Exporters in the non-oil export value chain are groaning under the federal government’s non paymentl of N123 billion accrued incentives as at December 2015. A delegation of the organized private sector in the non-oil export who visited Daily Trust Head Office said the backlog is crippling export and investments in non-oil exports.
They called on government to pay so jobs can be sustained and created and the economy, diversified.
About 110 firms in Nigeria employing over 11million people, mostly rural people, are involved in non-oil export. The Export Expansion Grant (EEG) scheme was introduced in 2005 by government to stimulate export oriented activities in the non-oil export sector.
A consultant to UNIDO, World Bank and Partner at Afro-consulting Trade & Services Ltd, Dr. Navdeep Singh Sodhi who spoke for the delegation said for 10 years, non-oil export companies have invested in value addition and processing activities but now, the investments are facing illiquidity crunch.
“Now the issue is that about N123billion worth of the certificates are lying in backlog. So the exporters export but they are not able to receive the incentives so there are a huge backlog and crises.
“The government hasn’t made any statement that the scheme has been suspended, reviewed or cancelled. Keeping it open ended doesn’t help planning. We need government’s definite pronouncement,” he said.
Also speaking, the Chairman of NACCIMA Export Group (NEXAG), Mr. Ade Adefeko, said in the last two years, non-oil exports have halved from $3billion to $1.6billion due to the non- payment of the EEG.
Experts under the auspices of Organised Private Sector Exporters Association (OPEXA) has urged the federal government to encourage diversification of the economy and boost production in the non-oil sector by clearing the backlog of N100 billion unutilised Negotiable Duty Credit Certificate (NDCC).
Speaking during a press briefing in Abuja, the executive secretary of OPEXA, Mr Jaiyeola Olarewaju, urged the federal government to process all pending applications against exports made till 2013, saying diversification is the need of the hour to generate employment by boosting production in the non-oil sector. He said: “Nigeria’s non-oil export sector is still in its infancy and came into mainstream in the last 10 years due to the policies that were put in place that encouraged the sector to invest in agricultural supply chains, export processing factories and overseas marketing. Nigeria’s export basket comprises agro-allied commodities such as cocoa, cashew, cotton, sesame seeds, and rubber, finished leather, tobacco, textiles, processed marine products, footwear and plastics.”
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Disruption in the implementation of the Export Expansion Grant pushed down Nigeria's earning from non-oil export from $3 billion recorded in 2013 to $1.6 billion in 2015.
This was revealed by the Executive Secretary of the Organised Private Exporters Association (OPEXA), Mr. Jaiyeola Olarewaju, in a statement in Abuja recently.
Olarewaju said if the disruption which started since 2013 was not addressed, the earnings will slide further downward before the end of this year.
The association said the non-acceptance of the Negotiable Duty Credit Certificate (NDCC), an instrument through which grant is disbursed, has resulted in the backlog of N123 billion of unutilized NDCC fund.
The association said exporters were paralysed by the backlog and therefore had no option but to scale down exports which bore a stark reflection on the country's non-oil export performance since 2014.
"Based on the positive government policy on export incentives, the direct employment in the non-oil export sector increased from 105,220 in 2005 to 211,291 in 2010. However due to the disruption in the incentive policy, the employment started to decline in 2011," the statement said.
Executive Secretary of the Organised Private Exporters Association (OPEXA), Mr. Jaiyeola Olarewaju Dele Ogbodo in Abuja The Executive Secretary of the Organised Private Exporters Association (OPEXA), Mr. Jaiyeola Olarewaju, has said Nigeria’s earning from non-oil export declined from $3billion in 2013 to $1.6billion in 2015 due to the disruption in the implementation of the Export Expansion Grant (EEG), scheme since 2010.
Olarewaju, who painted a glooming picture of the sector’s export earning potential, said there are indications that the earnings will slide further downward before the end of 2016. In a statement made available to journalists in Abuja, Olarewaju said the non-acceptance of the Negotiable Duty Credit Certificate (NDCC), an instrument through which the grant is disbursed has resulted in the backlog of N123billion of unutilised NDCC fund.
