Post by Trade facilitator on Feb 20, 2012 7:33:24 GMT 1
Since its discovery in Nigeria, crude oil has not only become the mainstay of the economy, but largely remained the country’s major export as well as main revenue and foreign exchange earner (with over 90 percent).
Consequently, and regrettably so, the export of non-oil products has been dismally low and marginally negligible. As a result of the high level of imports and low level of non-oil exports, the country has continued to record huge balance of trade and payment deficits in international trade. This, in my view, has been the albatross of the nation’s economic growth and development.
In order to reverse this unhealthy trend and underpin Nigeria’s global competitiveness in the international market, it has become imperative to diversify the economy and broaden the revenue base within and away from crude oil export. The government must embark on a deliberate, determined and systematic plan and programme of action to aggressively expand and vigorously promote non-oil exports. This has become even more apt and compelling, considering the volatility and attendant price fluctuations in the global oil market and its topsy-turvy effect on government’s revenue. Moreover, considering that Nigeria’s current oil wells, judging by recent reports, may dry up in the next few decades (estimated to be 30-40 years time), except of course new oil wells are discovered, the need for a strategic policy shift in favour of non-oil exports as the key driver of growth cannot be over-emphasised.
The stimulation of non-oil exports will provide a veritable alternative source of revenue, increase access to foreign exchange, and enhance the country’s foreign/external reserves. The increased foreign exchange earnings generated from non-oil exports will go a long way in ensuring a stable and competitive exchange rate/value for the naira.
Furthermore, the nation’s ability to reduce her external indebtedness and service existing debts will, to a large extent, depend on our export earnings through additional revenue from non-oil exports. The promotion and expansion of non-oil exports, willy-nilly, will have tremendous multiplier effects, directly and indirectly, on employment generation/job creation, especially considering the present high level of unemployment in the country. This is because with increased non-oil exports, there will be an exponential increase in employment opportunities in the industries engaged in direct production for exports. By extension, export growth will also have positive bearings and indirect effects on employment in feeder industries supplying inputs, materials and equipment to the industries directly engaged in export production.
The aggregate consumer expenditures of workers employed in all these industries, as a result of income earned, will also have significant salutary impact on the economy by way of lowering income inequalities, enhancing the country’s Gross National Income and stimulating economic growth.
In furtherance of its transformation agenda to liberate the nation’s tottering economy from the shackles of the current high-dependence on oil export/revenue, the government must adopt outward-looking and permissive economic policies which will emphasize vigorous export promotion and expansion through the provision of appropriate mix of incentives to exporters. In this regard, we need to learn from the experience of the Newly Industrialized Countries (NICs), especially the “Asian Tigers” - South Korea, Taiwan, China, Singapore, Hong Kong, Thailand, Malaysia and Indonesia. It is a widely acclaimed fact that the remarkable economic performances of the NICs have been largely due to the export-oriented growth of their economies. The governments of these countries, together with dynamic entrepreneurs and investors, succeeded in promoting vigorous export-led growth and industrialization.
In addition to the outward-looking strategies to effectively encourage exports, the government should also focus attention on effective exchange rate management system. Towards this end, the CBN should, as a matter of deliberate policy, maintain a regime of gradual and systematic deregulation of the foreign exchange market, if our non-oil exports are to compete favourably in the world market.
A deregulated foreign exchange market will ensure, over time, the evolution of a realistic, competitive and stable exchange rate/value of the naira. This is necessary because an over-valued naira may be counterproductive to the nation’s export promotion drive. A realistic and competitive exchange rate of the naira will go a long way in facilitating the growth of non-oil exports.
Furthermore, the Export Expansion Grant Scheme should be reviewed and streamlined to make it more functional and effective as an instrument for the promotion and development of non-oil exports.
The phenomenal industrial growth and export competitiveness of the NICs have been attributed to a number of factors which I think can be of immense usefulness to our policy makers. First, governments in those countries provided the necessary assistance in export promotion, through various monetary and fiscal incentives to export industries, in addition to the provision of basic, functional and efficient infrastructures. Secondly, these countries liberalized their import policies, thereby facilitating the imports of inputs and equipments required by the export industries. They also encouraged export-oriented foreign investments in their countries by encouraging joint ventures and entering into international sub-contracting arrangements with foreign multinationals. For instance, the steel industry in South Korea was supported by the biggest and the most advanced Japanese steel maker, Nippon Steel, while the petrochemical industry in Singapore was supported by the United States. Such joint venture deals and collaborations with foreign concerns and investors have not only gained them technical expertise in form of technology transfer, but also eased their marketing problems in the international market place. As a matter of fact, major industrial exports of the NICs, especially those of South East Asia, are generated not so much by wholly domestic companies as by foreign-owned concerns operating in their economies, particularly in the area of sophisticated/technological industrial products. For example, in South Korea, Taiwan and Singapore, in the 1970’s, over half their export of electronic home appliances such as colour television sets, were made by foreign companies. The role of foreign firms/investors in competitive exports, especially in a developing economy like ours, therefore, cannot be over-emphasized.
Finally, government should take concrete steps to ensure that existing free trade/export processing zones in the country are more active and functional, while creating new ones where manufacturing industries will be exempted from duties and commodity taxes on their imported inputs/materials subsidized by the government, through specific financial credit schemes (e.g. through both domestic and offshore waivers and concessions), in addition to being exempted from corporate tax. If, through the free trade/export processing zones, companies are permitted reasonable freedom to export their products and to import production inputs with minimal restrictions, then I foresee a very great potential for non-oil exports in Nigeria.
