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  • WEDF 
  • Discussion Brief for the Export Strategy-Maker

    THE TRADE SUPPORT NETWORK IN NIGERIA: DOES IT WORK?

    Olufemi Boyede, Chief Executive Officer, Koinonia Ventures Limited, Lagos, Nigeria

    INTRODUCTION 

    Nigeria became independent in 1960 and attained the status of a Republic in 1963. The major export commodity today is crude oil, for which the country is rated as the world’s sixth largest producer. Though Nigeria has the capacity to develop other products for the export market, this capacity and potential is left untapped. So the country’s non-oil export performance remains low and unimpressive. Non-oil exports actually contribute less than three percent of the annual total revenue of Nigeria. Available evidence of possibilities however denotes otherwise. Nigeria’s performance in international trade is a sad story of significant under-achievement. 

    Current Trade Support Institutions in Nigeria and their Statutory Roles 

    Nigerian Export Promotion Council (NEPC) 

    This is the central agency created by the Federal Government of Nigeria to promote the development of non-oil exports in the country. The council has statutory responsibilities for advising the Government on new and viable export developmental policies, evolving new incentives to spur increased export activity. Its task is to spearhead the participation of Nigerian companies in overseas international trade fairs, organize solo exhibitions of made-in-Nigerian products in selected overseas markets; provide an efficient trade information network that would effectively link Nigerian exporters with overseas markets, and carry out periodic supply-base studies of Nigeria’s export commodities and potential, etc. Under the decree establishing a new autonomy and dynamic orientation for the Nigerian Export Promotion Council, 18 distinct statutory responsibilities were actually assigned to the agency. Today, more than 15 years after, the council’s impact is hardly felt by up the nation’s non-oil export industry. More importantly, up to five of the "established" export incentives are not working. Various reasons can be found for this. 

    Nigerian Export Processing Zones Authority 

    The Nigerian Export Processing Zones Authority was created a few years after the new Nigerian Export Promotion Council took off. NEPZA was, in fact, one of the brilliant suggestions of the NEPC as an innovative global strategy to simplify and reduce the cost of export manufacture. Government spent enormous sums in carrying out a preliminary study of Export Processing Zones in Malaysia, Taiwan and Kenya. Over the past ten years or so, Government has attempted to build an Export Processing Zone in Calabar, a South Eastern sea port. More than eight Ministers of Commerce and fabulous budgetary expenditures later, the zone is yet to be commissioned. As an institution, it is left to be seen how it will support trade from Nigeria, even though it has received a new nomenclature of Free Trade Zone. 

    Nigerian Investment Promotion Commission 

    Like NEPC, the Nigerian Investment Promotion Commission was set up to attract Foreign Direct Investment into Nigeria. Ordinarily, investment promotion should be inward, but when it is considered that the output of all meaningful investment, especially in the manufacturing sector, is export-oriented, the activities of the commission will indirectly impact on international trade. Unfortunately, the two organizations whose activities are supposed to complement each other see each other as rivals for the very stingily distributed Government subventions. 

    Nigerian Export-Import Bank 

    The bank was set up, ostensibly to provide easy access to export financing for potential manufacturing exporters and export merchants in Nigeria. Over the past few years, however, the bank has had to go looking for funds from elsewhere even to keep afloat. The maximum allocated to the bank, over the past five years has been about five hundred million Naira per annum, hardly adequate even as working capital support for a cocoa processing plant, of which Nigeria has more than 17. 

    Industrial Development Co-ordinating Committee 

    The committee was established by decree No.36 of 30th September, 1988, to administer business industry approvals. The general objective was to facilitate the approval process for investment in the country’s technological development and therefore improve international trade, by serving as a co-ordinating and approving centre, at the federal level, for all government approvals with respect to the establishment of new industries and business undertakings, and with respect to the operation of governmental schemes and policies aimed at promoting industrialization in the country. In order to facilitate its operation and make it a veritable "one-stop approval centre", its membership was made up of seven Ministers of related portfolios who were collectively charged with the responsibility for ensuring that all required approvals are granted within 60 days. Again, these responsibilities would seem to have been carried out only on paper. The non-performance of the committee, it is believed, might have led to the emergence of the Nigerian Investment Promotion Commission (see above), which is headed by an Executive Chairman from the Private Sector. 

    State Committees on Export Promotion 

    The Nigerian Export Promotion Council led to the creation of an export promotion committee for every State of the Federation including Abuja. It is however doubtful whether many of these have achieved any visible milestone achievements. 

