Re-gaining Lost Opportunities In Nigeria’s Foreign Trade

The ministerial forum on the African Growth and Opportunity Act (AGOA) in Lusaka, Zambia, in June has, no doubt, exposed some challenges faced by many nations in their foreign trade.

The U.S. government enacted AGOA in 2000, to give opportunities to entrepreneurs from 37 sub-Sahara African countries to export 6,500 varied products to the U.S. on tax- and duty-free basis.

For Nigeria in particular, the forum presented it an opportunity to re-appraise its foreign trade strategy, with a view to exploring new opportunities, while disallowing red-tapeism and other administrative bottlenecks that hinder initiatives in its non-oil external trade, especially with the U.S.

Under the AGOA, value-added and semi-processed agricultural products such as Shea butter, honey, apparels, furniture and artifacts, are eligible for export to the U.S. from the select African countries. The lifespan of the concession, under the Act terminates in 2015.

In 2010, for instance, eligible African countries exported goods worth 44 billion dollars to the U.S. under the terms of the Act but Nigeria’s fraction of the export volume was rather negligible since its economy is largely oil and gas based.

Moreover, the stifling bureaucratic bottlenecks faced by the Nigerian entrepreneur had not been helpful either.

Some analysts, nonetheless, moan that while entrepreneurs from other eligible African countries readily grab the opportunities availed by the Act to advance their foreign trade, with the full backing of their respective governments, the situation in Nigeria has been different.

They express reservations at the hurdles placed on the way of many entrepreneurs by a plethora of government agencies.

During the Lusaka meeting, for instance, a Zambian company signed a two-million-dollar agreement with an American company to process tomato puree in Zambia and export same to the U.S. The feat was achieved with active backing of the Zambian government, as a measure of its support for indigenous entrepreneurs.

In Nigeria, however, agencies like the Small and Medium Scale Enterprises Development Agency of Nigeria (SMEDAN), the Bank of Industry (BOI), the Nigeria Export Import Bank (NEXIM) and the Bank of Agriculture exist to assist local entrepreneurs in such endeavours but how these institutions have discharged their mandates in this regard is a matter for conjecture.

Some analysts, nevertheless, are very skeptical of any meaningful gains in the activities of these agencies and institutions.

Their arguments are premised on the fact that basic infrastructure to promote trade is still lacking, as a farmer, for instance, will still need to transport his agricultural produce on good roads to processing centres and mills in good forms, to ensure value-addition and thus, benefit maximally from AGOA.

They further point out that the problems of bad roads, which hinder effective transportation of products, often lead to decay and wastages, aside from the problem of power outages, which limit the production capacities of mills.

Other policy and institutional problems, they say, include multiple taxations, corruption and inefficient bureaucracy.

They stress that the cumulative effects of these limiting factors are excessive production costs, which lead ultimately to internationally uncompetitive prices of the end-products, in comparison to products from more organised economies.

Nigeria’s High Commissioner to Zambia, Folake Marcus-Bello, who led the country’s delegation to the Lusaka ministerial forum, said that Nigeria placed third on AGOA ranking, mostly because of its oil and gas-based exports to the U.S.

“We have re-assessed ourselves. We have determined where the fault lies. We have seen that the arms of government which need to support producers in Nigeria should be up and doing; NEXIM, Bank of Industry and the agricultural bank especially need to focus on the grassroots.

“There have been experiences of people finding it very difficult to access funds in Nigeria. The forms to fill are too many, the processes too long; the difficulties are there and they are discouraging. Things will not progress unless people have access to funding; cheap funding from government,” she said.

Marcus-Bello, nonetheless, expressed optimism that since the present administration focused much attention on agriculture; Nigeria’s ranking in AGOA, in relation to the export of non-oil goods would improve soon.

According to the envoy, the delegation on its return to Nigeria will make a representation to the Federal Government on ways to improve the condition of the country’s foreign trade in the non­oil sector.

“After this meeting, we’ll sit together as a group, with all those who have come from the Ministry of Trade and Commerce, to make a presentation to government.

“It is important that we focus on small-scale industries in Nigeria for them to have access to the international market. We have to educate ourselves, develop our infrastructure and I know that once the issue of power is sorted out, then Nigeria is on the way to greatness,” she said.

Marcus-Bello’s optimism was however, not shared by a Lagos-based entrepreneur, Mr Sola Akinfemi, who felt that even the advantages taken in the oil and gas sector had not impacted positively on the lives of the citizens.

His words: “Trade support infrastructure that are supposed to drive the scheme in Nigeria are not there and so, Nigerian entrepreneurs are not competitive in terms of quality, product packaging and pricing.

“Most producers are still producing below capacity and cannot expand; so, they lack the economy of scale enjoyed by their counterparts in other parts of Africa where government is better focused.”

He stressed that it was unthinkable that a Nigerian entrepreneur, who took a bank loan at 25-per­cent interest rate, would be able to compete successfully with his African counterpart, who secured a loan at seven per cent interest rate.

These limitations notwithstanding, there seems a ray of hope, as the administration of President Goodluck Jonathan has started exploring ways out of the quagmire.

On May 28,2010, it established a Task Force on Trade Facilitation in the Ministry of Commerce to chart a roadmap out of the country’s spider’s web.

The task force has members drawn from all ministries, departments and agencies of government that have outposts at airports, seaports and the borders.

It is also expected to facilitate the provision of facilities and related infrastructure that are considered critical to the movement of goods and people.

Mr David Adejuwon, who heads the task force, expressed the viewpoint that until Nigeria was able to make the trade climate conducive for investments, the opportunities provided by AGOA might be elusive.

“The U.S. should also assist in the provision of needed infrastructure in a symbiotic relationship that will yield mutual benefits,” he said, adding:  “Nigeria also needs technical assistance, particularly in the food processing and packaging chain. “For Nigeria to be able to add value to its produce and export same to the U.S., as required under AGOA, there should be a synergy between the two countries, which should encourage the private sector people to bring technology into Nigeria and add value to the abundant raw materials,” he said.

Observers, nonetheless, say that the way forward is for the government to make the investment climate more attractive, while reducing the number of government agencies, which “interfere” with production and export activities.

They hinge their argument on the fact that potential investors will always consider factors such as government’s policies, tax regimes, security, port facilities and the type of available manpower, to guarantee returns on their investments.

Hakeem writes for News Agency of Nigeria.

Alli Hakeem