KEY POINTS

• Rising costs and high interest rates are hindering production of exporters.
• Additionally, issues arise from policy restrictions on foreign exchange repatriation and delayed issuing of export grants.
• Improving competitiveness, logistics and access to export proceeds is called for by experts.

Challenges confronting exporters in Nigeria are crippling the non-oil export sector, a major source of foreign exchange inflows.

Rising costs of goods and services, high interest rates, and multiple policy restrictions have made a significant dent in exporters’ performance, especially in the first half of 2024, a Financial Vanguard investigation has revealed.

Costs and interest rates escalating

Over the last year, skyrocketing prices for goods and services have driven working capital for exporters up more than 350 percent.

In addition, high bank interest rates that surpass 30 percent to be precise have pushed it to the point where businesses cannot secure enough the funds to keep or expand production.

This has eaten into their profits and left exporters in the profession struggling to compete in the international market, they say.

Challenges of policy and infrastructure

Exporters are also facing the payment of foreign exchange earnings and they are not being paid the export grants that had been promised between 2021 and 2024.

More systemic challenges like flooding, port congestion, have complicated the difficulties and weakened growth in non-oil exports (NOEs).

Central Bank of Nigeria (CBN) data shows that NOEs grew by just 3.1 percent year on year (YoY) in the first half of 2024 (H1’24) with notably weaker growth in re-exports and electricity exports. Meanwhile, informal trade and some other non-oil exports also recorded slight increase.

Exporters speak out

Otunba Felix Oladunjoye, Chairman of the Cocoa Processors Association of Nigeria (COPAN), states that barriers like rising inflation, naira depreciation, and high borrowing rates are hindering export growth.

Exporters now have to meet five times the working capital they used to as the costs of exporting have multiplied and borrowing costs are now around 35 percent, he said.

Similarly, Dr Victor Iyama, Chairman, Federation of Agricultural Commodities Association of Nigeria (FACAN), said price volatility in commodities such as cocoa is discouraging exporters.

Further complicating the matter, he said restrictions placed on how exporters should use their foreign exchange proceeds is another reason.

Climate change and seasonal factors

The economic and policy related challenges aside; climate change and season factors have negatively impacted agricultural exports. Aging trees and poor export policies have hampered the cashew production, according to Ojo Joseph Ajanaku, President of the National Cashew Association of Nigeria (NCAN).

According to Vanguard, He states the volatile exchange rate and the government’s restrictions on the use of export proceeds are making it difficult for exporters to plan and compete.

A path to recovery

Muda Yusuf, the Director General of Centre for Promotion of Private Enterprise, and other experts said with regards to non oil exports to thrive in Nigeria, the country must work to create a competitive environment for exports.

This entails lowering the cost of production, streamlining the logistics, raising the quality of product, and moving up from the primary to value added products.

Exporters also insist that they need access to their foreign exchange without restricting policies to improve their competitiveness and make the sector stable.