There are indications that companies operating in the Nigeria’s manufacturing sector may be manipulating the tariff concessions in foreign trade in manufactured goods valued at over N4.8 trillion in the first quarter of 2021.
Details of the manufacturing trade statistics of the National Bureau of Statistics, NBS, shows that rather than produce locally under the concessionary tariff, the goods are imported. Moreover, the same round-tripping is said to be going on in export manufacturing where concessions are used to import the items and then re-export them.
Consequently, on both counts huge foreign exchange is expended in supporting local manufactures that are heavily import dependent.
Financial Vanguard analysis of the NBS Report shows that over 95 percent of total trade manufactured goods are imported, while only 20.8 percent of manufactured goods exported from Nigeria in the first quarter of 2021 (Q1’21) under the concessions were actually produced locally.
A breakdown of the NBS Foreign Trade in Goods Statistics (Q1 2021) revealed that the import component of foreign trade in manufactured goods was N4.532 trillion representing about 95 percent, while export component accounted for only N250.4 billion or 5 percent.
An analyst says the development is a reflection of shortcomings in the manufacturing sector, adding that the sector needs to be strengthened for better competitiveness in the era of the Africa Continental Free Trade Agreement, ACFTA.
Another analyst opined that companies are taking advantage of tariff concessions on importation of some manufactured goods by the government for round tripping.
According to NBS, the value of manufactured goods traded in Q1 2021 was N4.782 trillion, which amounts to 49.01 percent of total foreign trade in goods valued at N9.76 trillion. Total imports in the quarter was valued at N6.85 trillion representing 70.2 percent of the total trade, while the value of total exports stood at N2.91 trillion, representing 29.8 percent.
The value of imported manufactured goods grew by 18.47 percent in Q1 2021 compared to Q4 2020 and 69.70 percent as against Q1 2020.
On the other hand, value of total exports in Q1 2021 decreased by 8.99 percent against the level recorded in Q4 2020 and down by 29.26 percent compared to Q1 2020.
However, the value of manufactured goods exports rose by 94.0 percent in Q1 2021 compared to Q4 2020, but it decreased by 43.7 percent compared to Q1 2020.
However, further details on the export figures show a disturbing picture.
Foreign goods are re-exported
The NBS trade report indicated that foreign manufactured goods that were re-exported from Nigeria accounted for about N198.4 billion, representing 79.2 percent of the N250.4 billion worth of total manufactured goods exported from the country in the quarter.
This implies that only about N52 billion worth of exported manufactured goods, or 20.8 percent, were made locally.
Moreover, a look at the NBS’ report on manufactured items exported from Nigeria shows some items that could not have been manufactured locally given the technological and industrial capacity of the country, thereby confirming the impression of huge non-value added re-export as well as possible shortchanging of the government’s trade concessions.
NBS trade report stated: “The products that drove up manufactured export products were Helicopters of unladen weight exceeding 2000 kg which were exported to Ghana, at a value of N71.1 billion. Vessels and other floating structures for breaking up were exported to the United Kingdom and Cameroon, worth N38.9 billion and N17.6 billion.
“Other products were floating or Submersible drilling platforms exported to Equatorial Guinea, at a value of N39.5 billion, and storage units worth N31.3billion exported to Ghana.’’
Generally, total foreign trade data suggests that imports have been expanding strongly to exceed exports since Q2 2020 up until Q1 2021.
In Q1 2020, exports accounted for 50.8 percent against imports at 49.2 percent. But since Q2 2020, exports have expanded steadily against imports with exports at 43.3 percent versus imports at 56.7 percent; Q3 2020, exports 35.7 percent and imports 64.3 percent; Q4 2020, exports stood at 35.0 percent versus imports at 65.0 percent.
Costly regulatory environment remains manufacturing Achilles’ heel – MAN
In his reaction to Financial Vanguard’s concerns over this report, the Director General, Manufacturers Association of Nigeria (MAN), Mr. Segun Ajayi-Kadir, stated: “There is no doubt that manufacturing exports have been bending backward for a good number of years, particularly from 2014. The fact is that only a competitive manufacturing sector can meaningfully and beneficially engage in export trade.
‘‘It takes a favourable macroeconomic ambience and supportive regulatory environment to achieve scale production and competitive manufacturing.
‘‘Our economy remains a mono-economy, not diversified to achieve multiple streams of exports and consequent foreign exchange.
“So we need to deliberately accelerate our efforts at diversifying the export basket; support domestic production, particularly manufacturing to achieve scale and diverse production; remove supply side and regulatory constraints that bedevil competitiveness and fashion out a coherent trade policy. Otherwise, manufacturing export performance will remain unimpressive.
“The regulatory environment is costly while the piecemeal trade policies kind of environment has remained an Achilles’ heel.
“Manufacturing export is a strategic national economic power. Industrial economies would not allow the sector to be affected by vagaries of market forces. Rather, it is helped with deliberate encouragement by the government. They include incentives that are deliberately targeted at boosting exports.
“Nigeria has a similar scheme in Export Expansion Grant (EEG). When the scheme was well implemented, non-oil exports increased by 197% from $1 billion in 2006 to $2.97 billion in 2013, visible industrial expansion and market penetration of made-in-Nigeria goods and employment of about 11 million persons in the non-oil sector. All of these waned within one year of the suspension of EEG in 2014.
‘‘Although implementation has resumed, but it is still bedeviled with highly diminished and far between grant payments.”
In his reaction, Dr. Muda Yusuf, immediate past Director General of the Lagos Chamber of commerce and Industry (LCCI), stated: “The trade figures graphically reflect the shortcomings of the Nigerian manufacturing sector. 95 percent of the manufacturing trade is imports, while manufactured exports account for a mere 5 percent. Even a good part of the exports are not domestically produced goods. They are essentially re-exports.
“There is a great deal of work to be done to pave the way for manufacturing competitiveness. The reality is that on the global trade arena, competitiveness is the name of the game.
“We therefore need to strengthen competitiveness. We need to fix the structural, regulatory, policy, macroeconomic and institutional impediments to manufacturing competitiveness in Nigeria.
“The headwinds against the manufacturing sector’s growth have not abated. If anything, they have intensified. Production costs remain elevated, operating costs are high, energy costs are accelerating, purchasing power is being rapidly eroded, influx of cheap products into the country is on the increase, the ports situation remains very challenging for industries, cost of funds is currently on an upward trajectory.”
Also commenting, renowned economist, Dr. Biodun Adedipe, Chief Consultant, BAA Consult, said: “The trade statistics show our inordinate dependence on imports, which accounted for 70.2 percent of our total foreign trade in Q1 2021.
“My argument is that some business entities or individuals must be taking undue advantage of the government’s policy of tariff concession on imported transportation equipment. That perhaps, is the only possible explanation for Nigeria exporting helicopters when we don’t produce them in Nigeria. That is what you will find when you interrogate the foreign trade data published by NBS.”