The chief executive officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, has advocated a strategic approach to Nigeria's value-addition drive, focusing on competitiveness before compulsion.
Yusuf stated this in the CPPE policy brief titled, 'Primary Product Export Vs Value Addition: Imperative of Proper Policy Sequencing' released yesterday to the media.
He emphasised the importance of domestic value addition as a vital pathway toward Nigeria's industrialisation, job creation, export diversification, and enhanced foreign-exchange earnings.
According to him, the initiative to enhance Nigeria's position in the value chain of primary commodity production and export aligns perfectly with the country's broader economic transformation goals.
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According to him, to effectively implement policies mandating domestic processing before export, it is essential to ensure sufficient, efficient, and competitive domestic processing capacity.
Establishing this foundation is critical to avoid potential market distortions that could negatively impact the primary production value chain.
"Given the recent positive momentum in Nigeria's non-oil export sector, driven mainly by foreign-exchange reforms that have bolstered export incentives, it is imperative to approach value-addition mandates with care. Ensuring that changes are thoughtfully sequenced can protect the progress already made in this sector."
He noted that the guiding principle of sustainable value-addition policies is clear: capacity should precede compulsion.
"For domestic processing to flourish, it is fundamental to have adequate and operational processing capabilities; competitive production costs comparable to global benchmarks; reliable infrastructure, particularly in power, transportation, and logistics; access to affordable financing options, modern technology, and skilled labour; among others."
"When these supportive conditions are lacking, imposing value addition through export restrictions can be counterproductive and could have adverse effects on primary producers and the overall economy," Yusuf added.
He also pointed out that restricting the export of raw commodities without adequate domestic processing capacity can create market distortions, leading to excess supply that depresses prices, and that this situation can significantly impact the incomes of farmers, aggregators, and rural communities.
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He called on policies that could potentially lower prices or limit access to export markets should be approached with caution, as they risk undermining production incentives, jeopardising rural employment and household incomes, and putting more pressure on vulnerable agrarian communities.
Yusuf disclosed that value addition will only be beneficial when the processed products are competitive in price, quality, and reliability on the global market, saying that "if processing is primarily sustained through protective export restrictions rather than efficiency, the consequences may include higher production costs and reduced demand for processed products."
He added that for Nigeria to achieve meaningful domestic value addition, a strategic approach is necessary, one that prioritises competitiveness before compulsion.
He stated that investments from both public and private sectors should focus on building adequate processing capacity, saying that "this involves expanding installed capacity, optimising utilisation rates, and ensuring that processors can absorb domestic output without distorting primary product prices."