    Association of Nigerian Exporters 

    A non-governmental organization that is supposed to provide trade information and advisory services to its members, the Association of Nigerian Exporters had been moribund for the past ten years or so until its resuscitation in the last seven months. 

    Manufacturers Association of Nigeria – Export Group 

    Conceived as a pressure group to fight for a better and more conducive environment for export manufacturing. The Group was once strong enough to provide inputs for Government’s policies on Export. Today, due to continual leadership tussles, it has lost its bite, and membership has waned. 

    Nigerian Association of Chambers of Commerce, Industries, Mines and Agriculture – Export Group: 

    Also supposed to provide export advisory services for its members. Membership is however very defective and needs export education. 

    Lagos Chamber of Commerce, Industries Mines and Agriculture, Non-oil Export Group 

    Conceived for the same services as above. 

    Department of Commodities and Export Trade, Federal Ministry of Commerce 

    Appears to have the same responsibilities as the Nigerian Export Promotion Council, except that the department is under the Ministry and therefore enjoys closer supervision and a preferential relationship with the Minister of Commerce, who is also the supervising Minister for the Export Promotion Council as well as the Nigerian Export Processing Zones Authority. 

    Some other bodies in the network: 

    • Export Commodities Co-ordinating Committee 
    • Nigerian Shippers Council 
    • Nigerian Institute of Freight Forwarders 
    • Nigerian Maritime Authority 
    • Nigerian Ports Authority 
    • Nigerian Customs Service 
    • National Association of Small Scale Industrialists 
    • Various bilateral Chambers; e.g. Nigerian-British Chamber of Commerce, Nigerian-French, Nigerian American, Nigerian-Portuguese, etc. Chambers of Commerce 
    • Bankers Committee 
    • Federal Ministry of Finance 
    • Senate Committee on Commerce 
    • House of Representatives Committee on Commerce 

    SOME INDIRECT TRADE SUPPORT INSTITUTIONS 

    Nigerian Telecommunications 

    Very important in the provision of telecommunication services. 

    National Electric Power PLC 

    Provision of electricity and power to the manufacturing industry. This is perhaps the most inefficient of the trade support institutions today. Any reasonable manufacturer in Nigeria today first invests in high-power generator and only keeps NEPA as stand-bye. 

    National Road Networks (Federal Ministry of Transport) 

    Supposed to rehabilitate and maintain the road networks. 

    Nigerian Railway Corporation 

    This corporation is supposed to facilitate transportation of heavy export goods from the hinterland to the coasts and ports of shipment. 

    Federal Aviation Authority of Nigeria 

    Facilitation of persons and export goods. 

    Apart from the recognized agencies supposed to be directly involved in trade facilitation from Nigeria, the institutions listed above also play a very important role in trade matters in Nigeria. Unfortunately, they are worthy of mention here because their non-performance, or because the level of infrastructural deficiency related with their functions has negatively impacted on the development of international trade. 

    DIRECT INDICATIONS OF THE NETWORK NOT WORKING 

    There are abundant pointers to the fact that trade support institutions in Nigeria hardly contribute anything to trade activities in Nigeria. Some might say categorically that they are not working. A few of these indicators are listed below: 

