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Nigeria’s trade balance: Need to sustain the momentum – THE CITIZEN

Minister-of-Industry,-Trade-and-Investment,-Dr.-Olusegun-Aganga

Recently the Minister of Industry, Trade and Investment, Dr. Olusegun Aganga, announced that Nigeria’s performance in trade for 2012 led to a national savings of N4.2 trillion because of a decrease in the importation of manufactured goods. He said that the terms of trade represented “a sharp decrease in the value of imports from N9.8trillion to about N5.6trillion by the end 2012. However, the country’s performance for the year under review is revealing in many other ways. According to the “Nigeria’s External Sector Report” by the Central Bank of Nigeria (CBN), the country’s trade balance appreciated from US$1.60 billion in July to September (3rd quarter), 2011 to US$12.37 billion in the same period in 2012. It added that the total exports rose to US$24.37 billion in the third quarter of 2012 from US$22.53 billion in the same period in 2011. The report confirmed that the new trade position was as a result of “lower imports of goods and services and increased exports earnings”.

The minister was quick to take credit for the upbeat figures released by the CBN and the National Bureau of Statistics (NBS). He said that it was the first time since 2008 that Nigeria had recorded a fall in imports and that the reserves came largely from a declining dependence on imports of vegetable oil, textiles and cement. He also revealed that in 2012, he did not issue any import licence for cement and he was yet to do so in 2013 because of the increasing capacity utilization in the local manufacturing sector.

Stakeholders agree that there is a need forNigeriato reduce imports and reverse its trade imbalance with other nations, for example,ChinaandRussiawhose trade relations withNigeriahave broadened in the last two decades. Available figures showed thatNigeria’s imports fromChinain the last three years were seven times higher than exports. WithRussia, the scenario is worrying. According toNigeria’s ambassador toRussia, Assam EkanemAssam, the trade withRussiawas totally lopsided that the Russians had exported about US$350 million worth of goods toNigeriaby November 2012 andNigeriaexported nothing. This development bolstered the government’s determination to reverse the massive trade deficit. Therefore, it was significant that the latest report form the NBS showed that the total value of Nigerian exports contributed to the positive trade balance of US$16.82 billion in 2012.

Industrialisation

However, analysts are of the same opinion that there is a need for sustaining the positive figures forNigeriato attain its economic transformation objectives; and the minister of Industry, Trade and Investment, Dr. Aganga concurs by identifying industrialization as the driver of economic growth. Speaking recently at the National Council on Industry, Trade and Investment inIbadan, on cement production inNigeria, he said that with “the Federal Government’s policy on Backward Integration,Nigeriahas increased its capacity from a country that produced about 2 million metric tonnes in 2002 to a country that produces 28.6 million metric tonnes of cement in a year.” According to the Group Head, Communications, Dangote Group, (owners of Dangote Cement) Tony Chiejina, in a communication to the media recently, he said that the figures for the first months of 2012 showed increased local production with supply surpassing demand. The excess is therefore available for exports which, according to media reports, Dangote Cement Company is already exporting to Ghana and exploring export opportunities to other African countries; thereby boosting non-oil revenue for Nigeria. Therefore, Aganga excitedly declared that “for the first time, in 2013, we are now a net exporter of cement outside the country”. There are also strong growth forecast that the local cement production capacity will advance towards 40 million metric tonnes in 2015.

Industry watchers have however noted that it is ironical that the price of cement is still high when there is an apparent glut in supply. But, further investigations reveal that this situation is the by-product of intrigues and power-play among local cement manufacturers which, they agree, that time and government intervention strategies will ameliorate the situation. However, optimistic reviewers have chosen to focus on the positives deriving from the burgeoning cement industry which includes a national savings of N210 billion every year and a labour growth; which statistics from the ministry of industry, trade and investment show the sector created about 2 million direct and indirect jobs since 2002. This is against the backdrop of the recent call by the Central Bank of Nigeria (CBN) governor, Mallam Lamido Sanusi that “it is only by creating industries that we will create jobs”.

Besides, the cement industry, the textile sector has been revamped through the Bank of Industry-managed Cotton, Textile and Garment (CTG) Industry Revival Fund Scheme that disbursed loans to about 50 textile companies at 6% interest rate. This contributed to an increase in capacity utilization in the sector from 29% to 52%. Recent findings show an encouraging impact as figures from the Manufacturers Association of Nigeria (MAN) reveal that some ailing textile mills have been revitalised leading to 8,070 jobs being secured and 5,000 new ones created. However, facts have emerged that show that some companies that benefitted from the loans are still operating with some difficulties; but, evidence show that they are burdened by ancillary factors including, but not limited to inconsistent power supply in the country and previous fiscal commitments to creditors. But in the long run, Aganga said that “our aspiration for the textile industry is to increase its domestic market share from its present position of 12% to 25% by 2020. This explains why we have included the sector in the Industrial Revolution Plan”.

