In need of a boost to non-oil exports
The latest quarterly Economic Report from the CBN puts non-oil exports provisionally at US$0.62bn in Q4 2017, indicating a rise of 21% q/q and a decline of 46% y/y. The q/q increase was attributed to a significant rise in receipts from agricultural products. Based on industry sources, the value of Nigerian agricultural exports to the US under its African Growth and Opportunity Act increased by 200% y/y to US$9m last year. The pick-up is commendable but generated revenue still remains low.
· The sectoral breakdown shows that proceeds from agricultural products stood at US$313m in Q4, representing 50.9% of total non-oil export proceeds.
· 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).
· 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 N500bn 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 N50bn intervention fund for the same purpose.
· The implementation of the re-introduced export expansion grant (EEG) has been slow; N20bn was set aside for the EEG in 2017 budget. For this year, we understand that the FGN has reduced the allocation to N9.7bn.