Economists urge local value addition to reduce import cost

Sequel to the contagion effects the current Middle East crisis is having on Nigeria, economists are urging the government to develop local capacity to add value to raw materials for the production of manufactured goods.

The economists are in agreement that Nigeria actually has many raw materials, but still imports them or their processed forms because of weak processing capacity, weak policy enforcement, poor infrastructure, and limited industrialization.

According to the National Bureau of Statistics, Nigeria spent about N3.53 trillion importing raw materials in the first half of 2025, a 19.7% increase from N2.95 trillion in H1 2024. Over 70% of manufacturing inputs are still sourced abroad.

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What they are saying

The chief economist at SPM Professionals, Dr. Paul Alaje, acknowledging that Nigeria depends largely on imported raw materials for the manufacture of its industrial goods, told this medium that Nigeria should import only raw materials that are not available here.

He said the government must identify states that are viable in the production of agricultural and mineral resources, map them, and invest in them for productivity.

• The economist said, “Nigeria seems to be adopting a capitalist system, but what is lacking is the availability of capital for those who want to do critical business; and the cost of capital in Nigeria is extremely high for a country that is modeling capitalist structure. That means, adding value to raw materials must be a government-supported initiative, but driven by the private sector.
• “The initiative must be clear from the government. We need to identify everything that is in our soil and then find the private sector’s support, either through the Bank of Agriculture or the Bank of Industry, to provide support for them so as to set up processing plants to make this adaptable to what our industrialists can use.
• “Thirdly, there needs to be consistency in government policy. Before Nigerians can trust the government, there must be a document that binds the government as well as Nigerians to ensure they are responsible for any policy before the investors can part with their investment,” Alaje said.
• “What this will do is that it will create jobs all around the country, especially in zones where those raw materials are produced, He added.

Also speaking, the chief executive of the Center for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, stated that value addition is the way to go for Nigeria because it has a lot of benefits for the economy in terms of job creation, easing pressure on foreign exchange, and easing Nigeria’s balance of payments position.

Yusuf, however, cautioned that the cost of adding value is too high, so much so that by the time manufacturers are done producing, they cannot compete locally and internationally.

• “By the time we consider structural and logistics issues, high interest rates, the cost of production is so high that our manufacturers cannot compete favorably,” he said.
• “The beauty of manufacturing is to meet the demand of the local market and also export. But how much can we export? It all boils down to competitiveness issues.
• “The bottom line is if we really want to transition from exporting raw materials to a significant value addition, we need to create the environment for whatever is produced here to be competitive in quality and in pricing,” Yusuf added.

A financial economist at Auchi Polytechnic, Zakari Mohammed, noted that decades of policy flip-flops and infrastructural decadence had made Nigeria’s manufacturing sector, which is supposed to command one of the largest shares of the country’s GDP, a struggling one. He stressed that Nigeria’s governments, over the decades, had not been consistent in their development strategies.

Why it matters

By exporting raw materials and importing the same in some value-added form for manufacturing purposes, Nigeria is losing trillions of naira in the form of lost foreign exchange, job creation, higher import bill, pressure on the local currency, balance of payment, inflation, economic growth, and more.

• The trend manifests itself in the form of crude oil exports and imports, where Nigeria has the capacity for self-sufficiency in petroleum production, but still imports petroleum products.
• Nigeria exports cocoa, but imports cocoa powder, Cocoa butter, and chocolate products.
• Nigeria exports sesame, ginger, and cashew nuts, but imports processed sesame oil, ginger extracts and flavorings, and packaged cashew snacks.
• This happens because the processing industry is still underdeveloped, experts say.
• Nigeria exports sugarcane and imports raw and refined sugar. Sugarcane for refining is among the largest raw material imports into the country.
• Nigeria has abundant livestock and hides, especially from the northern region, but imports finished leather, processed skins, and leather products. Yet hides and skins are actually among Nigeria’s raw exports.
• Nigeria was once the world’s largest palm oil producer, but today it imports palm oil and derivatives used in food processing, cosmetics, and soap manufacturing.

Nigeria has large deposits of iron ore, copper, zinc, lithium, and tin. Yet the country imports steel, aluminum products, and industrial metals, because domestic mining and refining industries are weak.

What you should know

Prof. Nnanyelugo Martin Ike-Muonso, the Director-General of the Raw Materials Research and Development Council (RMRDC), has said local value-addition policies requiring at least 30% processing of raw materials before export could boost jobs, investment, and industrial growth to boost the country’s GDP by trillions of naira annually.

But while Nigeria’s Senate has passed the Raw Materials Research and Development Council Amendment Bill, requiring a minimum of 30% value addition before raw materials can be exported, Nigeria still imports value-added goods that it exports in raw form.