According to him, Nigeria’s GDP in 2015 grew at 2.7percent with forecast for 2.3percent and 3.5 percent for in 2016 and 2017, however showed a sharp contrast with Ivory Coast, which has GDP growth above 8 percent.
“East African countries of Kenya, Tanzania, Uganda and Ethiopia are growing at 6 percent plus. A common thread among these countries is that they have a diversified production base of agro-allied industries.” he said.
Olarewaju said exporters were paralysed by the backlog and therefore had no option but to scale down exports, which bore a stark reflection on the country’s non-oil expert performance since 2014.
The report which was based on impact assessment report prepared by the Nigerian Export Promotion Council released in May, according to him, was based on a survey of 105 export oriented firms from across the country.
He said: “Based on the positive government policy on export incentives, the direct employment in the non-oil export sector increased from 105,220 in 2005 to 211,291 in 2010. However due to the disruption in the incentive policy, the employment started to decline in 201.”
While bemoaning the country’s export as suffering from neglect, he said IMF world economic outlook released in April 2016, showed Nigeria in a worst performer among sub Saharan African economies.
He admitted that Nigeria’s non-oil export sector is still in its infancy and only came into mainstream in the last ten years due to the policies that were put in place that encouraged the sector to invest in agricultural supply chains, export processing factories and overseas marketing.
“Nigeria’s export basket comprises agro-allied commodities such as cocoa, cashew, cotton, sesame seeds, and rubber, finished leather, tobacco, textiles, processed marine products, footwear and plastics.
“Europe Union (EU) is our largest trading partner accounting for about 40per cent of the market share followed by Asia and ECOWAS accounting for 25 percent and 18 percent respectively.
“For the past 2 years’ exporters have been sitting on a backlog of over N 100 billion worth of unutilised export certificates issued under the seal of the ministry of finance. These are sovereign instruments and the government should honour its financial commitments as per extant law.” Olarewaju said.
He said it is unfair that some exporters were issued the certificates for exports made till 2013 whereas many others who had submitted their applications remain outstanding for no fault of theirs.
He added: “This is part of the backlog lying with NEPC. After all, government policy is not based on first come first served. By any principle of fairness and justice, all pending applications for EEG on account of exports made till 2013 should be treated by the Finance ministry.
“We are happy to learn that NEPC is working on a so-called zero oil export strategy. However, ultimately it is the private sector that has to achieve the production and export targets. And this can only happen, if the nagging issue to EEG backlog is addressed.”
Nigeria’s non-oil export sector suffering neglect
According to the latest prediction from IMF, Nigerian economy will contract in 2016. This should be a wake-up call for our policy makers to engage in urgent debate on how to mitigate the harsh impact of the inevitable consequence of a unipolar economy. According to the IMF World Economic Outlook released in April 2016, Nigeria is the worst performer among sub Saharan African economies. In 2015, the country’s GDP grew at 2.7% and the forecast for 2016 and 2017 is 2.3% and 3.5% respectively. How contrast this with other sub Saharan countries and it is revealing. Ivory Coast has risen like the proverbial phoenix in ECOWAS region with GDP growth above 8%. East African countries Kenya, Tanzania, Uganda and Ethiopia are growing at 6% plus. A common thread among these countries is that they have a diversified production base of agro-allied industries.
Nigeria’s non-oil exports halved from US$ 3 billion in 2013 to $ 1.6 bn in 2015.From available indications, 2016 trend is downward. According to a comprehensive Impact Assessment Report prepared by the Nigerian Export Promotion Council and released in May 2016, the decline is chiefly attributed to the disruption in the implementation of the EEG (Export Expansion Grant) scheme since 2010. Due to the non-acceptance of the Negotiable Duty Credit Certificate(NDCC), an instrument through which the grant is disbursed, a backlog of N 123 billion of unutilized NDCC’s has piled up. The exporters were paralysed by the backlog and had no option but to scale down exports which bore a stark reflection on the country’s non-oil export performance since 2014. The said report is based on a survey of 105 export oriented firms all over Nigeria. Based on the positive government policy on export incentives, the direct employment in the non-oil export sector increased from 105,220 in 2005 to 211,291 in 2010. However due to the disruption in the incentive policy, the employment started to decline in 2011, the report stated.
