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Nigeria has historically relied on the export of raw materials, albeit without significant beneficiation, to drive its economy. Key exports include energy minerals, crude oil and gas, agricultural products such as cocoa and sesame seeds, and solid minerals like tin, columbite, and limestone. Of these raw material potentials, the exploitation of crude oil is the most significant, substantially influencing over 80% of government revenue prospects. While oil remains the backbone of Nigeria’s economy, agriculture and solid minerals present substantial opportunities for diversification and growth. As of 2021, Nigeria exported approximately ₦505.9 billion (roughly $1.2 billion) of raw materials. In Q3, 2023 it was ₦189.22 billion. According to the World Bank, agricultural raw materials exports (% of merchandise exports) were 0.38112 % in 2023 despite its huge abundance in the country. The export of solid raw materials is even more lacklustre when compared to the vast deposits available. The mining sector’s contribution to GDP is less than 1%, highlighting the inefficiencies in resource utilization.
Several factors hinder Nigeria’s ability to enhance its competitiveness in the global raw materials market. Infrastructure deficits, regulatory challenges, and inadequate investment in technology and research are primary obstacles.
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Significant infrastructure deficiencies have traditionally hindered Nigeria’s economic growth. Our electricity generation and utilization rates are far below those of several peer countries, impeding the ability to process raw materials domestically before exporting them. Power generation has not surpassed 5,000mw, with estimated energy requirements exceeding 40,000mw. Unofficial estimates suggest private power generation constitutes about 50% of business operating costs and diminishes Nigerian exports’ competitiveness in the global market. Similarly, the transportation networks are particularly problematic, and according to worldData.info, only 37% of Nigeria’s approximately 195,000 kilometres of roads are in good condition, resulting in 63% in bad condition as of 2021.
Several reports indicate that transportation costs from deficient road infrastructure hamper the flow of commodities and add approximately 12% to the overall cost of doing business in the country. A lack of efficient rail systems and congested ports like the Apapa Port in Lagos further aggravate these logistical challenges for enterprises. Again, the railway system, the most cost-effective mode of transport, contributes less than 1% to the transport sector’s GDP. At the same time, only about 3,800 kilometres of a vast network of inland waterways spanning 10,000 kilometres are navigable, limiting the potential for efficient water transport. Atop these logistical nightmares are the largely inadequate storage and warehousing facilities contributing to substantial post-harvest agricultural losses, estimated at 20-30% annually.
Promoting private sector involvement in the provision of public infrastructure can substantially improve the efficiency of the raw material export sector. A good case is the public-private partnership, exemplified by the Lekki Deep Sea Port project, programmed to enhance port capacity and efficiency, addressing the country’s pressing need for modernized transport infrastructure. The government has additionally initiated significant projects to improve logistics and transportation networks, such as the $1.5 billion rehabilitation of the Port Harcourt-Maiduguri rail line. Despite these and similar projects, there is an urgent need for increased spending on road maintenance and rehabilitation to facilitate smoother movement of goods. Only 37% of Nigeria’s 195,000 kilometres of roads are in good condition. Furthermore, investing in modern storage solutions is essential to reduce post-harvest losses.
In addition to infrastructure inadequacy, regulatory and policy issues create weighty challenges in Nigeria’s export sector. Due to complex and inefficient customs procedures, exporters often encounter delays and high costs. At least ten agencies, namely the Standards Organization of Nigeria (SON), Nigeria Drug Law Enforcement Agency (NDLEA), National Agency for Food and Drug Administration and Control (NAFDAC), Economic and Financial Crimes Commission (EFCC), Directorate of State Services (DSS), Nigeria Customs Service (NCS), Nigerian Police, Nigeria Ports Authority (NPA), Nigeria Exports Promotion Council (NEPC), Nigeria Immigration Service (NIS) all demand to be part of the inspection of raw material exports thereby unduly extending the waiting time and commodity value loss. The World Bank’s Doing Business report reflects these difficulties, ranking Nigeria 131st out of 190 countries in its 2020 Ease of Doing Business report. Furthermore, frequent policy changes, such as the ban and unban on certain raw material exports, create uncertainty and disrupt trade. Corruption is another primary concern, earning Nigeria 149th out of 180 countries in Transparency International’s Corruption Perceptions Index ranks.
Streamlining regulations and policies is essential for enhancing operational efficiency in trade and investment. One practical approach is the implementation of single-window systems at ports, which can significantly reduce delays and costs associated with customs and logistics. Additionally, establishing a consistent policy framework is crucial for attracting investment. Stable and transparent policies give businesses the confidence needed for long-term planning and investment decisions.
