Aggressive export promotion as an elixir for Nigeria’s economic problems

After eight years of lethargy on issues regarding the economy during the immediate past Buhari administration, the current administration took off with a bang and in rapid succession announced two earth-shaking economic policies that reverberated across the country.

The first was the removal of petroleum subsidies which President Bola Tinubu announced impulsively during his inauguration while the second which was announced a month later was a partial floating of the Naira which resulted in a massive devaluation of the currency with it’s consequent impact on the economy.

Being an import-dependent country, the impact of the devaluation of the Naira affected the cost of a wide range of goods and services across the country. When coupled with the increase in the price of petroleum products which also affected the cost of goods and services in the country, the negative consequences of this double-edged sword on the populace is best left imagined.

Most economists agree that the two major economic policies introduced by the current administration are a step in the right direction however, the implementation of the policies was abysmal with little or no thought of how to reduce the negative impact of these policies on the masses neither were there any plans to take advantage of these policies to accelerate economic growth.

Some may want to argue that the government gave some palliatives but the truth is that apart from the fact that they were an after-thought, it was just a politically motivated red herring that was designed to provide temporary relief for a handful of Nigerians while no thought was given for implementing policies that we enhance sustainable economic growth.

Contrary to economic theories of “demand-pull” and “cost-push” inflation, the leading causes of inflation in Nigeria are the falling exchange rate of the Naira and the cost of petroleum products. If we take into consideration the fact that the exchange rate of the Naira also affects the cost of petroleum products, we can safely conclude that the poor exchange rate of the Naira is the number one cause of inflation in Nigeria today.

The question now arises; what is responsible for the poor exchange rate of the Naira and why does it keep falling against other international currencies? The simple answer is that the demand for foreign exchange in the country is far higher than the supply and as a result of this, the Naira is constantly being put under pressure thus the downward slide.

How then do we solve this problem? We can either implement restrictive policies to reduce the demand for foreign exchange or engage in an aggressive export promotion drive to boost foreign exchange receipts into the country. For a country that is serious about growing it’s economy, the latter option is the obvious choice.

Nigeria currently generates between 45 and 50 billion dollars annually from exports of which over 90% of it is attributable to oil and gas exports while our import bill for 2022 alone was $53.61 billion. Although our foreign exchange receipts are also complimented by diaspora remittances of between 20 and 25 billion dollars annually, a significant amount of the forex from the oil receipts is retained by the oil-producing companies and is not available to fund the foreign exchange market thus the huge shortfall.

Apart from forex needed to fund imports, there is a huge demand for forex to fund intangibles such as foreign school fees, foreign medical care, BTA, and PTA all of which add up to the high demand for foreign exchange in the country. According to a banker friend of mine, the demand for forex they receive in his bank is at least ten times the forex allocation that they get from the CBN.

Contrary to the current administration’s strategy of borrowing $3 billion from AFREXIM Bank to provide liquidity in the foreign exchange market which will only result in temporary relief, what our government should be embarking on now is an aggressive export promotion drive to ensure that foreign exchange receipts into the country increases on a sustainable basis.

Ironically, AFREXIM Bank was established to promote and fund exports for African countries and one would have expected the government to approach them with the mind of funding export promotion to bring about a sustainable solution to our foreign exchange problems while giving the economy a boost. Sadly, they seem fixated on short-term solutions while postponing the evil day.

Given that government already has institutions like the Nigeria Export Promotion Council, (NEPC) and Nigeria Export-Import Bank (NEXIM) what the government needs to do is to energize both institutions so that they can embark on an aggressive export promotion drive. While NEPC should be given increased funding to create more awareness about the export potentials and opportunities available in the country, NEXIM should also be empowered to fund the export drive.

To start with, the $3 billion loan from AFREXIM should be diverted to NEXIM to fund export promotion instead of just using it to fund the forex market to provide temporary liquidity. By so doing we will be providing a permanent solution to our forex problems having used the funds to support export businesses that will continually ensure a steady flow of foreign exchange into the country. Effectively speaking, export promotion should be made a major policy of this administration, and all available resources deployed to support the initiative.

While Nigeria is very rich in a lot of natural resources that are in high demand globally, the agricultural sector provides a golden opportunity to significantly increase our foreign exchange earnings while at the same time creating jobs for millions of Nigerians. For instance, a small country like the Netherlands which is just about the size of Niger state generates revenues of over $100 billion annually from the export of agricultural produce. Imagine what Nigeria which has ten times more arable land can generate if we put our house in order.

In my reckoning, we can move Nigeria from a country that generates less than $50 billion from exports annually to one that generates more than $300 billion annually in the medium term if we put the right policies in place to aggressively support export promotion and enhance the value of our export produce. By so doing, we will not only be improving our foreign exchange earnings, but we will also be creating jobs for millions of Nigerians and ensuring the overall growth of the economy.

With the significant increase in the amount of foreign exchange revenue flowing into the country, there will be much less pressure on the Naira and this will give our local currency the much needed stability needed to curb inflation and it’s negative consequences on the economy while at the same time enhancing economic growth. The time to act is NOW!!!

Oshobi, a development economist and management consultant writes from Lagos