Nigeria’s non-oil export sector is still in its infancy and came into mainstream in the last ten years due to the policies that were put in place that encouraged the sector to invest in agricultural supply chains, export processing factories and overseas marketing. Nigeria’s export basket comprises agro-allied commodities such as cocoa, cashew, cotton, sesame seeds, and rubber, finished leather, tobacco, textiles, processed marine products, footwear and plastics. EU is our largest trading partner accounting for about 40% of the market share followed by Asia and ECOWAS accounting for 25% and 18% respectively.
According to Mr. J.P. Olarewaju, Executive Secretary of the Organized Private Sector Exporters association (OPEXA) for the past 2 years’ exporters have been sitting on a backlog of over N 100 billion worth of unutilized export certificates issued under the seal of the ministry of finance. These are sovereign instruments and the government should honour its financial commitments as per extant law. It is unfair that some exporters were issued the certificates for exports made till 2013 whereas many others who had submitted their applications remain outstanding for no fault of theirs. This is part of the backlog lying with NEPC. After all, government policy is not based on first come first served. By any principle of fairness and justice, all pending applications for EEG on account of exports made till 2013 should be treated by the Federal Ministry of Finance, he added.
“We are happy to learn that NEPC is working on a so-called zero oil export strategy. However, ultimately it is the private sector that has to achieve the production and export targets. And this can only happen, if the nagging issue to EEG backlog is addressed.”
According to the OPEXA boss, the exporters have made several representations to the relevant ministries including Budget & Planning and Finance however an outcome was still awaited.
According to Alhaji Hamma Kwajaffa, the director general of Nigerian Textile Manufacturers Association, “The textile sector has suffered a blow due to policy inconsistency in implementation of export incentives. Our members increased their capacity as per government policy and boosted their exports of cotton-textiles however we have a huge backlog on unutilized NDCC’s which we have suggested the government to convert in lieu of our loan instalments to Bank of Industry”. “We have made representation to the federal ministry of finance and we have been told that an inter-ministerial committee is looking into the matter”, the NTMA boss added.
An inter-ministerial committee set up the ministry of Industry, Trade and Investment has been deliberating on a review of the EEG scheme for over 6 months and is yet to come up with an outcome. According to the non-oil export sector operatives, while it is the government’s prerogative to formulate a new policy in consultation with the stakeholders, it should honour all past bona fide claims against exports made as per extant guidelines. A reason often cited in the government circles concerns the purported abuse of the export incentives. However, nothing could be substantiated during several investigations carried out by various government agencies and by involving reputed international audit firms such as PwC during 2005-14. Even if there were certain irregularities the same should be dealt with individually rather than imposing a blanket ban.
Most developing countries give incentives to boost their exports, China, the world’s largest exporter, increased the export tax rebates in 2015 to check decline in exports. India provides a package of incentives to its exporters through its 5-year foreign trade policy.Nigerian manufacturers need EEG to mitigate the negative impact of infrastructural and other cost disadvantages.
Way forwardDiversification is the need of the hour to generate employment by boosting production in the non-oil sector. There are 11 million Nigerians employed directly and indirectly in the non-oil export sector. The government should clear the backlog of unutilized NDCC’s and process all pending applications against exports made till 2013. This could be even done by converting them into government bonds with a medium to long term maturity to avoid undue pressure on current government revenue. A new policy should be formulated in consultation with all stakeholders.
About OPEXA (www.nigeriaexportgroup.com)
OPEXA is an organized private sector body that represents the interests of over 11 million stakeholders directly and indirectly engaged in the largely agro-allied non-oil export sector pan Nigeria. It aims to actively engage with the public and private sector stakeholders to diversify the Nigerian economy for boosting production, employment and foreign exchange earnings.
OPEXA is registered with the Corporate Affairs Commission.
By Femi Adekoya on February 25, 2016 12:00 am
Non oil export
PHOTO: sweetcrudereports.com
Following the inability of Federal Government to revive incentives for non-oil exporters, proceeds from the sector has continued to witness a southward trend, as the nation’s earnings hit $1.6 billion from $3 billion recorded in 2013.
