Export Development Fund Scheme: Need for transparency and impact

The COVID-19 pandemic had a brutal impact on global trade. According to the WTO, global merchandise trade in 2020 declined by 9.2% and is projected to rebound with a growth of 7.2% in 2021. Nigeria’s exports – both oil and non-oil have suffered a blow due to a fall in the international demand, disruption of trade logistics, and prolonged lockdowns in several countries. According to the Nigerian Bureau of Statistics, total merchandise exports declined by 52% and 44 % during Q2 2020 and Q3 2020 respectively over the corresponding period in 2019.

However, exports of agricultural goods bucked the trend and recorded growth of 6% and 44% Year on Year. Governments all over the world have come up with relief measures to cushion the effect on vulnerable sectors both at the macro and micro level to support the industries and firms.

Export Development Fund Scheme (EDFS)

The exporters welcomed the announcement of augmented EDFS under the FGN’s National Economic Sustainability Plan. Registered exporters must apply to NEPC for financial assistance to cover their export promotion costs. The exporters have asked NEPC to ensure that the implementation mechanism is effective and streamlined in consultation with the stakeholders for greater impact and transparency.

Impact of Covid-19

The bulk of Nigeria’s non-oil exports are agro-allied. Over ten million farmers are engaged along the agricultural value chains such as cocoa, sesame, cashew, marine products, cotton-textiles, and rubber. These agriculture value chains in turn depend on the exporters who are involved in a series of grassroots activities ranging from “farm to fork”. Their engagement with the primary sector starts from the provision of agricultural inputs to the small growers, technical support in crop management, quality assurance, storage logistics, packaging, off-take guarantees, and finally market access. Leading exporters are committed to the sustainable development of commercial crops and therefore have an ongoing engagement for the welfare of the rural communities.

The COVID-19 pandemic has seriously affected Nigerian exporters. Several contracts were suspended or canceled, buyers reneged on payments and even refused to take delivery of shipped goods citing force majeure. Thousands of containers were held up at upcountry warehouses and ports accumulating huge demurrage costs. However, the exporters supported the growers and processors during this hardship and fulfilled commitments by absorbing unforeseen costs.

It is imperative that the export development is administered in a manner that cushions the losses suffered by exporters and reward them for supporting rural communities. This can be ensured through a direct benefit transfer based on a criterion that is transparent. The exporters have suggested that a significant chunk of the EDF should be disbursed as per objective standard based on export performance within the base period. NEPC has the entire database in its records. This will ensure that the benefits are commensurate with the contribution of individual firms to the country’s non-oil exports. The exporters have already absorbed the costs of promoting Nigerian exports in overseas markets.

International best practice

Other developing countries have implemented several measures to help exporters to mitigate the adverse impact. China released all export tax rebates within one month. India has extended the interest equalization scheme for exporters by one year to help them deal better with the disruptions caused by the Covid-19 pandemic. A budgetary provision for $250 million dollars was made. Likewise, the Nigerian banks directly assisted the firms by extending the repayment period of working capital and term loans.

It is equally important to disburse the fund in a timely manner within the next two to three months in order to be effective and draw lessons from past experiences. In the past, the liquidity of exporters was severely affected by the delay in the processing of Export Expansion Grant claims which resulted in a sharp fall in non-oil exports. The backlog of Export Expansion Grant (EEG) claims for 2017-20 are still unprocessed as i write.

Way Forward

The non-oil export sector is strategic for the diversification of Nigeria’s economy and supports the livelihood of over 10 million persons. The exporters have suffered during the pandemic. The Export Development Fund should be utilized to provide relief to the exporters directly and rapidly. This will be a key success factor to promote Nigeria’s non-exports.

Ade Adefeko is Chairman Agricultural Trade Group NACCIMA.