The Centre for the Promotion of Private Enterprise (CPPE) has kicked against the Raw Materials Research and Development Council (RMRDC) Bill currently before the National Assembly, which proposed that no raw material should be exported from Nigeria without attaining 30 per cent local value addition.
The CPPE said that the bill has the prospect of creating significant adverse and unintended consequences for Nigerian exporters and manufacturers.
It also called on the National Assembly to discontinue deliberations on the bill because it is an aberration for the RMRDC to dabble into trade policy matters.
The Chief Executive Officer of CPPE, Dr. Muda Yusuf, also expressed concerns on some provisions in the bill that “manufacturers will not be allowed to import raw materials that are available in sufficient quantity in the country.”
Yusuf said that “the current proposal in the bill will penalise exporters in the country, most of whom export primary products.
“Thousands of jobs in the primary products export supply chain would be put at risk. The major non-oil exports are: cocoa beans and cocoa butter, cashew nuts, Gum Arabic, Ginger, sesame seeds, shea butter. Even crude oil export is still a major component of Nigeria’s export. Until recently, domestic refining capacity was nil.”
He added that the policy has to ensure a balance between the interests of exporters of primary products and the processors despite of the fact that the idea of promoting local value addition is good for the economy and potentially enhances the chances of better earnings from our exports.
According to him, “it is also imperative to undertake a robust study on domestic raw materials availability before legislating on a ban on raw materials for manufacturers. What is needed is a win-win proposition, not a zero-sum game.”
Yusuf said that the proposed bill raised a number of questions on “what metrics would be used to determine the minimum 30 per cent value addition.
“Who will determine and give approval for the export to proceed?
“What study has been done to determine the local processing capacity for each category of primary products currently been exported.
“What metrics would be used to determine raw materials that manufacturers would be allowed to import into the country?
“What is the effective time frame for implementation?”
He went on to ask if it is “within the mandate of the RMRDC to be promoting the ban of exports or imports?”
According to Yusuf, “the position of the CPPE is that this bill raises more questions than answers. It is a very simplistic proposition, which has not taken into account the critical challenges of manufacturing, processing and value addition in the Nigerian economy.
“These contextual understanding is very critical to enrich the conversations around the raw materials bill. Most agro processors have collapsed not so much because of the raw materials availability, but the challenges of productivity and competitiveness as production costs are prohibitive,” including the cost of energy, cost of funds, logistics cost, bureaucratic bottlenecks, exchange rate, multiple taxation etc.
He pointed out that these are bigger issues that need to be addressed to promote value addition.
“We should be causative in our approach to solving problems and focus less on the symptoms.
“If passed, the bill would create new corruption gateways in the bureaucracy as businesses will now be burdened with another chain of approvals.
“Additionally, the issue of export or import ban is not within the remit of the RMRDC or the Ministry of Science and Technology.
“It is in the realm of fiscal policy, which is within the purview of the Ministry of Finance, working in collaboration with the Ministry of National Planning and the Ministry of Industry, Trade and Investment.
“And in this particular instance, the Nigeria Export Promotion Council (NEPC) must be in the loop,” Yusuf said.
He explained that this is essential to determine the implications for the non-oil export sector and the manufacturing sector and the economy as whole. It is also important for policy coordination and coherence.
“Import and export regulations are not often legislated. They are trade policy issues, which are calibrated from time to time by the fiscal policy authorities in the light of prevailing economic conditions.
“It is not a matter for the National Assembly to legislate upon. Trade policies are also meant to be flexible, which is why they are not often a subject of legislation.
“We, therefore, submit that the National Assembly should discontinue deliberations on the bill and encourage the RMRDC to focus on its core mandate of raw materials research to offer most cost effective raw materials option for manufacturers,” he said.
