The challenges of non-oil export

Pipeline

By Jide Ayobolu

The Nigerian Export Promotion Council says an assessment of the impact of coronavirus on agricultural exports shows that the pandemic will lead to a fall in export of cocoa beans, cashew nuts and sesame seeds this year. The Executive Director and Chief Executive Officer, NEPC, Mr Olusegun Awolowo, while speaking at a webinar themed ‘Non-oil exports: Disrupting Nigeria’s growth cycle’ recently, noted that based on commodity prices and market trends, fall in sesame seed export would be minimal. According to him, the crash in oil prices as a result of the pandemic is an indication that a mono-product economy is not sustainable and that there is an urgent need to develop non-oil export. “We cannot rely on crude oil export as both our major source of government revenue and foreign exchange generation. We must diversify our export base,” Awolowo said.

He identified the export of services as a rapidly growing export industry that could generate more revenue for the government. To ease the burden of non-oil export during the coronavirus pandemic, Awolowo suggested realigning the exporters’ foreign exchange window with the prevailing forex rate. He called on the government to ensure special clearance for non-oil export at the ports; acceleration of EEG claims; to waive port levies and offer tax holiday for non-oil exporters, among other incentives.

The Executive Secretary, Nigerian Investment Promotion Council, Ms Yewande Sadiku, called on relevant government agencies to provide the necessary bottlenecks for some sectors that had been made profitable and attractive by the pandemic. She said financial and tax incentives would be preferred by investors in these sectors and where the government could not provide tax incentives, investor care incentives could be explored. On her part, the Managing Director, Nigerian Ports Authority, Hadiza Bala-Usman, stated that to reduce time spent by exporters at the ports, exporters should commence and conclude the documentation process before their cargo reached the ports. According to her, the NPA is working with the Lagos and Ogun state governments on the provision of dedicated parks for trucks to ease congestion on the roads leading to the ports.

President Muhammadu Buhari has already diversified the Nigerian economy, Minister of Information and Culture, Lai Mohammed, has claimed. He pointed to Nigeria’s exiting of recession as proof that some other critical sectors like agriculture and mining were now contributing significantly to the economic base of the nation. Mohammed claimed Nigeria exited recession, not because of the rise of crude price in the international market, but the contribution of the mining and the agriculture sectors to the economy as managed by the Buhari administration. The minister said this recently when he received a delegation of permanent secretaries led by Winfred Oyo-Ita, Head of Service of the Federation. “Frankly speaking we cannot repair the damage that has been done in over 16 years in three years. “We have diversified the economy, we went out of recession, not because of the increase in the price of crude but because of agriculture and mining, these are things you need to share regularly if not they will accuse you because you are the government,” Mohammed said.

The Buhari led government has been working round the clock to ensure that the suffering of Nigerians is assuaged and ameliorated, by laying a solid foundation for a greater and better tomorrow. The campaign of calumny against the government of President Buhari has been largely predicated on ethnicity and tribal particularism as well as politics of vendetta, especially by the opposition party that roundly defeated at the polls after many years of misrule, bad governance and monumental fraud. The other point which cannot be waved aside is the fact that one of the cardinal policies of this administration is the war against corruption, and since this government came on board, never like before, it has consistently waged a relentless war against graft in the country; and the high and mighty are not spared; now surreptitiously, corruption is fighting back in a very dirty and desperate manner. It is germane to observe and rightly so that, since the present administration came on board under the leadership and watch of President Muhammadu Buhari, the president and his team has worked relentlessly to bail out the economy from the recession in which it is presently enmeshed, an economic situation which is self-inflicted as a result of bad governance, mismanagement, corruption and apparent lack of accountability of past leaders in the country. They dissipated the scarce financial resources of the country on conspicuous consumption as well as hedonistic and epicurean lifestyles; and refused to save for the raining day.

It is this multifaceted errors of the past that the present government is trying to put right, unfortunately, the present government has been severally criticized by those who created the economic challenges in the first place, particularly members of the past administration, who mercilessly plunder and pillage the resources of the country on selfish individual desires, thereby neglecting vast majority of the people. As the government is working hard to resolve the fundamental economic contradictions with the economy, people who have illegitimately enriched themselves by pilfering the national treasury and are presently undergoing trials, are clandestinely sponsoring violence against the Nigerian state and painting the country black in both local and international media.

