(Bloomberg) -- Nigeria's push to end its economic contraction requires expanding the country's road and rail networks for an export-led recovery that would ease a reliance on oil, head of the West African nation's export agency said.
“It's important we build roads that lead to markets,” Segun Awolowo, chief executive officer of the Nigerian Export Promotion Council, said in an interview in the capital, Abuja. “The rail needs to move goods to the ports, so we can export.”
That's the thrust of a national recovery plan to be announced by President Muhammadu Buhari this month, a “zero-oil plan” that will harness agribusiness and mining potential, and create industrial parks where investors will get favorable terms to produce for export, he said.
Government revenue plunged and foreign currency shortages ensued as the price of oil, the country's main export, fell from the peak reached in mid-2014, and production fell as militants in the Niger River delta blew up pipelines. The authorities have struggled to manage the economic fallout, at one point pegging the exchange rate against the dollar for more than a year and at another using law enforcement to try and bring down the street price of foreign currency.
Factory output contracted 4.4 percent in the three months to the end of September, the third consecutive quarter of decline, and construction shrank 6.1 percent, the fifth straight quarterly contraction.
Nigeria's GDP decline is in line with falling oil output.
The slump in oil and shortages of foreign currency and power could cause the economy to shrink 1.7 percent this year, according to the International Monetary Fund. That would be Nigeria's first full-year contraction since 1991, according to data from the Washington-based lender.
Brent crude, which compares with Nigerian oil grades, rose 1.2% to $55.12 per barrel as of 11:44 a.m. in London, the highest since July 23, 2015.
The export promotion council, or NEPC, was set up almost four decades ago, and charged with overseeing the diversification of Nigeria's economy through the management of incentives to aid the export of non-oil commodities. The agency is in talks with Iran to get companies to invest in petrochemicals and pharmaceuticals, while similar deals are being sought with Mexico, Thailand and India, Awolowo said.
Nigeria provides multibillion-dollar opportunities in export-led production in petrochemicals, agriculture and mining that will boost foreign income and end the currency shortages that have crippled businesses once the infrastructure for efficient transportation is built, according to the agency.
Non-oil exports, led by cocoa, earned about $3 billion for Nigeria in 2014 and then fell to $1.6 billion in the following year. NEPC expects improved export income from these commodities from 2017.
“By the time the many things we're working on start kicking in, we'll be able to galvanize more traction,” Awolowo said. “Exports are the most viable and sustainable way of increasing our supply of foreign exchange.”
To contact the reporter on this story: Solape Renner in London at srenner4@bloomberg.net. To contact the editors responsible for this story: Karl Maier at kmaier2@bloomberg.net, Dulue Mbachu, Michael Gunn
