Onome Amuge
Nigeria has a golden opportunity to capitalise on the untapped potential of its agro commodities sector, which the International Trade Centre (ITC) Export Potential Map estimates at $3.1 billion.
The report asserts that by harnessing this potential, Nigeria could boost its exports, tap into the lucrative global market for agricultural products, and realise the benefits of increased economic growth and diversification.
The International Trade Centre’s Export Potential Map is considered a crucial player in uncovering hidden potential for exports in countries like Nigeria, providing valuable insights into untapped opportunities for growth in the international trade market.
The ITC data revealed that Nigeria has an estimated $1.1 billion worth of potential in its cocoa bean industry, which far exceeds the country’s actual exports of $697 million in this sector.
The ITC data also showed that the Netherlands represents a lucrative market for Nigerian cocoa beans, with an export potential of $210 million for Nigeria. Despite this promising potential, Nigeria’s actual exports of cocoa beans to the Netherlands is recorded at $243 million, highlighting the untapped potential for Nigeria to further expand its exports in this sector and seize the opportunity to capitalise on the Netherlands’ substantial global imports of cocoa beans, which stand at $1.9 billion annually.
Germany has also emerged as a promising market for Nigerian cocoa beans, with an estimated export potential of $173 million. However, actual cocoa beans exports from Nigeria to Germany only amount to $117 million, signifying a significant gap of $56 million in untapped export potential.
Given Germany’s annual global cocoa beans imports of $1.2 billion and its substantial trade in goods with Nigeria, estimated at $1.8 billion, there is clearly a significant opportunity for Nigeria to further develop its cocoa beans exports and unlock the unrealised potential of this lucrative market.
The untapped potential for Nigeria’s cocoa beans exports has been further illustrated in the Indonesian market. The ITC data reveals that Indonesia’s export potential for Nigerian cocoa beans stands at $149 million, exceeding actual exports of $73 million, leaving a gap of $76 million in unrealised potential.
Commenting on the disparity between potential and actual exports of cocoa beans, Caleb Usoh, chief of staff of OCP Africa, a leading global provider of phosphate and its derivatives, attributed Nigeria’s agro-export underperformance to a deficient logistics system, which fails to guarantee quality and connect farms to markets.
“We have the potential to do more in every front of agriculture. From production to preserving to outbound logistics- There are a lot of inefficiencies which we have to address. Some of these inefficiencies are largely based on infrastructure which is not available in some instances,” he stated.
Speaking further on the limitations faced by Nigeria’s agricultural sector, Usoh identified the inadequate transportation and storage facilities as a major hindrance to the efficient movement and preservation of agricultural products.
According to Usoh, the provision of infrastructure, primarily the responsibility of the government, is vital for enabling trade, particularly international trade.
Despite the federal government’s push to export Nigerian agricultural products to international markets, Usoh noted that exporters are facing significant challenges due to a subpar logistics system that negatively impacts the quality and price competitiveness of their products.
Usoh attributed the country’s underperforming export potential in agriculture to poor storage and delivery systems, which hinder the efficient transport and preservation of products, ultimately resulting in reduced competitiveness in global markets.
He pointed out, “The roads are very bad. Materials stay on the roads for upward of 10 days. Imagine if you are moving from the North to Lagos and you are on the road for 10 days. Some of these products have short shelf lives. Exporters lose a lot as a result of poor logistics.”
In order to facilitate an increase in exports, the OCP Africa chief of staff, stressed the need for the government to assess and improve the processes at seaports, which he believes are currently detrimental to Nigeria’s competitive advantage and potential for robust growth.
Usoh urged the government to partner with the private sector to develop more efficient logistics, enhance connectivity, and optimize the business environment in order to improve the nation’s overall competitiveness in international markets.
Usoh also advocated for a comprehensive logistics optimisation strategy involving greater coordination between all public institutions and the private sector.
He believes that such a system-wide approach would not only maximise the effective capacity of existing logistics infrastructure but also eradicate distortions that raise costs and compromise quality, thereby enhancing Nigeria’s overall export earnings.
Reports have indicated that while being able to offer competitive payment terms is critical for exporters in securing export markets, many players in the agricultural sector often face challenges in accessing bank credit for export financing, either due to restrictive credit conditions or a lack of risk appetite among lenders.
This situation creates a significant barrier for them in the export sector, limiting their ability to compete effectively in international markets and capitalise on opportunities for growth and expansion.
According to economic analysts, the provision of credit facilities by commercial banks is vital to the overall health of the economy, particularly in supporting the export trade sector within the agricultural business.
A study, conducted by 3T Impex Consulting, a leading import-export training and consulting firm, found that about 94 percent of exporters encountered rejection of their financing requests by Nigerian banks.
This statistic, revealed in a report titled “Stimulating Export Finance Growth”, also highlighted that only 11 percent of exporters received approval for their export financing request. Additionally, the study uncovered that 42 percent of rejected requests were denied without any explanation, while 21 percent were rejected due to lack or inadequate collateral security.
Bamidele Ayemibo, director of 3T Impex Trade Academy, analysed the findings of the report, noting that 57 percent of exporters surveyed identified three primary barriers to export growth including; access to export finance, port logistics issues, and delays by government agencies at the port.
Ayemibo highlighted a key factor in the rejection of exporters’ financing requests, being that many banks in Nigeria are more accustomed to financing imports and are unfamiliar with the unique challenges and risks associated with export trade.
This lack of expertise, he noted, often leads to a reliance on traditional assessment criteria that are not tailored to export financing, which in turn results in a high rate of rejections for exporters seeking financial support.
Recommending solutions to address the identified challenges associated with export trade finance rejection, the trade finance experts said, “The banks need capacity building; the government needs to support them with credit insurance, and I think we should reduce the rate at which the government is asking banks to give guarantees.”
Ayemibo proposed a potential solution to the financing challenges faced by Nigerian exporters: a government guarantee that would enable banks to extend credit without assuming the full risk of these transactions.
This approach, common in other countries, would shift the risk to the government, which Ayemibo argued could stimulate greater interest among commercial banks in promoting exports.
In addition, he called on relevant government authorities to implement monetary policy and incentives that would make export financing more attractive to financial institutions, thereby fostering growth in the agriculture export sector.