    • The total absence, or inadequacy of information on and for Nigeria’s external trade sector (opportunities and practices) 
    • High cost of doing business in general, and export manufacturing in particular 
    • Inactivity of the Nigerian Committee on Trade Procedures (NITPRO). This has retarded the ability of Nigeria to adopt new international trade strategies and tools 
    • Proliferation of Government agencies and other self-acclaimed ‘authorities’ at Nigeria’s ports, leading to unnecessary congestion and undue delays in clearing of goods for export and import 
    • Untapped trade opportunities especially in the ECOWAS sub-region where Nigeria should stand a chance of controlling the market. Similarly, the country has yet to make use of emerging opportunities in the South-South Zone and from the US African Growth and Opportunities Act (AGOA) 
    • Unimpressive performance of Nigeria and Nigerian-made goods at international trade fairs and exhibitions 
    • Complete absence or inadequacy of research and development activities oriented towards the development of Nigerian manufacturing industries 
    • Difficulty on the part of the Nigerian international trader to access funds for long-term investment. This has made it near-impossible to contemplate export-oriented investments which, usually, do not bring in immediate returns 
    • Inadequacy of education and awareness on Government policies oriented towards the development of international trade and exports. For instance, despite the fact that pre-export shipment inspection was cancelled about two years ago, customs officials at Seme, Nigeria’s border with the Republic of Bénin, still demand evidence of inspection 
    • The Central Bank of Nigeria still collects a $5 per tonne export levy despite the fact that Government has banned all forms of levy on exports since 1996 
    • Despite the proliferation of trade support institutions, the Nigerian trader cannot derive satisfactory service from any of them, but has to rely on embassies of foreign countries for reliable information 
    • Policy inconsistency makes it difficult for manufacturing exporters to design any long-term plans. Government’s fiscal policies are, for example, modified and/or totally altered in each year’s national budget 
    • Stifling and protective import regulations end up creating undue difficulties for manufacturers to import necessary raw materials. These may include outright import prohibitions or prohibitive import duties; 
    • Preference of the Nigerian exporter for the unorthodox channels in getting his goods onto the international market. Foreign exchange earned through the ‘back door’ still attracts a higher exchange rate in Nigeria than the official export proceeds 
    • Ambiguity and multiplicity of efforts and strategies, which are most of the time uncoordinated and therefore never achieve the desired results. For instance, there is no forum that gathers all of the agencies above together, to determine a concerted and focused strategy for the development of Nigeria’s trade industry. 
    • Many of the institutions are staffed by personnel who have received no relevant training within the last ten years or so. They are themselves not technically supported, and would naturally find it difficult to support trade 

    SUMMARY OF TRADE SUPPORT INSTITUTIONS, SCHEMES AND CURRENT SITUATION 

    NAME OF TRADE SUPPORT INSTITUTION 

    TYPE OF SUPPORT PROGRAMME 

    IS IT WORKING? 

    Nigerian Export Promotion Council 

    Export Development Fund 

    Never been applied to direct beneficiaries 

     

    Export Expansion Grant 

    Fewer than 20% of Nigerian exporters benefit from it 

     

    Duty Drawback refund 

    As above. Undue processing time discourages new applicants 

     

    Export Credit Insurance/Guarantee Scheme 

    Never applied 

     

    Export Price Adjustment Scheme 

    Never applied 

     

    National Trade Information Network 

    Not enough funds allocated for this. no reliable data on Nigeria’s exports 

     

    Participation in overseas trade fairs 

    No direct impact on exports from Nigeria. Selected companies have remained largely, those that go for on-the-spot sales. no depth of participation or effective post-fair follow-up 

     

    Export awareness seminars 

    Does not appear to be the focus of management. no meaningful seminar in the past five years 

     

    Awareness campaigns in local trade fairs 

    Lacking in depth. no longer can you find impressive NEPC stands at local fairs. 

     

    Supply Base Studies 

    Too far apart to make any impact 

     

    Periodic releases of world market prices of selected export products 

    No longer in practice 

     

    Export advisory services 

    Export community does not believe in the advice from the council. would rather surf the Internet or use local consultants 

     

    Grassroots export promotion (states committees on export) 

    Ill-defined roles and expectations. no direction 

     

    Export production villages 

    Adopted only as propaganda 

     

    Cottage industries development 

    Not effective 

     

    Sectoral promotion of export products 

    Not pursued deeply enough to make any impact 

     

    Contribution to evolution of national export policy 

    The absence of an articulated export policy for Nigeria is indicative of failure in this regard 

     

    New export incentives 

    Has not been able to harness all stakeholders in the export industry to address critical areas of difficulty. Funds released to this agency are barely enough to cover operations and overheads. Under 10 per cent of the targeted industries have benefited from any NEXIM funding 

    Nigeria Export Processing Zones Authority 

    Improve export trade by facilitating all processes especially duty-free importation of raw material inputs to export manufacture; hitch-free exportation; protection of proceeds for local exporters and exportation of proceeds and investment profit for foreign investors 

    The agency has experienced quite a number of problems especially with other agencies providing parallel facilities. The manufacture-in-bond scheme anchored by the Ministry of Finance and supervised by the Nigerian customs services is a clear example. 

    Export Commodities Coordinating Committee 

    Facilitate the export process 

    Rather than simplify the process and reduce the cost of Exporting, this committee has exerted the opposite effect. it empowers the CBN to charge $5.00 per tonne of goods exported from Nigeria in order to raise its working finance. this has served as a big reduction to overall profit of the export companies. 