According to stakeholders in the sector, earnings from non-oil export can easily cross $5 billion this year and bring some relief to tackle the foreign exchange crisis prevailing in the economy, if suspended incentives are revived and other challenges addressed.
Executive Secretary of the Organised Private Sector Exporters Association (OPEXA), Jaiyeola Olarewaju in a chat with The Guardian, noted that exporters have in the last two years, been sitting on a backlog of over N100 billion worth of unutilized export certificates issued under the seal of the Ministry of Finance, urging government to honour its financial commitments in regards to extant law
“It is paradoxical that one sector that had the potential to cushion the commodity shock has been paralysed due to lack of inter-ministerial coordination. Nigeria’s non-oil exports fell from $3billion in 2013 to $1.6 billion in 2015. In 2014, the country had realised $2.7 billion in non-oil exports. In 2015, exports of cocoa, Nigeria’s largest commodity declined by 35 per cent whereas leather exports, which is the main stay of industrial economy in the North plunged by 60 per cent.
“If the EEG policy had been sustained, our non-oil exports today would have easily crossed $5 billion by 2016 and brought some relief to tackle the foreign exchange crisis prevailing in the economy. The officials have been evading the issue by alluding to perceived abuses of the grant which led to its suspension. It is classic case of throwing the baby with the bath water. The exporters relied on the extant policy and repatriated forex through the banks duly verified by the CBN”.
He explained that while diversification is being advocated as the need of the hour to generate employment by boosting production in the non-oil sector, government should clear the backlog of unutilised NDCCs and exports made in 2014 and 2015 under the extant policy to sustain about 11 million Nigerians employed directly and indirectly in the non-oil export sector.
He noted that addressing unutilized export certificates could be done by converting them into government bonds with a medium to long term maturity to avoid undue pressure on current government revenue.
“The ministries of Industry, Trade and Investment as well as Finance, should harmonise their position and come up with a sustainable and effective EEG policy to put non-oil exports back on track,” he said.
Nigeria’s non-oil export sector is still in its infancy and came into mainstream in the last 10 years due to the policies that were put in place that encouraged the sector to invest in agricultural supply chains, export processing factories and overseas marketing.
“The root cause of the decline in non-oil exports was a legacy of the past administration inherited by the present government. There is an opportunity to reverse the trend by restoring the policy framework that led to the rapid development of the sector.
“Non-oil exports were boosted by the Export Expansion Grant or EEG policy meant to cushion the cost disadvantages faced by our exporters due to infrastructural deficiencies. It improves the price competitiveness of Nigerian products in the international market. Since 1999, EEG has been given in form of negotiable duty credit certificates (NDCCs). However, the former Minister of Finance arbitrarily suspended the utilisation of the certificates pending a review of the scheme which for the past three years has been languishing due to lack of inter-ministerial coordination”, he added.
Latest monthly economic report released by the CBN provisionally puts non-oil exports at $244 million in the month of November, noting that the month-to-month decline was precipitated by fall in receipts from the food products and minerals sectors. Industrial products, which earned $79 million, accounted for the largest proceeds.
The sector breakdown shows that proceeds from manufactured products, agricultural products and the industrial sub-sector grew by 13.3 percent, 13.5 percent and 38.3 percent, respectively, on a month-to-month basis.
On the other hand, proceeds from food products and minerals decreased by 86.4 percent and 49.2 percent, respectively. In the month of November, non-oil exports stayed very low at approximately 1 percent of GDP.
The report stated that, “the agriculture and manufacturing sector, which underpinned non-oil exports in November, grew by 2.6 percent yearly and contracted by minus 1.8 percent in third quarter 2015, respectively. The national accounts are due for later this year.”
By Anna Okon
Members of the Organised Private Sector have urged the Federal Government to implement the Export Expansion Grant following a drop in revenue from the non-oil sector to $1.6bn from $3bn recorded in 2013.
