The Securities and Exchange Commission (SEC) has said that developing the commodities ecosystem will boost Nigeria’s non-oil sector and foreign exchange earnings.
Lamido Yuguda, director-general of SEC, said this at the 2022 annual conference of the Finance Correspondents Association of Nigeria (FICAN), with the theme ‘Boosting domestic capacity for sustainable export earnings’, held over the weekend in Lagos.
Represented by Hafsat Rufia, director, Lagos zonal office of the commission, Yuguda said, “We believe that implementation of the roadmap for vibrant commodities trading ecosystem in Nigeria by the commission will support the development of the agricultural sector and diversification of the Nigerian economy and, ultimately, advance the country towards attaining sustainable foreign exchange earnings.”
He said it was imperative for the country to focus on all sustainable foreign exchange earning avenues of the capital market.
“We must, therefore, leverage on the capital market through the commodities ecosystem, the equity, and bond markets to develop and exploit all the potential sources of forex.”
According to data from the National Bureau of Statistics (NBS), the total value of capital importation into Nigeria in the second quarter of 2022 stood at $1.535 billion. The largest amount of capital importation was received through portfolio investments, which accounted for 49.33 percent ($757.32 million).
Foreign direct investments (FDI) accounted for 9.58 percent ($147.16 million) while other investments stood at 41.09 percent ($630.87 million).
The largest amount of portfolio investment went to money market instruments – 55.8 percent ($422.56 million). Bonds followed with 42.5 percent ($322.04 million) and Equities accounted for 1.68 percent ($12.72 million) of portfolio investment in Q2 2022.
The SEC DG stated that the Securities and Exchange Commission continues to advocate for a unified foreign exchange rate in order to attract more foreign portfolio investments into the country, adding “we appreciate the efforts of the Central Bank of Nigeria in exchange rate management and will support in whatever way we can to enable achievement of the objective of exchange rate stability.”
Olukayode Pitan, managing director/CEO of Bank of Industry (BoI) said the national budget was heavily reliant on the revenue generated from the oil sector, lamenting that since the 70s, the focus on oil as a major source of foreign exchange has negatively impacted growth in the non-oil sector and has led to a decline in its contribution to foreign exchange earnings.
Represented by Ominiaboh Uyoyou Jermila, project officer, he noted that, nonetheless, the non-oil sector contribution to GDP has been significant, pointing out that during the 2008 global financial crisis the non-oil sector helped to absorb extra natural shocks caused by the declining oil revenue.
He explained that sectors such as telecommunications, ICT, trade, industry and agriculture were critical to the economic recovery from the 2008 financial crisis and have remained so following the twin economic recession in 2016 and 2020.
Pitan said this has highlighted the need for economic diversification, which has become a significant point in national and policy-making imperatives, though with varying degrees of success.
He added that boosting export earnings has become more important given the naira devaluation and shrinking foreign exchange reserves.
As a result of this, he said, the government has made concerted efforts to focus on the non-oil sector for the increase and efficient collection of customs duties and other taxes.
Pitan noted that while there have been a lot of government policies and initiatives to encourage non-oil exports, especially among small and medium-scale industries, the performance of the sector is still likely to be below par due.
In the same vein, Muyiwa Akinyemi, deputy managing director, United Bank for Africa, noted that the discovery of crude oil brought a shift that has made the country to depend majorly on the oil sector while neglecting other sectors.
According to him, this made the economy susceptible to fluctuations in revenue, occasioned by the usual instability associated with the prices of crude oil in the international market.
“Successive governments have made differing efforts at diversifying the revenue sources of the economy by promoting non-oil export trade which cumulatively impacts on overall economic growth”, Akinyemi said.