Nigeria loses billions exporting raw materials – Report

Nigeria is forfeiting billions in potential economic value by exporting raw materials rather than processed goods, according to a report from Rome Business School Nigeria. The document, titled "Rethinking 'Made in Nigeria': Value Chains, Global Positioning and Economic Identity Transformation," argues that the country's weak value chains are impeding local businesses' ability to generate jobs, foreign exchange, and compete on the world stage.

The nation's shea industry serves as a prime example of this issue, as Nigeria provides around 40 percent of the world's raw shea nuts, yet captures only 1 percent of the global shea product market, which is valued at approximately $6.5 billion. Most of the value is generated after the raw materials leave Nigeria, where they are transformed into cosmetics and other consumer products, packaged, and sold under international brands.

This pattern is observed in various agricultural commodities, such as cocoa, leather, and spices, where Nigerian producers supply raw materials while foreign businesses reap the majority of the value from processing, branding, and distribution. The report also highlights the petroleum industry, where Nigeria retains about 15 percent of the sector's value, compared to more than 40 percent in Brazil, underscoring the economic cost of limited domestic value addition.

As Nigeria strives to reduce its reliance on crude oil and boost domestic production, the findings come as a critical reminder of the economic consequences of limited value addition. Crude oil accounted for 74.98 percent of Nigeria's exports in the second quarter of 2024, while manufacturing contributed only 9 percent of the country's gross domestic product, with factories operating at just 57 percent of their installed capacity.

The report also sheds light on agricultural challenges, estimating that over 40 percent of fresh produce is lost post-harvest due to inadequate storage, poor road infrastructure, and weak cold-chain facilities, resulting in smallholder farmers losing more than 30 percent of their income. Micro, small, and medium-sized enterprises make up 96.9 percent of businesses in Nigeria, employ 87.9 percent of the workforce, and contribute 46.32 percent of the country's GDP, yet they hold only 6.21 percent of exports, demonstrating the challenge local businesses face in expanding beyond domestic markets.

Rome Business School Nigeria's President and Dean, Professor Antonio Ragusa, stated that the country possesses the resources and entrepreneurial talent required to build a stronger manufacturing base, but needs to capture more value from its products. He emphasized that "Made in Nigeria" should be associated with quality, innovation, reliability, and international competitiveness rather than merely being a patriotic campaign.

Head of academics at Rome Business School Nigeria, Sam Igwe, proposed that Nigeria can strengthen its national brand by enhancing institutions, industrial infrastructure, and supply chains, citing Afrobeats as an example of how Nigerian creativity has gained global recognition. He stressed that similar efforts are needed to boost the international appeal of Nigerian products.

General Manager of Rome Business School Nigeria, Olakunle Asummo, highlighted the need for policymakers and manufacturers to address infrastructure, financing, certification, packaging, and internationally recognized standards if Nigerian businesses are to compete more effectively abroad. The report also identified consumer confidence as a barrier to local brand growth, as Nigerians often prefer imported products due to perceived consistency, better packaging, warranties, and stronger consumer protection.

The report's central argument is that Nigeria's main challenge lies not in a shortage of resources or entrepreneurs but in the inability to connect production with processing, logistics, branding, and global distribution. By addressing these gaps, Nigerian businesses could retain more value domestically, expand exports, create higher-paying jobs, and reduce the economy's dependence on raw commodity exports.