Fueling Growth: How Policy and Local Refinement Can Maximize Nigeria’s Resource Wealth

By Chinedu Okoye 



Summary:

- Nigeria has struggled to capitalize on its natural resources due to limited production scaling and reliance on raw exports. The launch of Dangote Refineries, which enables local refining and value addition, is a major shift

- This model must extend to sectors like agriculture, mining, and manufacturing to reduce imports and boost foreign exchange (FX) earnings.

- Expanding industrial capacity requires policy support, including subsidized credit and tax incentives, to encourage businesses to invest in value-chain creation.

- The goal is to drive sustainable growth through local value creation in key industries.




Local Value Creation and Resources Wealth Maximization:

Similar to many African Countries, Nigeria, has failed to leverage its natural resources to deliver sustainable growth. This stems from the struggle for businesses to scale up production or venture into new industries.

For a long time most of Nigerian economic activities in key sectors were stuck at the primary stage. For decades the country has depended on imported refined petroleum for energy whilst exporting crude export in its raw form.

The Dangote Refineries official commencement and other local refineries subsequently is a long waited development as refining locally creates a deep value chain enabling the country maximize the resource (Crude). As opposed to selling only crude the country can now sell a range of refined petroleum products.

Major players in industries tied to the countries natural resource endowments would need to replicate this move (build factories to convert resources to finished goods) for an increased output in key sectors. For this to happen there would need to be a wide range of similar policy interventions and support.



Critical Sectors and Commodities:

• Agriculture:
Raw Materials: Cassava, maize, yams, cocoa, palm oil, rice, millet, sorghum.
Products: Processed foods (e.g., garri, cassava flour), cocoa products, palm oil derivatives.

• Mining:
Raw Materials: Limestone, tin, coal, iron ore, lead, zinc, gold, barite, gemstones.
Products: Cement, construction materials, refined metals, jewelry.

• Manufacturing:
Raw Materials: Cotton, plastics, rubber, metals (steel, aluminum).
Products: Textiles, electronics, consumer goods, automobiles.
Increasing Industrial Capacity/Output:


Scaling Up Production Capacity in Critical Sectors:

By scaling up energy production, Nigeria has eliminated at least 20% of her annual imports. Refined Petroleum made up 21.50% of total imports in 2023. Adding food and metals to the list concurrently in terms of production capacity a d scale, would greatly impact industries like manufacturing, mining and food production.

This group of products in their raw or semi processed state provides the market (local and international) with foundational component goods from which a wife range of products can be derived. This translates to increased FX receipts or savings from the sale of these commoditiesto foreign and local entrepreneurs respectively, and an overall increase in output.

If the government is able to incentive and induce investment, deep value chain could be created in the above sectors.



Imcentivizing Value-chain Creation:

To encourage more secondary activities (processing of these resources to finished goods) there would need to be a similar support policy as has been accorded Dangote in the company's venture into Oil and Gas. 



Broadscale Support measures include;

Credit Support: A subsidized rates or special purposes credit facilities for businesses in targeted industries would relieve businesses of heavy interest rate costs as the government induces banks to lend at lower rates.

Policy Incentive:  A couple of incentives ranging from tax waivers, tax credit or tax holidays for a select industries to custom duty waivers for select capital equipments would be very supportive of businesses.


Policy Aims and Objectives:

The objectives are to stimulate industry on all levels with innovative policies that support sustainable growth of industries. Food and energy are the most essential Commodities of focus as increased local supply checks inflation. 

The credit support scheme provides finance at a cheaper cost, the broad policy incentives could encourage long-term investment decisions making

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