This is contrary to some spurious and erroneous claims in some quarters that this government is idle and doing nothing about the socio-economic miasma in which the country is presently enmeshed, unfortunately, this unfounded and baseless claim is gaining currency because of the hardship Nigerians are presently going through. Those who created these problems are now behaving like the much-needed messiah to rescue the country from this crisis, but what did they do for the country and the people in the last 16 years? The gang-up and conspiracy against the Buhari led government are because of the anti-corruption crusade of the present administration, hence, their inability to make cheap money and fleece the country of funds needed for development. Undoubtedly, this government is working hard and even world leaders know this fact, hence the need for all Nigerians to rally round the government and move the country forward; and stop the issue of violence, blackmail, vendetta, corruption and anything that can inhibit growth and development in the polity.

Recalled that, the Federal Government (FG) is collaborating with the Governors of cocoa-producing states and other stakeholders to enable Nigeria benefits from the projected $67.22 billion global cocoa market. This was announced by a senior official of the Nigerian Export Promotion Council (NEPC), the agency responsible for developing and promoting non-oil exports. The NEPC official, said, “I am happy to inform you and the public that President Muhammadu Buhari-led administration has continues to drive the diversification process. Also, efforts to reposition the country’s cocoa export to increase production and meet the requisite internationally accepted standards for export into the European Union and the US are gradually yielding results. At present, cocoa is the leading major agricultural export of our nation. “The commodity is one of the 13 National Strategic Export Products (NSEP) of the Federal Government and very prominent in the NEPC’s Zero Oil Plan initiative. It was integrated into Government’s Economic Recovery and Growth Plan (ERGP), 2017-2020 because the government is serious with its diversification agenda. “But unless the state government supports the efforts of the Federal Government, the country may lose its global ranking, due to poor production practices and non-compliance to Importing countries’ requirements, among others.”

As stated by the NEPC official, the global cocoa market size, which was $43.13 billion in 2018, is expected to be worth $67.22 billion in the next five years. This is due to the high demand from the chocolate confectionery sector which is also expected to rise in the coming years. Therefore, when the demand for cocoa and chocolate escalates, the chocolate and cocoa market revenue would also see growth. This is why the government and stakeholders must work hand in hand in the industry. It was reported when AFEX Commodities Exchange disclosed in its latest report that cocoa was one of the leading non-oil export products alongside Sesame and cashew. This was by the end of the third quarter of 2019. Cocoa had grossed a total of $30.03 million with Sesame and Cashew grossing $41.19 million and $13.75 million each.

Besides, Nigeria earned over N103 billion from cocoa commodity export in the year 2018. This was disclosed by Mr. Segun Awolowo, the Chief Executive Officer of the Nigerian Export Promotion Council (NEPC). While speaking recently at a capacity building programme on cocoa grading and regulations in Lagos, Mr. Segun Awolowo reportedly disclosed that the country earned $338.17 million or N103.8 billion from Cocoa commodity export in 2018. Cocoa, which is one of Nigeria’s leading agricultural exports and the second highest foreign exchange earner next to crude oil production capacity, lurks around 245 metric tons.

According to the Chief Executive Officer of NEPC, “the low levels of production is a result of many factors including poor grading and quality-related issues.” While disclosing the efforts made by NEPC to boost cocoa production, he said, “We have donated seedlings and agro-inputs including sprayers, agro-chemicals as well as organizing capacity building on integrated pest management for our cocoa farmers and processors. Workshops for cocoa farmers and stakeholders were held in Akure, Ondo State; Oshogbo, Osun State, Umuahia, Abia State, Uyo, Akwa Ibom State and Ikom, Cross River State.”

In a bid to boost revenue from cocoa exports, the Nigerian government is planning to team up with Cameroon to influence international cocoa prices. Both countries currently account for 10% of global cocoa production. Mr Sayina Riman, President of the Cocoa Association of Nigeria, recently stated that Nigeria and Cameroon were looking to see if they could become a regional bloc and see if buyers who knew the quality of both countries cocoa were willing to give better prices differentials. However, all of these are still informal talks between the two countries and a bilateral approach would be taken to establish it formally. According to the foreign trade report recently released by the National Bureau of Statistics (NBS), as at Q2 2019, Nigeria’s  cocoa commodity export was to the tune of N18 billion, as against N14.2 billion the recorded in Q2 2018. This represents a 29.65% increase in the value of cocoa commodity exports year-on-year. The breakdown of cocoa exports in the NBS report showed that Nigeria exports different types of Cocoa products. Specifically, Nigeria’s cocoa exports include fermented cocoa beans, natural cocoa butter, other quality cocoa butter, and other quality raw cocoa beans.