Obvious evidence of poor regulatory standards is that primary product exports from Nigeria frequently struggle to meet international quality standards, posing a significant barrier to their acceptance in global markets. For example, the European Union has periodically rejected Nigerian agro-raw material exports due to non-compliance with phytosanitary regulations, highlighting exporters’ challenges in adhering to necessary quality benchmarks. Without effective frameworks to ensure consistent quality, raw material exporters risk damaging their credibility and competitiveness in the international arena.
Ideally, the Raw Material Research and Development Council (RMRDC) should naturally be responsible for providing robust quality assurance systems and certification for raw material exports and imports. While the Standards Organization of Nigeria (SON) plays a crucial role in setting and enforcing quality standards, the collaboration of the RMRDC is required to achieve massive success in global-level raw material quality certification. In addition to establishing quality control systems, capacity building through targeted training programs is essential for raw material exporters to meet international standards.
Again, high tariffs and trade barriers imposed on raw material exports by key trading partners like the European Union and the United States also significantly affect Nigerian exports in accessing global markets. For instance, Nigerian cocoa exports are subject to a 6.1% tariff in the EU, which hinders their competitiveness and profitability. Moreover, Nigerian raw materials compete with those from countries with more advanced extraction and processing technologies, such as Brazil and Indonesia. This technological gap puts Nigerian exports at a disadvantage as they struggle to match the quality and efficiency of their competitors.
In general, expanding market access and enhancing competitiveness are crucial for boosting Nigerian exports and fostering economic growth. One significant opportunity lies in leveraging trade agreements, such as the African Continental Free Trade Area (AfCFTA), which aims to create a single market for goods and services across Africa. By reducing tariffs and trade barriers, AfCFTA can facilitate more access to new markets for Nigerian raw material exporters, thereby increasing their reach and potential customer base. Additionally, promoting Nigerian products through international trade fairs and expos can significantly enhance the visibility and demand for local raw materials.
Furthermore, significant technological and operational challenges also hinder the competitiveness of Nigeria’s raw material exports in the global markets. The country’s extraction and processing technologies are often outdated, reducing efficiency and product quality compared to more advanced competitors. This technological gap puts Nigerian exports at a disadvantage as they struggle to match the standards and efficiency of their rivals. Furthermore, inefficient production processes, such as artisanal mining, result in low productivity and environmental degradation. These operational inefficiencies limit the quantity and quality of exports and have negative ecological consequences.
Investing in modern extraction and processing equipment is essential for improving operational effectiveness. The focus on research and development (R&D) is pivotal. Increased R&D initiatives by the Raw Materials Research and Development Council (RMRDC) and similar organizations foster innovation in raw material processing. This investment drives technological progress and boosts productivity and economic growth by creating more efficient processing methods.
Financial constraints also severely hinder the growth and competitiveness of Nigerian raw material exports. Limited access to affordable financing options is a significant challenge, as interest rates in Nigeria are among the highest globally, often exceeding 20%. This lack of access to affordable capital discourages investment in modern equipment and technologies, perpetuating the use of outdated and inefficient production methods. Moreover, exchange rate volatility increases the risk for exporters, affecting their profitability. Currency fluctuations add an additional layer of uncertainty to the already challenging operating environment.
Financial support and incentives are vital for enhancing productivity and boosting raw material exports in Nigeria. For instance, the Nigerian Export Promotion Council (NEPC) supports exporters through various government incentives, including the Export Expansion Grant (EEG), encouraging investment in the export sector by offsetting costs and enhancing competitiveness. Moreover, improving the offerings of risk management tools such as export credit insurance plays a crucial role in safeguarding investments against uncertainties like currency fluctuations and defaults.
Nigeria’s raw material export sector also faces significant environmental and sustainability challenges that threaten the long-term viability of its export industries. Unsustainable extraction practices, particularly in the mining sectors, have caused substantial environmental degradation, including soil degradation, water pollution, and habitat destruction. Moreover, there is increasing pressure from international markets to comply with environmental standards, which many Nigerian raw material exporters struggle to meet. Failure to adhere to these standards can lead to rejection of exports and loss of market access. Promoting environmental sustainability and enforcing compliance with international environmental standards is critical to enhancing competitiveness in the market. The Nigerian Environmental Standards and Regulations Enforcement Agency (NESREA) monitors adherence to these standards, ensuring that industries operate within the established legal and environmental frameworks.
Finally, addressing the challenges in exporting Nigerian raw materials is crucial for the country’s economic growth and global competitiveness. Nigeria can unlock the full potential of its raw material exports by improving infrastructure, streamlining regulations, enhancing quality control, expanding market access, adopting modern technologies, providing financial support, and promoting sustainability. Collaborative efforts from the government, private sector, and development partners are essential in realizing these goals and ensuring sustainable economic development.
