TRALAC - Trade Law Centre

Nigeria: $100b non-oil export target - stakeholders push for AGOA

Thursday, 17 August 2017 Published: | CHIKODI OKEREOCHA

Source: The Nation (Nigeria)

The foreign commercial service of the United States (U.S.) diplomatic mission to Nigeria has been living up to its mission of promoting the expansion of the U.S trade and investment in Nigeria.

Its team of trade and commercial specialists has consistently maintained the importance of the African Growth and Opportunities Act (AGOA) as a powerful tool for Nigeria to drive non-oil export and diversify the local economy.

The team has taken every advantage of its interactions with officials of the Federal Government and business leaders to explain how powerful AGOA could be for Nigeria to shore up non-oil exploits and drive its economic diversification policy.

AGOA is the cornerstone of the U.S. trade and investment policy in Africa. The programme, which was signed into law by the U.S. Congress in 2000, is a preferential trade agreement between the U.S. and some eligible sub-Saharan African countries that allows the exportation of certain products into the U.S. market tariff and quota-free.

The free-duty export programme seeks to increase market access to Nigeria and 38 other eligible sub-Saharan African countries to export about 7, 000 product lines to the U.S. market.

Its ultimate aim was to give Nigeria and other African nations opportunity to build capacity in the global markets and also create jobs. Although, the Act initially covered eight years (October 2000 to September 2008), amendments signed by former U.S. President George Bush in July 2004 extended it to September 30, 2015.

The U.S. Congress later extended it for additional 10 years. It is billed to expire on September 30, 2025.

Encouraged by the 10-year window, the foreign commercial service has stepped up efforts at promoting the expansion of U.S. trade and investment in Nigeria through support of business partnerships between American and Nigerian companies.

The [former] U.S. Assistant Trade Representative for Africa, Ms Florizelle Liser, recently reiterated the U.S. Government’s commitment towards making AGOA more viable in the next decade.

At a recent tele-conference with reporters across Africa monitored in Lagos, Ms Liser said the Act had opened business and investment development between the U.S. and its partners.

She said that African countries had tripled export of their non-oil products into the U.S., adding that AGOA had in the last years, created employment opportunities for young Africans and their American counterparts.

But much of the benefits have eluded Nigeria, despite its resource endowment, especially in the agriculture and mining sectors as it has not grabbed the opportunities offered by AGOA in the last 17 years to rejuvenate its non-oil export and diversify the economy to create jobs.

Despite proven a powerful tool for the promotion of export of goods into the U.S., members of the Orgnaised Private Sector (OPS) and the Federal Government have yet to leverage on the AGOA window to promote their businesses, even after the programme’s extension by another decade.

The Nation learnt from industry sources that many exporters of non-oil products and commodities have been exporting with duties between 16 and 25 per cent, all of which could be removed if they had channeled their exported through the AGOA programme. Thus, exporters have been losing a lot of funds by not exporting under the AGOA Act.

Experts have said that it may be difficult for Nigeria to meet its yearly target of $100 billion revenue from non-oil export year, if it failed to reverse the trend.

Under its Zero Oil Plan, which targets to replace oil as a major foreign exchange earner by boosting non-oil export, the government through the Nigerian Export Promotion Council (NEPC), has set for itself an ambitious target of realising $100 billion revenue from non-oil export annually.

The NEPC has identified 22 priority countries as markets for Nigeria’s 11 strategic products with high financial value to replace oil under the plan.

The government has a target to get about 20 per cent of the nation’s Gross Domestic Product (GDP) from a repositioned non-oil sector. The identified products are: palm oil, cashew, cocoa, soya beans, rubber, rice, petrochemical, leather, ginger, cotton and shea butter.

According to NEPC’s Zero Oil Plan, “Nigeria’s trade has been largely driven by exports of petroleum products, which contribute about 17 per cent to GDP, signifying about 90 per cent of total merchandise exports and more than 65 per cent of government’s income.