Source: www.businessdayonline.com/NG/index.php/analysis/commentary/33349-stimulating-non-oil-exports
Learn more about Non Oil Export @ THE THY GLOBAL INVESTMENT LTD exportfromnigeria.proboards.com/index.cgi?board=general&action=display&thread=78
Consequently, and regrettably so, the export of non-oil products has been dismally low and marginally negligible. As a result of the high level of imports and low level of non-oil exports, the country has continued to record huge balance of trade and payment deficits in international trade. This, in my view, has been the albatross of the nation’s economic growth and development.
In order to reverse this unhealthy trend and underpin Nigeria’s global competitiveness in the international market, it has become imperative to diversify the economy and broaden the revenue base within and away from crude oil export. The government must embark on a deliberate, determined and systematic plan and programme of action to aggressively expand and vigorously promote non-oil exports. This has become even more apt and compelling, considering the volatility and attendant price fluctuations in the global oil market and its topsy-turvy effect on government’s revenue. Moreover, considering that Nigeria’s current oil wells, judging by recent reports, may dry up in the next few decades (estimated to be 30-40 years time), except of course new oil wells are discovered, the need for a strategic policy shift in favour of non-oil exports as the key driver of growth cannot be over-emphasised.
The stimulation of non-oil exports will provide a veritable alternative source of revenue, increase access to foreign exchange, and enhance the country’s foreign/external reserves. The increased foreign exchange earnings generated from non-oil exports will go a long way in ensuring a stable and competitive exchange rate/value for the naira.
Furthermore, the nation’s ability to reduce her external indebtedness and service existing debts will, to a large extent, depend on our export earnings through additional revenue from non-oil exports. The promotion and expansion of non-oil exports, willy-nilly, will have tremendous multiplier effects, directly and indirectly, on employment generation/job creation, especially considering the present high level of unemployment in the country. This is because with increased non-oil exports, there will be an exponential increase in employment opportunities in the industries engaged in direct production for exports. By extension, export growth will also have positive bearings and indirect effects on employment in feeder industries supplying inputs, materials and equipment to the industries directly engaged in export production.
The aggregate consumer expenditures of workers employed in all these industries, as a result of income earned, will also have significant salutary impact on the economy by way of lowering income inequalities, enhancing the country’s Gross National Income and stimulating economic growth.
In furtherance of its transformation agenda to liberate the nation’s tottering economy from the shackles of the current high-dependence on oil export/revenue, the government must adopt outward-looking and permissive economic policies which will emphasize vigorous export promotion and expansion through the provision of appropriate mix of incentives to exporters. In this regard, we need to learn from the experience of the Newly Industrialized Countries (NICs), especially the “Asian Tigers” - South Korea, Taiwan, China, Singapore, Hong Kong, Thailand, Malaysia and Indonesia. It is a widely acclaimed fact that the remarkable economic performances of the NICs have been largely due to the export-oriented growth of their economies. The governments of these countries, together with dynamic entrepreneurs and investors, succeeded in promoting vigorous export-led growth and industrialization.
In addition to the outward-looking strategies to effectively encourage exports, the government should also focus attention on effective exchange rate management system. Towards this end, the CBN should, as a matter of deliberate policy, maintain a regime of gradual and systematic deregulation of the foreign exchange market, if our non-oil exports are to compete favourably in the world market.
A deregulated foreign exchange market will ensure, over time, the evolution of a realistic, competitive and stable exchange rate/value of the naira. This is necessary because an over-valued naira may be counterproductive to the nation’s export promotion drive. A realistic and competitive exchange rate of the naira will go a long way in facilitating the growth of non-oil exports.
Furthermore, the Export Expansion Grant Scheme should be reviewed and streamlined to make it more functional and effective as an instrument for the promotion and development of non-oil exports.
The phenomenal industrial growth and export competitiveness of the NICs have been attributed to a number of factors which I think can be of immense usefulness to our policy makers. First, governments in those countries provided the necessary assistance in export promotion, through various monetary and fiscal incentives to export industries, in addition to the provision of basic, functional and efficient infrastructures. Secondly, these countries liberalized their import policies, thereby facilitating the imports of inputs and equipments required by the export industries. They also encouraged export-oriented foreign investments in their countries by encouraging joint ventures and entering into international sub-contracting arrangements with foreign multinationals. For instance, the steel industry in South Korea was supported by the biggest and the most advanced Japanese steel maker, Nippon Steel, while the petrochemical industry in Singapore was supported by the United States. Such joint venture deals and collaborations with foreign concerns and investors have not only gained them technical expertise in form of technology transfer, but also eased their marketing problems in the international market place. As a matter of fact, major industrial exports of the NICs, especially those of South East Asia, are generated not so much by wholly domestic companies as by foreign-owned concerns operating in their economies, particularly in the area of sophisticated/technological industrial products. For example, in South Korea, Taiwan and Singapore, in the 1970’s, over half their export of electronic home appliances such as colour television sets, were made by foreign companies. The role of foreign firms/investors in competitive exports, especially in a developing economy like ours, therefore, cannot be over-emphasized.
Finally, government should take concrete steps to ensure that existing free trade/export processing zones in the country are more active and functional, while creating new ones where manufacturing industries will be exempted from duties and commodity taxes on their imported inputs/materials subsidized by the government, through specific financial credit schemes (e.g. through both domestic and offshore waivers and concessions), in addition to being exempted from corporate tax. If, through the free trade/export processing zones, companies are permitted reasonable freedom to export their products and to import production inputs with minimal restrictions, then I foresee a very great potential for non-oil exports in Nigeria.
Source: www.businessdayonline.com/NG/index.php/analysis/commentary/33349-stimulating-non-oil-exports
Learn more about Non Oil Export @ THE THY GLOBAL INVESTMENT LTD exportfromnigeria.proboards.com/index.cgi?board=general&action=display&thread=78