    National Advisory Committee on Economic Recovery 

    Supposed to design strategies to simplify trade and trade investments 

    The activities of this committee are hardly felt by stakeholders in the Nigerian economy 

    The Nigerian Economic Summit Group 

    A group of private sector professionals and industry leaders, the body has held national economic summits on an annual basis in the past seven years with a view to advising government on the problems inherent in current economic policies, recommending solutions thereto in the hope of facilitating smooth inward and outward international trade from Nigeria. 

    Governments were, at the onset, enthusiastic about implementing the recommendations of the group. Today the summits appear to have metamorphosed into avenues for pursuing personal agendas and vendettas 

    One fact is obvious: the Nigerian trader is getting little or no support from the numerous ‘support’ institutions put in place by the Government. The level of export awareness is critically low, as evident in the small number of merchants and companies involved in export activity. For those exporters, the level of difficulties to surmount is getting stiffer by the day. Oil export continues to account for the lion share of Nigeria’s annual revenue and foreign exchange earnings. The vast export opportunities and potentials remain untapped. In the light of the foregoing, it would be appropriate if the following recommended measures are adopted and applied with the utmost urgency. 

    RECOMMENDED 

    The problems, as highlighted only appear enormous; they are not insurmountable. In order to achieve a long lasting remedy however, we have classified the recommended solutions below in order of immediacy or medium to longer-term implementation. 

    IMMEDIATE 

    • Government to institute a Presidential Committee on non-oil exports. It shall be the duty of the Committee to: 
    • Organize a national conference on non-oil exports revival before the end of the year. The conference will discuss, determine and design a National Export Strategy. They would be empowered to involve expertise of international trade assistance agencies such as the International Trade Centre and the World Trade Organization. 
    • Identify the reasons why exporters prefer the unofficial channels (smuggling) to the detriment of official exports. 
    • Identify the current bottlenecks to smooth exports at the Nigerian ports. 
    • Compile the various export opportunities and potentials with a view to designing a framework for sectoral export promotion. 
    • Define a framework for inculcating export promotion as an integral component of the proposed Youth Employment Scheme. 
    • Define the modalities for adopting the export production village strategy in all agricultural development efforts and programmes. 
    • Establish the modalities for inculcating an export culture in the Nigerian populace. 
    • Evolve a complimentary economic development agenda for Export and Investment promotions. This should set the tempo for a new and symbiotic relationship between NEPC, NEXIM, NEPZA, NIPC, NMC, CBN, ECCC etc. 
    • Consider the continued relevance of some of the export policies currently listed as incentives in Nigeria, especially those that have never been activated. 
    • Define modalities for the adoption and use of Export Trading Houses to capture and control the markets first of West Africa, and then in selected countries all over the world where Nigerian products are known to have relevant comparative advantage. 

    The Committee should also mandate the NEPC to process and disburse export incentives within a maximum of two months. Today incentives approved since April are yet to be paid to beneficiaries. 

    • Stop the practice of piecemeal release of Negotiable Duty Credit Certificates in settlement of export incentives as is currently done. 
    • Mandate the CBN and the Federal Ministry of Finance to complete the full negotiability and transferability status of the Negotiable Duty Credit Certificate. 
    • Liaise with other trade promotion organizations all over the world with a view to securing technical assistance in developing Nigeria’s export potentials and opportunities. 

    MEDIUM/LONG TERM 

    • Government to restructure export promotion agencies such as NEPC and NEXIM and make them more active and relevant. As of today, fewer than 5% of the Nigerian ‘exporting’ community feels any impact from NEPC’s activities 
    • Evolve a new set of export incentives that would be completely radical and supportive of a catalytic approach. This could include: 
    • A new window of exchange for export proceeds that allows exporters to enjoy a higher exchange rate for all dollars earned from the export activity; 
    • National recognition of export performance via the institution of an "exporter of the year" Award, as is done for the farming sector for the past few years; 
    • Adoption of zero-duty importation of raw materials and machinery as an established policy. This implies focusing on some products for which markets exist outside the country and applying the benefits of MIBS directly rather than to be applied for; 
    • Qualification for the enjoyment of Export Processing Factory Status to be lowered to exportation of 50% of total production rather than the present 75%. 