“This revenue boom has been threatened by a sharp drop in the global price of oil…NEPC’s vision is to replace oil as a major foreign exchange earner by growing non-oil export to $30 billion in the next 10 years and eventually to $100 billion annually based on its Zero Oil Plan.”

According to NEPC’s Executive Director/Chief Executive Officer Segun Awolowo, Nigeria’s survival would no longer be tied to oil revenue earnings if could effectively key into the Council’s plan and take advantage of the opportunities in the agricultural sector.

Why govt fails to utilise AGOA

AGOA’s targets are: energy-related products, textiles/apparel and transportation equipment. The sectors account for over 90 per cent of exports qualified for AGOA benefits. But, in the last 17 years of the implementation of the policy, Nigeria has only been able to feature prominently in the energy-related products sector. Her performance in the textiles and apparel, agricultural products and mineral and metals sectors have been everything but starling.

Unfortunately, these are areas Nigeria has huge potential and strength. They are also the sectors on which the country anchored its hopes of attaining its $100 billion non-oil revenue target.

Analysts believe that because of Nigeria’s over-dependence on the oil & gas sector, which provides the bulk of her revenue, contributing as much as 95 per cent of foreign exchange earnings and about 80 per cent of its budgetary revenues, it has been difficult for agriculture exports to play an important role in Nigeria-U.S. trade under AGOA.

The agriculture sector exports has not been able to play an important role in the Nigeria-U.S. trade under AGOA because of Nigeria’s over-dependence on the oil and gas sector.

At least, 95 per cent of the country’s foreign exchange (forex) earnings and about 80 per cent of its budgetary revenues come from oil and gas.

The challenge of quality and standard has also compounded Nigeria’s woes because of the dearth of functional laboratories to determine the exportability of the products.

Nigeria’s push to stimulate non-oil export and facilitate economic diversification suffered an embarrassing setback with the European Union (EU) ban on the importation of Nigeria’s dried beans on grounds that it contained high level of pesticides considered dangerous to human consumption in June 2015.

As relevant government were still battling to get the EU ban lifted, the European body extended the ban by another three years, citing the continued presence of dichlorvos (pesticide) in dried beans imported from Nigeria.

The Republic of Ireland had earlier rejected and returned five containers of beans exported from to the country. The products were said to have been received with heaps of weevils. The U.S. added to Nigeria’s woes with the recent ban on cocoa exportation into its market from Nigeria.

Dearth of infrastructure

Operators continued to bemoan poor infrastructure, including power supply, which, according to them, push up cost of production and also erode their competitiveness at the global market.

Worst hit are operators in the Small and Medium Enterprise (SME) sector. The export capacities of most Nigerian SMEs have been seriously undermined by the high cost of production, lack of adherence to contractual terms, and ignorance of local and U.S. Customs regulations. Add to these poor labelling and insufficient information on nutritional content, the challenges facing Nigeria under AGOA come into bold relief.

The ECCIMA Drirector-General Emeka Okereke said lack of standardisation was denying Nigeria the opportunity of benefiting from AGOA.

According to him, Nigeria failed to take advantage of the trade policy to boost her export drive to the U.S. market due, partly, to its failure to improve on products standardisation especially in the area of packaging.

He told The Nation that America, being a developed nation will not take the second best in terms of quality products. He said although, many local businesses tried to export products under the scheme, most of them met with stringent U.S. import measures. He therefore urged that a critically look at the Act again to smoothen the grey areas in its implementation.

Estimating Nigeria’s export to the U.S. at about 30 per cent, Okereke put Ghana’s at about 60 per cent, noting that it was possible that the U.S. had more confidence in Ghana’s method of processing products for export than Nigeria’s.

He said: “I think there is a systemic lack of confidence on Nigeria by the U.S. Ghana may be having an edge over Nigeria because she has the ears of the U.S. The image of Nigeria before the U.S is different from Ghana.”

