5 Secrets Investors should know about Nigerian Non-oil Export are listed and explained in this article. You will find this informative.
Nigerian Non-oil Export
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Nigeria’s economy is endowed with abundant human and material resources. For several years, Oil products have been the major exports while the non-oil export trade of Nigeria is consistently evolving over time.
Thus, this article will focus on five secrets that every investor should know about non-oil products. Non-oil products consist of groundnuts, palm kernels, palm oil, cocoa, rubber, cotton, coffee, copper, tin ore, columbite, hides, skin and cattle bean seed, and other products.
Non-oil export refers to products that are produced within the country that are sent outside the country to generate revenue for the growth of the economy. Such products are mainly agricultural and industrial mining products.
What are the distinguishing things about non-oil export?
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1. Natural Resources
However, the impressive benefits of non-oil exports are usually seen in statistics value. This makes the Nigerians experience several shortages as important secrets about non-oil exports are not known.
Looking at today’s economic activities, the country is lagging behind socially, economically, and even politically compared with other developing countries in the world.
Ironically, its annual output and volume of export over the years are not commensurate with the natural resources that abound on both land and sea within its geographic space.
There is a consensus that diverse factors determine a country’s output as well as exports. When Investors specialize in non-oil exports rather than just oil exports, there is bound to be optimization of resources.
The activities of investors remain an important issue that usually dominates the policy-making agenda of governments both in developed and developing countries.
In Nigeria and indeed many developing countries, non-oil exports are available and yet to be fully utilized. This creates competitiveness among investors who can discover the resources and transform them into a finished product for the final consumers.
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2. Non-oil Exports enhance economic growth and development
Many Nigerian and foreign investors have excessive dependence on crude oil exports and this has important implications for the Nigerian economy since the oil market is a highly volatile one.
The Nigerian economy became subject to the vicissitudes and vagaries of the international oil market such that international oil price shocks were immediately felt in the domestic economy.
The removal of all bureaucracies and additional incentives through the Structural Adjustment Programme (SAP) did not have any significant impact on the volume of non-oil exports. This shows that the Non-oil sector improves productivity.
3. Design and Implementation of policies by the Government
Specifically, It is important to note that the prerequisite for success in the design and implementation of policies that are aimed at promoting non-oil exports lies in a proper understanding of economic activities in the Nigerian economy.
The government should make policies that will promote domestic production in the economy. This will enhance non-oil exports and reduce importation.
To achieve this, the government can deliver efficient infrastructural services, especially power supply, and other energy resources, and reduce pressure on the naira exchange rate.
4. Increase in Value
However, following the adoption of the Structural Adjustment Programme (SAP) in 1986 the country moved from a pegged regime to a flexible exchange rate where the exchange rate was allowed to be determined by the forces of demand and supply.
From this period the exchange rate of naira began to rise although the rate of non-oil exports rose above the exchange rate between 1991 to 1993.
In 1994, there was a sharp increase in the exchange rate to N21 per dollar but the effect did not reflect immediately in the value of the non-oil exports.
In the year 1995, the value of non-oil exports quadrupled from N5bn to N23bn. During this period, the exchange rate was still stable at N21 per dollar.
The exchange rate increased to an average of N111.70, N126.26, and N134.04 =US $1.00 in 2001, 2002, and 2003 respectively. However, the exchange rate experienced little appreciation over the period between 2004 and 2008 following the various monetary policy measures introduced by the monetary authorities.
These measures include among others the banking sector consolidation in 2004, the strengthening of the Dutch Auction Market, the narrowing of the premium between the DAS, Bureau De Change, and Inter-Bank rates, and the introduction of the Monetary Policy Rate as a replacement for the Minimum Rediscount Rate.
As the exchange rate increased above N100 in the year 2001, the value of non-oil exports correspondingly increased to N94bn in the year 2002.
From the year 2004 to 2012, the value of non-oil exports increased to hundreds of billions of Naira. However, the exchange rate averaged N140 per dollar.
The only year the non-oil exports in Nigeria reached the value of a trillion Naira was in 2013. Afterward, the value of non-oil exports dropped to N953bn in 2014 and further dropped to N660bn in the year 2015, and since 2016 till date, there’s been a slight increase in the value of non-oil exports.
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5. No Market Uncertainty
Also, one of the major factors that determine a country’s output is the exchange rate which affects both oil export extensively and other factors.
This effect is capable of causing market uncertainty but in the case of non-oil exports, there is little or no market uncertainty.
The instability of market equilibrium is the core issue for every investor. If an equilibrium price is displaced slightly, the concern of the investor will be on its effect on its original value.
If an exchange rate equilibrium price is not stable, a slight increase will generate either an excess demand for foreign exchange or a slight decrease will cause an excess supply.
The market price could also fluctuate simply because the determining curves shift a great deal. This perdition has little or no proportional effect on non-oil export.
In conclusion, non-oil export is an effective tool that the government can employ to enhance the economy. It is pertinent that non-oil export is an imperative tool for the sustainable growth and development of the Nigerian economy.
Therefore, there should be a drive toward domestication of the country’s resources through an inward-looking policy, which will encourage the local utilization of the country’s abundant resources and also diversification of the country’s export base.
The country should develop linkages between the primary commodities and its industrialization in order to reduce overreliance on the international market.
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Again, the Government should make policies that will promote domestic production in the economy. This will enhance non-oil exports and reduce importation.
To achieve this, the government can deliver efficient infrastructural services, especially power supply, and other energy resources, and reduce pressure on the naira exchange rate.
