FROM MAGAZINE: Nigeria’s exports move from heyday to mayday

Nigeria’s supply chain, which is predominantly governed by its oil and gas Industry and agricultural exports, has taken a double whammy of collapsing oil prices and trade disruptions caused due to virus shutdowns. As markets around the world are cautiously resuming operations and frantically shifting, Nigeria is thriving to retain its trade partners with a threat of extended lockdowns and not opening up the economy in time to the world.

Nigeria’s revenue from crude oil sales in first quarter for the year 2020 missed its target by 31 percent, with total sales standing at $2.6 billion. Nigeria’s oil sales contribute to almost 60 percent of country’s revenue and 8 percent of GDP. The shortfall in the output comes after the International Monetary Fund (IMF) approved Nigeria’s request for emergency financial assistance of US$ 3.4 billion under the Rapid Financing Instrument (RFI) to meet the urgent balance of payment needs stemming from the outbreak of the Covid-19 pandemic and the plunge in oil prices. 

The damaging effects of the double whammy and closed borders are predicted to cost Nigeria an estimated N2.27 trillion worth of exports according to a report by Verraki Partners, a business solutions company for Africa. Country’s import sources like China, Spain, Netherlands, and USA that amount to 40 percent of total imports have closed their borders due to the threat of contagion and if this continues for another two months, the report said “Potential N2.23 trillion loss from Nigeria’s top five import nations which would lead to domestic scarcity.”

As oil prices slipped to negative, which tickled the liquefied natural gas (LNG) prices and demand, Nigerian National Petroleum Corporation reported over 12 LNG cargoes stranded globally with no hope of being purchased due to loss of demand caused by the coronavirus outbreak. And the resolve to these tankers lie in the hands of European markets, which see no improvements in demand. 

Disoriented raw material sourcing and agri produce
Supply chain operations in the country stand at the cusp of disruption, as manufacturers in the country hunt for alternate, local sources for the raw materials since access to Chinese raw materials remains shut. Obi Goodluck who is a partner and head of consumer and Industrial markets at KPMG Nigeria spoke to CNBC Africa about Nigeria’s raw material crisis amid the country wide lockdown and explained that “From the Nigerian point of view, we will no longer rely on importation of raw materials. As it were, this pandemic started from China and over 80 percent of Nigeria’s raw material imports come from China and the Asian countries. With the lockdown even in China, that became an issue. As such, companies had to come up with alternative means of raw material sourcing. Those who already imported raw materials prior to the lockdown relied on their stock until they ran out.”

The Cocoa Association of Nigeria reported that between 5,000 and 6,000 tonnes of cocoa beans stuck at the Lagos port and warehouses across Nigeria, as the lockdown has disrupted transport and port activities. Europe is the largest importer of Nigerian cocoa beans, especially Germany and Netherlands. And the ensuing lockdowns and trade restrictions in these regions are hitting such commodities hard.  

“Ships are being quarantined at the port, creating extra storage costs. Trading houses are anxious to receive their shipments and delays could affect demand for further beans from farmers, especially as the mid-crop harvest is about to start. We are hoping for an improvement,” explained Mufutau Abolarinwa who is the president of the association.

Transportation of foodstuff within country has become an arduous task and a safety concern as well. While the food truck drivers are allowed to move the essential supplies amid lockdown, drivers fear their safety and arrest by overzealous police. Trucking logistics firm Kobo360 had stated that 30 percent of its fleet across Nigeria, Kenya, Togo, Ghana and Uganda remained nonoperational as a result. Farmers complained about crops rotting in the fields or at the depots awaiting trucks in vain. And millers unable to get their milled rice to buyers.

While logistics operations in the country remain mostly withdrawn and without a fiscal or regulatory resolve, considering Nigeria’s reliance on ocean freight transportation, port operations in the country are seemingly catching momentum. Maritime industry, with its advantage in international trade, may see a rapid recovery of export activity as worlds manufacturing gets decentralised. As Federal Airport Authority of Nigeria (FAAN) and Nigeria Airspace Management Agency (NAMA) are forced to cut losses by downsizing, maritime sector’s economic position in Nigeria’s trade and commerce is highly likely to build up.