Ghana tops the AGOA chart

Nigeria is trailing Ghana, Angola and some others countries in the export of agricultural and industrial items under AGOA. Nigeria’s non-oil export to the U.S. under AGOA Act has continued to lag, recording $1.141 million last year.

According to the AGOA trade statistics accessed by The Nation, Nigeria’s non-oil exports to the U.S. under the policy fell by 23.5 per cent, from $1.491 million in 2015 to $1.141 million in 2016.

Oil takes the centre stage in export under the policy accounting for 99.9 per cent out of the $3.475 billion AGOA exports to the U.S. in 2016.

In contrast to Nigeria, Ghana exported items worth $29 million to the U.S. under AGOA in 2016. It has even gone a notch higher, with President Nana Addo Dankwa Akufo-Addo, announcing on Monday $500 million as Ghana’s targets the U.S. by 2020.

He said the Ghanaian government was in the process of finalising Ghana’s new AGOA export strategy and action plan to boost the volumes of exports to the U.S.

“We aim at increasing our export volumes under AGOA to $500 million in 2020, which will create in its wake hundreds of thousands of jobs. The target is ambitious, but certainly achievable”, the Ghanaian President said. 

Push heightens for AGOA 

With eight years to the expiration to the AGOA 10-year extension, operators and stakeholders in the non-oil sector said there could not be a better time than now for Nigeria to grab the opportunities offered by AGOA, considering the urgent need to diversify the economy and create jobs.

The tumbling price of Nigeria’s crude oil in the international market since June 2014, plunged the economy into its worst recession in history last year. It has necessitated the calls on the Federal Government to speed up the rejuvenation of the non-oil export sector as a wedge.

Experts have credited the sector with the capacity for rapid revenue base expansion, sustainable growth and employment generation. They are, therefore, of the view that embracing AGOA would give impetus to the ongoing efforts at repositioning the sector.

The President, Nigerian-American Chamber of Commerce (NACC), Chief Olabintan Famutimi, said that embracing AGOA will allow the federal and state governments to exponentially grow the businesses of Micro, Small and Medium Enterprises (MSMEs), increase export of made-in-Nigeria goods, and increase the states’ Internally Generated Revenue (IGR).

Famutimi canvassed the position at chamber’s July Breakfast Meeting with Anambra State Governor Willie Obiano.

The parley which held in Lagos, a fortnight ago, had its theme as “Investment promotion and protection: The Anambra State experience, challenges and opportunities.”

The Chambers’ president announced that the U.S. Commercial Service and U.S. Agency for International Development (USAID) are in full cooperation with the NACC to train entrepreneurs in the state to become AGOA compliant.

Famutimi added that the U.S. government has declared NACC as an AGOA Resource Centre, a status that qualifies it to undertake the trainings.

Besides, the Anambra State Chapter of NACC, he said, was in the offing, adding that the branch will soon join the chamber movement, having secured minimum membership requirements and an office accommodation.

Despite the assurances, Okereke insisted on the need for Nigeria to work on her trade diplomacy with the U.S.

“We need to work on changing that negative perception if we must benefit from the extension of AGOA this time,” he said.

Not a few industry operators and stakeholders believe that the programme has neither contributed in any significant way to the development of Nigeria’s economy nor raised the business potential of Nigerian entrepreneurs.

However, the U.S. Consul-General, Mr. John Bray, said at the breakfast meeting that the U.S. Government was willing to continue to provide support to Nigeria’s economic growth and development.

Bray, who was represented by the U.S. Commercial Counsellor, Mr. Brent Omdahl, said: “The Nigerian market is massive, it’s young and it’s growing.”

But will Nigeria leverage on its globally acknowledged market size, particularly for agriculture and mining products to benefit from AGOA this time? Will the authorities be courageous enough to address the issues that stand in the way of non-oil exporters maximising the immense opportunities in the U.S. free export programme?

Time, they say, will tell.

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