Mr. Olusegun Awolowo is Chief Executive Officer at the Nigerian Export Promotion Council (NEPC). In this interview with Ibrahim Apekhade Yusuf he speaks on the federal government’s plan to diversify the economy away from oil among other issues. Excerpts:
There has been a lot of media hype over the Zero-Oil Plan. What is this all about?
The Zero Oil Plan was actually inspired by President Muhammadu Buhari, when in 2015, with crude oil prices below $30 a barrel, he met with leading manufacturers in Abuja and said Nigeria must now begin to behave and plan as if it has no more oil. This was clearly a challenge laid out by President Buhari, as a flagship economic intent of the government. At the NEPC we took on the charge put forward by the President, and defined what the Nigerian economy would look like, if we did not export a drop of oil. What else could we be selling to the world? Who would buy it? How much could we make annually? Many Nigerians at first think this is impossible (a Nigeria without oil), but from the review process we have gone through we know it is not only possible, but actually essential for Nigeria’s future survival.
Nigeria has only 40 years or so of oil production based on its known reserves. Even if we shared all the crude oil Nigeria has to its 170 million citizens, we get only about N5million each, and nothing again forever. This is one of the lowest oil per capita levels in the world.
With the Zero Oil plan we have designed a Nigerian economy, without crude oil exports. The plan lays out the journey for us to make $100 billion annually from non-oil exports, with a first milestone of reaching $30 billion a year in non-oil exports. Today, Nigeria does less than $5 billion of non-oil exports a year. This will inject foreign exchange supply into the economy, which is the primary economic problem we face in the country today. The plan identifies eleven key products where Nigeria will make the most money through exports, as well as other export sectors that have less financial impact, but are essential to employment. Under our One-State One Export product program, we tie Zero Oil into the existing assets and resources which can be mobilised within each of the 36 States of Nigeria. This links federal policy to state economic policy, and turns every state into a major export hub, based on their specific areas of export advantage.
Over the next three years, we should see results in product groups with short gestation periods. For instance, radically scaling up exports of Soya products are possible in 24 months cycle, while palm or cocoa are likely to take longer, due to harvest cycles. Most oil producing countries are already adopting ‘post-oil economic policies, like Saudi Arabia’s plan just announced in April this year which, focuses on turning them into a portfolio investment country and not an export oriented country like we have set out. Regarding achievements, at least 10 states in Nigeria have commenced implementation of Zero Oil initiatives to develop new ways to develop their states without federation allocations.
From your discovery, how many of the states have started to export any products?
The One State One Product (OSOP) initiative is an essential part of the Zero Oil plan. The idea is to have all states of the federation identify at least one strategic export product based on their comparative advantage, from which Nigeria can earn foreign exchange. It’s important to note though, that states are not limited to choosing only one item. For example, Enugu continues to successfully export pineapples into the European market, despite choosing other products for OSOP. Nigeria is a very blessed country and we want to encourage state governments to ramp up production, so we can meet export targets in areas where the states are naturally endowed. Sometimes this means states working together, which is something we highlight during advocacy visits. For example in the Northwest, Jigawa, Kaduna, Kano, and Katsina have realised the potential of revamping their cotton industries. By working together these states have the potential to earn $ 2 – 2.5 billion annually from cotton and yarn exports by cultivating two-three million hectares of land and bettering their yields. We would like to see this type of synergy and collaboration replicated throughout the country.
In the Northeast leather can be a major export driver. Leather has the potential to earn $500-$750 million annually, from cow, sheep and goat hide, all of which Nigeria already has in abundance. In the North Central zone, Nigeria has the potential to earn $4-5 billion annually by increasing our production of soya beans, meal and oil. We need approximately five to six million hectares of land cultivated for soya with necessary investments in milling and oil production as well. In the Southwest, cocoa remains incredibly valuable, as it has been historically. With the right associated investment, Nigeria can move away from exporting the raw product and begin producing cocoa powder, butter and liquor. We have the ability to earn $2-2.5 billion annually from cocoa and its derivatives. In the Southeast, there is potential in gold. With one world-class gold mine, Nigeria can produce 1 million ounces of gold each year, earning $1billion annually. Finally, in the South South there is abundant potential in petrochemicals. Annually, the petrochemical industry is worth over $150 billion internationally and Nigeria, an oil producing nation, is missing from this. With at least five world-class petrochemical complexes in the South South region, Nigeria has the potential to earn $4-5 billion annually.
