We know that financing exports can be extremely difficult for financial institutions in Nigeria particularly because of the prevalence of commodity price risk and the dearth of knowledge around using appropriate tools to hedge trades. And there are other problems like sub-par produce, poor storage infrastructure and a disjointed export promotion strategy.
Solving these problems, however, could move the needle on the dial towards a much-needed liberation of our national economy that has been tethered to oil since the 70s.
In succinct language, if we do not look for a way to get our exports up and running, then we had better prepare for a plethora of dire consequences because the fifty-year oil music ended in 2014, even though the country continues to dance, five years on.
What happens if the political economy shifts into more peaceful times or technological advancements disrupt the global demand for oil is a thought left to dystopian imagination. The country will continue to service its debts but there will be too little to fund raw material imports, businesses will close, unemployment will rise and social problems, anticipated and unanticipated, will seize the country’s attention from different fronts.
The cause of the problem would not matter as much as the solution at that time because we would be forced to change.
However, prevention is better than cure and finding a solution could spell better fortunes for Nigeria if we accepted the demise of oil and simply put structures in place to facilitate the production, processing and export of cashew, sesame seeds, cocoa, groundnuts, hibiscus, ginger and the likes through public-private partnerships.
We have always had a way of championing our economy through monetary policy at the detriment of fiscal tools which is why proposing a National Commodity Trading House Act which will provide the legal framework for commodity trading houses to be set as public-private partnerships and financed by banks may just be Nigeria’s way out an impending foreign exchange crisis.
These trading houses will not only address the problems of substandard produce but they would also be able to take advantage of economies of scale through aggregation to bargain better deals locally and internationally, creating the groundwork for a commodity exchange that has been so needed in West Africa. Imagine that groundnuts grown in Auchi, midwestern Nigeria, could easily be pre-finance, aggregated and shipped to Suneor in Senegal based on a forward contract arrangement. Imagine the job prospects such an arrangement could also portend across the agricultural value chain for farmers, warehousing companies, warrant financiers, shipping companies, insurance and the industrial end-users.
Think about it, the possibilities are just endless.