Nigeria suffers major diversification setback as revenue from manufactured goods exports falls

NIGERIA'S diversification drive suffered a major setback last year as export earnings from manufactured products fell by 166% to N778.4bn ($554.84m) in 2023 from the dizzy heights of N2.1trn ($1.47bn) that were recorded in 2019.

Since the 1970s when Nigeria became a major crude oil producer, the country has been a mono-economy, with petroleum product exports accounting for over 90% of federal government revenue. Of late, however, there have been moves to diversify the economy, given the volatility in oil markets and the realisation that the country cannot rely on a single primary product for its existence.

In 2019, Nigeria recorded her highest ever manufacturing export revenue, raising hope that the country was gradually weaning herself off crude oil. However, the breakthrough has not been sustained, with industry operators blaming the poor state of infrastructure, logistics and other binding constraints which they say have worsened the operating environment in recent years.

Apparently, the trend since 2019 has been downwards, with a significant decline to N960.7bn recorded in 2020, which was attributed to Covid-19 in 2020. A minor recovery was recorded in 2021 at N1.15trn but in 2022, a huge drop to N781.1bn was recorded and another significant drop to N778.4bn was recorded in 2023.

In its Africa Pulse publication, the World Bank specifically blamed Nigeria's dwindling foreign trade on poor infrastructure and inefficient logistics, among other factors. According to the World Bank, the cost of trade in Nigeria and Ethiopia is four to five times higher than what obtains in the US due to insecurity, higher transportation costs, topography and poor road infrastructure.

A World Bank spokesman said: “Studies from the Africa region consistently find spatial differences in prices of imported goods (food and non-food) as well as non-traded agricultural staples, indicating that markets are not well-integrated, and retail prices of products are affected by distance. For instance, trade costs are four to five times higher in Ethiopia and Nigeria than in the US, due to poor road infrastructure, low competition in the transportation sector, and topography.”

Also, the report further noted that the consequences of these distortions include preference of African producers to sell locally rather than export. In a similar vein, statistics provided by the World Trade Organisation revealed that South African manufacturing export value was $46bn in 2022, which is 15 times higher than that of Nigeria which was $3bn in the same year. 

Segun Ajayi-Kadir, the director-general of the Manufacturers Association of Nigeria, said: “The rising cost of doing business has worsened competitiveness of Nigerian products in the global market, which is evident in the drastic reduction in global demand for these products. The reduction in global demand for Nigerian products was further buttressed by the Nigerian Bureau of Statistics report that confirmed that the manufacturing export value of Nigeria plummeted by 166% from 2019 to 2023. 

“In addition, the exorbitant lending rate of over 30% has contributed largely to a drop in the share of manufacturing exports to non-oil exports from 82.4% to 24.8% in 2019 and 2023 respectively.”