    THE NIGERIAN EXPORT PROMOTION COUNCIL 

    This organization could enhance the achievement of the foregoing recommendation and contribute to further non-oil export development in the following ways: 

    • Raise Export Expansion Grant to 20% of repatriated proceeds; 
    • Design a way, where possible, for CBN to release grants to exporters as soon as repatriation is confirmed. Today it is doubtful whether 50% of those qualified actually apply for and benefit from EEG. Making payments automatic and less stressful will certainly ensure the emergence of new exporters. 
    • The Export Development Fund should be restructured, the Trustees appointed and empowered. Releasing the fund for sole administration by the NEPC without request for accountability has rendered it useless and ineffective. The current practice is for NEPC to appropriate it as part of ‘onshore’ expenses for international trade fair participation. In this way it is spent on behalf of beneficiaries rather than by the beneficiaries themselves. This anomaly certainly needs to be corrected. The NEPC should process the fund and the Board of Trustees meets periodically to approve beneficiaries. Actual disbursement should be made direct to the beneficiaries. 
    • It would appear that the Council’s manpower is either not adequately trained or focused enough to generate new ideas on export promotion within the context of current global realities. Massive training should be immediately embarked upon to inculcate a pragmatic and business approach to export promotion in the staff. 
    • Still in the area of manpower, it would be reasonable and profitable to restructure the organization to ensure that true ‘marketers’ form the core staff base. The goal would be to prepare the Council for self-sufficiency within the next ten years or so. In order to meet global challenges, the Council certainly needs to make itself more relevant and thereby generate payment for its services. 
    • The Council would also need to be mandated develop the services exports industry, and turn the brain drain into service exports. The sector holds enormous export potential from which the country can certainly draw immense benefits. 
    • Similarly, the Council would need to revive seminars and export education campaigns. 
    • With world trade leaning for e-commerce, NEPC should transform itself into the online market for Nigerian products and services, via a visible and active participation in e-commerce, and Internet trade. 

    To achieve the above, the Council would have to spend the next three years or so to generate, compile and build a reliable database of Nigerian export products and services, their current markets, prices, trends, local sources, etc. 

    The NEPC as of today does not network sufficiently with other trade promotion organizations all over the world or with international aid agencies for the promotion of international trade. Technical assistance and trade promotion programnmes should therefore be designed and implemented by these agencies (including ITC) in neighbouring countries such as Bénin, Ghana, Cote d’Ivoire, Burkina Faso, etc. 

    The management should focus on these areas providing opportunities to freely train its staff. 

    The Council could use the same channels to assist manufacturing and merchant exporters to train their staff in modern trading techniques and tools. 

    It is the duty of the NEPC to design export promotion programmes that can get the export culture established even at grassroots levels. 

    The NEPC should be gingered up to become one of the leading agencies to "sell Nigeria". You cannot sell Nigeria to Nigerians in Nigeria. The focus would be to sell Nigeria overseas and attract foreigners to buy Nigeria outside Nigeria. 

    EXPORT EDUCATION/AWARENESS 

    In almost all fora where Nigeria’s economic progress is discussed, the level and inadequacy of education and awareness about international trade opportunities, potential, procedures and regulations has continued to receive strong emphasis. 

    It is therefore important that Government at the highest level consider the institution of an aggressive non-oil export education campaign. This could be done in the form of a sponsored weekly television programme that would run all-year round and take up a different aspect of non-oil export at each new session. Modalities could be provided on request. 

    CONCLUSION 

    The fact that over 95% of the country’s annual revenue has continued to come from the single commodity – crude oil – is disturbing enough to demand radical and dynamic solutions. The present democratic administration has continued to demonstrate an undaunted desire to see to the timely resuscitation of Nigeria’s dwindling economic fortunes, and has emphasized diversification of the economic base as veritable way to achieve this. The absence of an articulate policy on export has however impeded the rapid development of pragmatic strategies in this direction. 

    National economic revival and development are certainly important enough for the Presidency to take more than a passing interest in them. A healthy export sector is the principal yardstick of judging the development and prosperity of nations now. It is probably the most important legacy this administration can bequeath to future generation of Nigerians. 

    It is therefore in the light of this importance that this paper has dwelled so tenaciously on the role and importance of all the agencies and strategies listed and suggested. Deserving of particular and immediate attention, I think, is the call for a Presidential Committee to define a new export strategy and chart a pragmatic course for Nigeria’s journey in international commerce. 

    E-mail: koinonia@hyperia.com
    Web site: www.koinonia-ventures.com
     

    Top of page  
    Posted 18 August 2010 

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