Industrial Revolution Plan

Analysts are optimistic that the federal government’s industrial revolution plan will propel the industrialization ofNigeria. In developing the plan, the ministry of industry said that “it is based on the desire to create an inclusive economic environment where jobs and wealth will be created through a process of intense industrialization, based on sectors where we have competitive and comparative advantage”. How the ministry will transform its optimistic plans to actions remains to be seen. However, a popular view is that the new Sugar Master plan which is developed by the ministry is imperative to delivering these objectives. When fully completed, the plan is expected to deliver about 1.79 million metric tonnes of sugar; 161.2 million litres of ethanol; 411 megawatts of electricity and; interestingly 117,000 jobs.

Foreign Direct Investment

However, such hopeful revolutionary plans will be more convincing if it can be implemented alongside the new automobile programme which, Aganga insisted, would boost job creation and wealth generation. He said that the programme which was at its advanced stage had received positive reviews from Nissan andToyotawho had assured that they would come toNigeriaand invest in car production. He said that the federal government would make Lagos, Ibadan, Nnewi, Enugu, Kano and Kaduna as the clusters of the automobile programme.

There is an agreement among observers that the interest that has been demonstrated by automobile giants, Nissan andToyota, is an additional boost to foreign direct investment (FDI) potentials inNigeria. Already, KPMG, one of the world’s foremost audit, financial and tax advisory firms, has rankedNigeriaas one of the four major investment destinations and growth areas in the world; others areMexico,IndonesiaandTurkey. Moreover, the United Nations Conference and Trade and Development (UNCTAD) 2012 report showed thatNigeriawitnessed an FDI inflow of US$8.92 billion ahead ofSouth Africawith US$5.81 billion. Consequently,Nigeriais attracting governments and trade delegations from all over the world. Recently,NigeriaandCanadasigned a Foreign Investment Protection Agreement (FIPA) with the aim of boosting bi-lateral trade between both nations. This came after a delegation of 15 companies fromPolandvisitedNigeriato explore investment opportunities in the country. With them was the Polish Prime Minister, Donald Tusk, who signed an investment pact withNigeriaon the premise thatPolandwas responding to investment prospects inNigeria. A similar investment agreement had already been signed with Austria lately.

Friendly Environment

It is hard to recall that less than two decades ago many countries and investors were sceptical about pursuing investment opportunities inNigeria. However, Nigeria’s newfound status as an investment destination is unarguably boosted by a friendlier business environment made possible by a revival of business promotion, competitiveness and investor care strategies. While speaking to the Polish delegation toNigeria, Aganga reiterated thatNigeria“will provide an enabling environment for businesses to thrive”. He added that  the “one-stop investment centre at the Nigerian Investment Promotion Commission (NIPC) has been repositioned and strengthened to pave the way for efficient coordination of investment facilitation between relevant government agencies and achieve a 48-hour response target for all enquiries”.

Local businesses have been off the blocks to benefit from the expedited business-friendly policies. For instance, at the Abuja and Lagos offices of the Corporate Affairs Commission (CAC), new businesses can be registered in 24 hours and statistics have revealed an increase of applications for new businesses in the last five months with 19,919 applications and 20,800 in the Abuja and Lagos offices respectively.

A popular outlook is that these business friendly drivers will draw more investors to Nigeriawhich, with a population of about 167 million, raw materials and sound human capital, is a large and attractive market for any investor. These are among assessment factors taken into consideration in determining the national competitiveness of any country. The ministry of trade and industry had recently announced that Nigeriaachieved a milestone stone in this regard when the Global Benchmarking Network ranked the country 115th in an assessment of drivers of economy of 144 countries. The annual Global Competitive Reports released in September 2012 saw Nigeria leap to its present height from 127th position in 2011.

Last word

There is a consensus among analysts that there is a clear direction in the effective adoption and implementation of national economic growth factors in view of the positive audited accounts of Nigerian companies in trade and industry, a favourable balance of trade and a growing interest inNigeriaby foreign investors. There are yet more vocal calls for assertiveness in the government’s drive towards reducing the trade gap with specific countries and stimulating further growth in the local economy through amplified support for Small and Medium Scale (SME) industries. To this end, Aganga said that “we have taken time to develop the National Industrial Revolution Plan, which will in no time place our industries where they belong – at the forefront of inclusive economic growth and development.” However, we believe that the minister should expect scrutiny from all stakeholders for what he said sounded more like a commitment!