July 22, 2021/CSL Research
Yesterday, news reports revealed that the Nigerian Exports Promotion Council (NEPC) is about to kickstart a N50bn Export Expansion Facility Program (EEFP), which is aimed at growing export earnings in the country. The fund as part of the Economic Sustainability Plan (ESP) would provide for financial support for Nigerian exporters, establish top-notch warehouses, and provide an avenue for locally produced items to be packaged to globally acceptable standards. The fund is targeted at Micro, Small and Medium Enterprises (MSMEs) and expected to buoy export and increase inflow which would reduce Nigeria’s protracted dependence on oil revenue. Oil receipts contributed 66.4% to Nigeria’s export earnings in Q1 2021.
There have been repeated calls from analyst for economic diversification to reduce the country’s exposure to oil price volatility. The emergence of the coronavirus pandemic further revealed the country’s frailties resulting in a recession just as it happened in 2015. The ESP was refocused through the EEFP (launched on the 30 March 2021) to taper the effect of the pandemic on non-oil export businesses, as the Federal Government (FG) seeks to protect existing jobs and create new ones. Although the program had earlier anticipated 500 beneficiaries, available data suggests that 7x the expected number applied, while 2000 beneficiaries eventually met the eligibility criteria and were verified for the intervention.
Though the stated amount of the fund appears quite insignificant relative to what will be needed to make any significant impact, we welcome any effort aimed at buoying Nigeria’s non-oil exports. Diversifying the country’s export earnings from the continued dependence on oil receipts which continues to subject Nigeria’s foreign exchange performance to volatility is an urgent need. That said, we believe the issues affecting productivity within the economy should be addressed first. Overtime, we have reiterated the need for the security of lives and properties, infrastructural development, elimination of policy uncertainties and bureaucratic bottlenecks to improve the ease of doing business in the country. We hold that export receipts will improve when economic productivity improves.