestic use or export.” He said Nigeria should focus on diversification by exploring services export rather than commodities export, which it is currently struggling with.
“We have a lot of advantages in this area; we are English-speaking with a 60 per cent youth population and a favourable time zone. Until we fix our commodities non-oil export, let us develop the services sector which globally, is growing even faster than commodities. Nigeria’s GDP is tilting towards services already but sadly, nobody knows how much is being exported.
” He regretted that the concerned authorities who should take action and spearhead this are not bothered. “Many people operating in this sector don’t even want government interference because they will simply be taxed with no value added to what they do. There are records for produce export but none for services export, so we are not capturing any data; we have no idea where we stand.
“Looking at some of the raw commodities we export, at some periods during the season, their local prices are higher than international market prices, who then do we want to sell to? Do you want to sell higher than international market prices? If we continue like this, I don’t know where we will end up,” he said. Macroeconomist, business and policy analyst, Dr Vincent Nwani, said data has shown that exporting any product, either agricultural product or solid minerals in its raw form, the maximum value that can be gotten is just about five per cent of the total value. “However, when value is added in the processing, distribution and other services attached to that product, you can command the right market value.
All the things we export, be it rubber, cashew, cocoa and solid minerals, we are getting just about five per cent of their value. “Sadly, the few top exporters in Nigeria now are foreigners. Olam, one of the top non-oil exporters in Nigeria today, is an Indian-owned company.
The government knows what the problems are but is not ready to provide solutions to them. Pointing out that solutions lie in the hands of the government and its agencies, he said until the government becomes serious about removing the obstacles that hinder value addition that can boost non-oil export, private efforts would continue to be in vain. “Our youths are making skits online and struggling to become content creators because they can profit from it.
If there was hope and success in processing and manufacturing, people would easily gravitate there. Wherever there is money and investment safety, people would naturally go there. “We cannot compete with them, and if we dare try, our quality might be lower and pricing higher; this is a painful situation we find ourselves in.
We do not even produce enough to consume locally, which is less of an export for FX. Nigeria is a large market, and if we can produce what we eat, wear, use, and consume by even 50 per cent, that would be a major market for local manufacturers.” He expressed regret that we cannot add value to the few goods being exported due to the inherent challenges suffocating the sector, which he said has become even more worrisome.
Lamenting the worsening business environment, he said it has exacerbated insecurity, macroeconomic challenges, exchange rate and even power. “These unending problems kill the desire to add value to produce or manufacture goods for sale. Everyone prefers to import and sell now because it has less stress.
However, we cannot build an economy on imports because there would be no jobs for people to do while crime and insecurity will worsen,” he said. He said that because the government is not making money as it should from non-oil exports, it would continue to borrow and drown further into debt. “It is a vicious cycle of poverty at the end of the day.
” Adding that post-harvest losses will continue to worsen, he said it ties strongly into the problem as even the little being produced has nowhere to go. He said if industries are capable of off-taking what is being produced and demand is available, they will go into the farms themselves to buy up produce quickly. He said: “How many can people buy to consume raw like that? This is even outside the raging insecurity farmers have been complaining about for years, whereby before they harvest, cows and terrorists would have entered their farms and destroyed what is there.
” Pointing out that there is barely any industry left to feed with these raw materials, he said most of the things produced in the farms are not of industry standard..
