Nigerian Exporters Battle Sky-High Costs And Restrictive FX Policies

Nigerian Exporters Battle Sky-High Costs And Restrictive FX Policies

Amid Nigeria’s urgent need for foreign currency to stabilize exchange rates, exporters face a storm of challenges. Rising production costs, high-interest rates, and limited export incentives have drastically weakened the growth of non-oil exports (NOEs), leaving exporters in a tight spot.……….CONTINUE READING 

According to Financial Vanguard investigations, escalating costs have spiked exporters’ working capital needs by over 350% in the past year. Banks now charge interest rates above 30%, making it difficult for businesses to fund production. Exporters also cite strict controls on foreign exchange repatriation and unpaid export grants dating back to 2021.

Exporters report that these conditions have stunted growth, with NOEs in the first half of 2024 showing only a weak 3.1% increase year-on-year (YoY) and a slight quarter-on-quarter (QoQ) dip in Q2. Notably, re-exports and electricity exports dropped by 39% and 4.3%, respectively, which overshadowed minor growth in other areas.

Data from Nigeria’s Central Bank indicate that NOEs have yet to rebound to pre-pandemic levels. Despite some YoY improvement, Q2 saw a decrease from $1.77 billion to $1.76 billion, keeping overall NOE performance below pre-COVID numbers.

Insights from Exporters

Leaders in Nigeria’s export sector shed light on these challenges. Otunba Felix Oladunjoye, Chairman of the Cocoa Processors Association of Nigeria, attributed the sluggish NOE growth to adverse monetary policies, citing naira depreciation, inflation, and exorbitant interest rates. He noted that working capital for cocoa exports alone has increased fivefold, excluding smaller exporters from the market.

Victor Iyama, Board of Trustees Chairman of the Federation of Agricultural Commodities Association of Nigeria, mentioned that cocoa exports are unprofitable due to high local prices and a volatile exchange rate, making it hard for exporters to plan. Additionally, climate factors have reduced cashew production, according to Dr. Ojo Joseph Ajanaku, President of the National Cashew Association of Nigeria.

Insecurity, port congestion, and bureaucracy further strain exporters. Muda Yusuf, Director-General of the Center for Promotion of Private Enterprise, argued that these challenges hinder competitiveness, especially in agricultural exports.

Reviving Non-Oil Exports

To revive NOEs, experts advocate easing foreign exchange restrictions and improving logistics to fast-track exports. Quality control and cost efficiency are crucial, as export success relies on global competitiveness. Experts suggest that transitioning from raw to value-added products could boost revenues and address primary-product export limitations.

To enhance performance, exporters also urge streamlined export processes and reduced documentation, allowing Nigeria to reclaim ground in the global market.