Beyond the Zero Oil plan, what other strategy has the NEPC put in place to promote the non-oil sector?
While the “Zero Oil” plan is the Council’s main strategy for improving Nigeria’s non-oil exports, the promotion and development of Nigeria’s export trade is central to the work NEPC does everyday. We are an incentive organisation so it’s important that we constantly build consensus, advocate and regularly engage with potential exporters in the private sector. To do this, NEPC organises specific trainings for infant exporters through programmes such as our Export Clinic Initiative, which is targeted towards beginners, our Zero to Export programme, and the establishment of our AGOA Human Capital Development Centre in Apapa, Lagos. We also host training workshops on capacity building throughout the year and run a Youth Empowerment Export Skills Program (YEESAP) which is targeted at encouraging young people to enter non-oil exports.
Internally, the Council has a Strategic Plan that has revamped our decision-making processes and brought them up to date. We recently concluded an Institutional and Functional Review by KPMG that restructured the Council by making it more in line with other successful export promoting agencies internationally. For example, our Export Development and Incentives Department houses a division dedicated to SME financing. We’ve also increased collaboration with sister agencies and stakeholders needed for success in the export space. We strive to have a synergy of goals and mutual collaboration with organisations such as NEXIM, NIPC, CBN, BOI, NIMASA, NCS, NBS, and others.
Some people believe that the planned sale of the national assets is the only way the country can raise funds and increase its foreign reserves. Do you share such sentiments?
I think this question should be approached from a broader perspective. Nigeria today has over a $35 billion annual shortfall in the supply of foreign exchange to its economy- this has been caused mainly by low oil prices, and also an absence of savings over the years. The real question therefore is not whether Nigeria should sell assets or not; but rather what are the tools available for Nigeria to increase foreign exchange supply to its people.
We have six primary ways of increasing foreign exchange supply. These are – to increase foreign currency borrowing, to attract foreign direct investments, to attract foreign portfolio investments, to boost remittances by the diaspora, to sell assets where it makes sense, and to radically increase exports. Countries all over the world have done a combination of these things to get their economies well-funded with foreign currency, and in reality, Nigeria too, may need to look at a combination of all of these options as well.
What we have seen though, through numerous studies, is that out of these six thrusts I mentioned, only a radical increase of exports has been proven to be the most sustainable supply of foreign exchange over the long term, and can best catalyse economic growth and job creation.
In 1980, Nigeria and China accounted for about 1% each of global exports. In 2011, while China accounted for about 11% of global exports, Nigeria’s share had dwindled to about 0.4%? Why?
The answer is simple: Over the past 36 years, the Chinese have increased the volumes and types of products they produce and export; while Nigeria has focused mainly on selling crude oil. For decades we did not prioritise non-oil exports as an economic philosophy, while the Chinese moved into new products and diversified their export basket. But we actually can also replicate a similar economic miracle here in Nigeria.
The Chinese in the 1980’s were largely agrarian, with low skills and technology, and not producing much to sell to the world. But they realised quickly that they needed a sustainable economic model to become rich. It is interesting to note, that the entire Chinese economy is built on two key principles – Investments and Exports. Everything else is done to complement these economic principles. The Chinese raise income from exports, they use this income by investing heavily in hard infrastructure, and the infrastructure also makes them even more competitive to export some more – such is the cycle of the Chinese economy. It is only recently, that they are now shifting to the next phase of their economic journey, by boosting local consumption. But the export focused engine has brought China very far, and was consistently pursued across all facets of state policy – foreign investors were encouraged to invest more in export oriented sectors; strategic financing made available to export companies; the rails and the roads were built to bring cargo from the hinterlands to ports primarily for exports; and so on. They also carefully selected the export areas to penetrate, gradually dominate, and from there further expand into new areas. For instance, the Chinese first built strong competencies in production that needed a lot of labor, or a lot of energy supply. There is no reason why Nigeria cannot follow a similar trajectory, as we also have a lot of affordable manpower and even potentially more energy than China.