EEG, Agriculture Lift Non-oil Exports by $0.62billion

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Eromosele Abiodun

Following the gradual implementation of the re-introduced export expansion grant (EEG) by the federal government and the boost in agriculture, the nation’s non-oil exports has continued to grow, rising by $0.62 billion (N223.20 billion) in the last quarter of 2017, indicating a rise of 21 per cent quarter-on-quarter (q/q).

According to the latest quarterly Economic Report released by the Central Bank of Nigeria (CBN), while the non-oil exports grew 21 per cent q/q, it however declined by 46 per cent year-on-year (y/y).

The quarterly economic report attributed the q/q increase to a significant rise in receipts from agricultural products.

The sectoral breakdown showed that proceeds from agricultural products stood at $313 million (N112.68 million) in the fourth quarter of 2017, representing 50.9 per cent of total non-oil export proceeds.

The solid minerals sector trailed the agric sector with 16.8 per cent, followed by Industrials with 16.1 per cent while manufacturing and food products recorded 14.4 per cent and 1.8 per cent respectively.

Also, industry sources revealed that the value of Nigerian agricultural exports to the United States under its African Growth and Opportunity Act (AGOA) increased by 200 per cent y/y to $9 million in 2017.

In their comment, analysts at FBN Quest believe the pick-up in non-oil export is commendable stressing however that the generated revenue still remains low.

According to FBN Quest, “We note that food inflation has remained stubbornly high over the past several months. One likely reason, although anecdotal at this stage, is the increasing preference of farmers to export their produce as opposed to supplying domestically. In our view, the preference can be linked to currency depreciation and the attraction of being paid in a convertible currency (the CFA franc).”

The analysts added: “A favoured agricultural export is sesame seeds. Recent reports indicate that global demand for the product has picked up, with Japan positioned as its leading export destination. This is most likely due to the growing market for food products such as hummus as well as sushi in Japan.

“To encourage export activities, the CBN has reintroduced the N500 billion export stimulation loan for non-oil producers and exporters. This was initially introduced in 2015. Additionally, the Nigerian Export-Import Bank, the country’s export credit agency, has set up a smaller N50 billion intervention fund for the same purpose.
“From the CBN’s Economic Report Fourth Quarter 2017 we can see the limited success of the fiscal branch of the FGN’s diversification agenda. Gross non-oil revenue in 2017 amounted to N3.24trn, and so well short of the target for the full year, implied in the CBN’s commentary, of N5.34trn. Gross oil revenue in the same period of N4.11trn was far closer to budget due to the recovery in oil production and prices. Data from the same source has average crude oil output rising from 1.75 mbpd in Q1 2017 to 1.98 mpbd in Q3.

“Non-oil revenue peaks in the third quarter because of the deadline for payment of companies’ income tax (CIT). This has been the case every year since 2010, when collection was marginally higher in Q4. The chart does show some positive momentum on the non-oil revenue side. Collection of N815bn in Q4 represented an increase of 22.5 per cent y/y: drilling down into the sub-categories, we see rises of 59.4 per cent for CIT, 21.0 per cent for VAT, and just 7.9 per cent for customs and excise. As the economy has emerged from recession so we would have expected this improved take, most of all from VAT.”

The analysts added that they expect that in 2018 non-oil will underperform oil revenue collection relative to their respective targets.

They pointed out that the federal government’s budget proposals have an ambitious assumption for production of 2.30 mbpd.
“However, we still see some useful room for manoeuvre for the FGN from the price although the Senate has already raised the assumption to $47/b and may push for another rise in the continuing negotiations.”