Cocoa was a major agricultural export crop and a top foreign exchange earner in the 1950s and 60s. Before the discovery of crude oil in commercial quantities in the 1970s, Nigeria was the world’s second-largest producer of cocoa. Average cocoa production declined from 420,000 tonnes in the ’60s to 170,000 tonnes in 1999. Production climbed to 389,272 tonnes between 2000 and 2010 but fell back to 192,000 tonnes in 2015 and 2016. After dropping to fourth place, Nigeria is now the sixth-largest producer. Cocoa is a household cash crop and key agriculture produce in Nigeria. It is used for local consumption and is also exported which generates foreign exchange for the country. According to statistics, Nigeria produced 367,000 tonnes of Cocoa in 2017. The export data from 2017 shows that Nigeria exported 161,285.72 metric tonnes of agricultural produce. Cocoa export accounted for 33,294 out of this figure. Given these figures, Nigeria is yet to tap into the potential of the cocoa industry in the continent when compared to Cote d’ Ivoire and Ghana. This makes Nigeria the third producer of cocoa beans on the continent and fourth behind Indonesia in the world.

Cocoa farming in Nigeria is predominantly carried out by small-scale farmers who have outdated skills and limited access to finance and technology. Cocoa is grown in the southern region due to the favourable soil and climate condition. The top growing states Ondo, Ogun, Osun, Oyo and Ekiti account for about 60% of the cocoa production and makeup at least 30% of the total cocoa export in Nigeria. Ondo is rated the largest cocoa producing state with an output capacity of about 77,000 tons per annum.

Other producing states include Cross River, Kwara, Akwa Ibom, Ebonyi, Abia, Rivers, and Adamawa. After oil and gas exports, the largest revenue earners, cocoa beans, are the second most exported commodity. However, cocoa merely contributed 0.05% to GDP in 2016 from 0.3% in 2010. The cocoa industry has significant potential but is still underutilized. For instance, in the South-West and South-South region, thousands of acres of fertile lands suitable for cocoa cultivation are currently idle and wasting away.

In Nigeria, about 80% of cocoa produced is exported as cocoa beans while the other 20% is processed into powder, butter, cake and liquor before being exported. Nigeria is yet to fully capitalize on cocoa production, as most of the beans are sold unprocessed. There are eight cocoa processing factories in Nigeria with a combined installed capacity of 150,000 metric tons. Only four of the eight are functional with a combined total volume of 50,000 metric tons per annum.

These processing companies are often faced with challenges such as insufficient capital, irregular power supply, high cost of cocoa beans, and ineffective and unfavourable government policies.

The industry is reducing in rank in the world market due to poor production practices and non-compliance to importing countries’ specification. There is also the need to address low quality and poor packaging. This should be done by the export promotion council. There is a need to increase the grinding and consumption of cocoa by-products in the country. We also need a private sector driven cocoa value chain, a regulatory institution that will address many distortions along the value chain for the benefit of the local industry. There is also the need for education of many investors on the investment opportunities along the value chain for the local industry and to bring more farmers into both cocoa farming and value-added cocoa processing.

Nigeria could perhaps take a closer look at the success of Ivory Coast, Ghana, and others, and consider emulating and hopefully repeating their success in the processing of cocoa beans into chocolate and other products to earn more money. The Government has taken note of this and, along with the Cocoa Association of Nigeria (CAN), has set out a 10-year action plan to boost the agriculture sector. The Buhari administration wants to revive agriculture even more so as a result of the massive drop in crude oil prices, which has negated the country’s economy. “We have made laudable recommendations that can change the cocoa story in Nigeria, we hope those recommendations will be faithfully implemented in the interests of the industry.” CAN President Sayina Riman. It must be noted that, the major challenges facing the cocoa industry, as experts synthesized, include rapid population growth in Nigeria, leading to large-scale conversion of agricultural land to non-agricultural uses; low productivity emanating from old and low-yielding cocoa varieties/farms; inadequate information on cocoa farm assets; small-holding production of farmers; low income and limited level of diversification; weak and poorly coordinated organizations of farmers; inadequate support services; land tenure system which impairs the transfer of farm ownership; increasing demand for certification and traceability in the global cocoa market; need to improve research and development infrastructure and low capacity utilization among cocoa processors.

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