The Executive Secretary of the Organised Private Sector Exporters Association, Jaiyeola Olarewaju, noted that exporters had in the last two years, been sitting on a backlog of over N100bn worth of unutilised export certificates issued under the seal of the Ministry of Finance, urging the government to honour its financial commitments as regards the extant law.
He said, “It is paradoxical that one sector that has the potential to cushion the commodity shock has been paralysed due to lack of inter-ministerial coordination.
“Nigeria’s non-oil exports fell from $3bn in 2013 to $1.6bn in 2015. In 2014, the country had realised $2.7bn in non-oil exports. In 2015, exports of cocoa, Nigeria’s largest commodity, declined by 35 per cent whereas leather exports, which is the mainstay of industrial economy in the North plunged by 60 per cent.”
Olarewaju said earnings from non-oil export could easily cross $5bn.
He said, “If the EEG policy had been sustained, our non-oil exports today would have easily crossed $5bn by 2016 and brought an end to the foreign exchange crisis prevailing in the economy. The officials have been evading the issue by alluding to perceived abuses of the grant which led to its suspension. It is a classic case of throwing out the baby with the bathwater. The exporters relied on the extant policy and repatriated forex through the banks duly verified by the CBN.”
He explained that while diversification was being advocated as the need of the hour to generate employment by boosting production in the non-oil sector, government should clear the backlog of unutilised NDCCs and exports made in 2014 and 2015 under the extant policy to sustain about 11m Nigerians employed directly and indirectly in the non-oil export sector.
OPEXA secretariat organized its inaugural press conference at Ikeja, Lagos on 9th September 2015.
Correspondents from five national daily newspapers were in attendance: The Punch, The Guardian, The Daily Trust, The Leadership and The Nation.
Members of the press were briefed about the formation of the OPEXA, its aims and objectives and sought cooperation from the fourth estate to give wide coverage to the developments in the non-oil export sector to create awareness among concerned stakeholders and public at large.
The newspapers carried the story during 10-18th September. The news clips are included here.
A copy of the communique released to the press is reproduced below
Key stakeholders in Organized Private Sector who shared the aspiration of the Federal Government fordiversification of the economy in view of the shrinking oil revenue and foreign exchange reserveshave come together to form the Organised Private Sector Exporters Association (OPEXA). Membership cuts across the real sector comprising manufacturing and agriculture production and processing activities.
We are convinced that the only way out for the country to disentangle itself from the shackles of mono-economy is to diversify its export sector.McKinsey, the global consulting firm, reckons that Nigeria could easily double its agricultural output over the next 15 years by introducing some simple reforms.
There is ample evidence to show that the Government’s policy to boost the non-oil export had yielded some positive results.
Our Association is, therefore, formed to collaborate with the Government, all its agencies and other private sector organizations to further boost the expansion of non-oil exports. We intend to dedicate ourselves solely in public advocacy.
We see this as the only way for the economic growth of the country.
The growth earlier mentioned, however, is being hampered by the inconsistency in implementing the Government Policy on non-oil exportation. The extant policy on the EEG(Export Expansion Grant) and the utilization of the NDDC(Negotiable Duty Credit Certificates) had been put on hold. This is having a negative effect on the non-oil sector in particular and the economy in general.
We are of the opinion that the new administration should urgently intervene on this issue. We recommend that the following measure be taken to restore confidence of the stakeholders in the government on non-oil exports:
(a) Instruct customs to accept utilization of NDCCs for duty payment as per extant policy
(b) Meeting of the Inter-ministerial Committee on EEG should be reconvened in conjunction with the OPS
(c) Federal Ministry of Finance should Treat the backlog of NDCCs in a time-bound manner
(d) NEPC should process EEG against exports made till December 2014 as per extant policy
(e) Government should make a clear statement on non-oil exports and sustainable EEG Policy as a way forward
OPEXA is contemplating meetings with key policy makers in the new administration to draw their attention to the situation in the non-oil export sector and find constructive avenues to diversify the Nigerian economy.McKinsey, a consulting firm, reckons that Nigeria could easily double its agricultural output over the next 15 years by introducing some simple reforms:
Opexa Newsletter July 2017