FG to save N1.037trn annually from proposed raw materials bill – RMRDC

The Director General/CEO, Raw Materials Research and Development Council (RMRDC), Prof. Nnanyelugo M. Ike-Muonso, has assured that the Federal Government will save N1.037 trillion if the 30 per cent proposed Raw Materials Processing and Local Production Protection Bill sponsored by the Council, and currently before the National Assembly (NASS), is finally passed into law.

The bill which mandates minimum local processing requirements, has scaled first reading, and will be up for second reading by next week.

In a Statement signed by the Council’s Director of Corporate Affairs, Chucks Ngaha, on Friday, the RMRDC boss expressed confidence that when the Bill is passed, it would address the complex drawbacks and challenges that have stagnated the nation’s industrial sector.

According to the DG, the proposed legislation and the attendant policies emanating from the council echo successful strategies implemented in several countries, showcasing the potential benefits for Nigeria’s economy, citing Indonesia and Malaysia as countries that have successfully implemented similar policies.

“Indonesia’s raw material export restrictions, implemented through Law No. 4/2009 and Ministry of Trade Regulation No. 1/2017, effectively boosted domestic processing. Similarly, Malaysia’s PORLA regulations and industrial policies have created a robust processing sector”.

Ike-Muonso acknowledged that Nigeria has struggled with industrialization due to various factors, including inadequate infrastructure, inconsistent policies, and a lack of technological investment.

He noted that one major challenge is the continuous export of raw materials by aggregators-for-export exacerbates which has limits the availability of essential inputs for local industries.

The DG observed that unarguably, the Nigerian agricultural produce aggregators-for-export play a pivotal role in the agricultural value chain, serving as intermediaries who collect, consolidate, and facilitate the trade of agricultural products from farmers to both domestic and international markets.

He however said there is the need for them to change their value chain methods to allow innovations that will transform Nigeria’s agricultural potential into a powerful engine for economic growth and acceleration.

He added: “Nigeria’s industrial sector has historically been a critical driver of economic growth and diversification, and the country’s rich agricultural resources offer immense potential for industrial development, providing essential raw materials for various industries. However, the interaction between agricultural produce aggregators-for-export, and local industries has proven to be a significant hurdle”.

“These actors operate across various scales, from small-scale local aggregators to large export companies, creating vital links between producers and end-users while providing essential market access for countless small holder farmers.

“Their activities involve purchasing agricultural products directly from farmers or through local markets, sorting, grading, packaging, and ultimately selling them to processors, manufacturers, or primarily the export markets. Sadly, their activities make it difficult for local industries to compete and thrive.

“For example, while lucrative, exporting raw cocoa beans means local chocolate manufacturers lack the necessary raw materials to produce value-added products. Similarly, exporting raw soya beans and cashew nuts deprives local processors of the opportunity to create higher-value products such as soya flour, soya meals, and processed cashew nuts.

“The frustration with Nigeria’s industrial development is mainly attributable to its export-oriented focus on agricultural raw materials. In 2023, Nigeria’s agricultural exports reached ₦1.244 trillion, while imports stood at ₦2.281 trillion, creating a significant trade deficit of ₦1.037 trillion.

“Local industries struggle to secure raw materials as aggregators-for-export prioritize shipping agricultural commodities abroad.

“For instance, despite being Africa’s largest producer of cashew nuts, with an annual production of approximately 250,000 metric tons, Nigeria processes less than 6% locally, with the majority exported raw to Vietnam and India. This situation is also the case in the cocoa sector, where Nigeria, producing about 250,000 tons annually, processes less than 13 per cent domestically, unlike Côte d’Ivoire, which processes over 50 per cent of its cocoa production,” he said.

He stated that the trade deficit in agricultural goods further compounds the impact of this export-oriented approach, clearly stating that in 2023, Nigeria imported agricultural goods worth ₦2.281 trillion, exceeding exports valued at ₦1.244 trillion by ₦1.037 trillion.

“This ugly performance marks the fifth consecutive year that agricultural imports have surpassed exports; highlighting the inefficiency in the current agricultural trade practices”, he added.

Ike-Muonso who stated that significant investments in technology and infrastructure would enable local manufacturers improve their production processes and product quality, added that capacity-building programs aimed at developing the skills and expertise of local industry workers are crucial.

“Nigeria can reduce its dependency on raw material exports by fostering innovation, creating an enabling environment, and building a resilient, diversified industrial base,” the DG said.