The governor of the Central Bank of Nigeria (CBN), reacting to calls by citizens to take drastic action against the free fall of the naira against the US Dollar, was quoted in a report saying: "Domestically, there has been zero dollar remittance to the country’s foreign reserve by the NNPC. Monetary policy alone cannot bear all the burden of the expected adjustments needed to manage all these difficulties. It’s our collective duty as Nigerians to shore up the value of the naira.’’

The report, titled ‘The forex question in Nigeria; Fact sheet’ also said: “Considering Nigeria’s heavy dependence on oil exports for foreign exchange earnings and government revenue, the impact of the oil market crash severely affected the government’s naira revenue and other macroeconomic aggregates including economic growth. Hence the rate of exchange between the naira and other currencies has widened over the past few years.’’

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The statement above presents the problem Nigeria has had over decades with its over-reliance on oil and gas revenues (that are subject to cyclical shocks) as a mainstay for funding its budget and servicing the market demand for the US Dollar (that forms the crux of its foreign exchange policy).
The value of shea nuts

In 2017, the Nigeria Export Promotion Council (NEPC) through the Raw Materials Research and Development Council (RMRDC) identified shea nuts as the 13th most valuable commodity in terms of its potential to fetch the most FX earnings for the country.

However, it will interest you to note that, in the financial year 2021, of the 42,500 metric tonnes of shea nuts exported (ten per cent of the 425,000 metric tonnes picked), Nigeria earned only $14.5m ($341 per metric tonne) for a commodity that, if processed into premium grade A butter and oil, can fetch as much as $13,000 per metric tonne on the international markets.

The question is, why are we satisfied with proceeds that are only 2.6% of the total value that can be received if the commodity is fully explored?

The answer goes back to the source of the shea nuts. The farmers and villagers in the 17 out of 36 states in Nigeria that pick shea nuts operate in individual silos, sell to middlemen who act as brokers to international buyers, and report the figures through the Nigeria Customs Service to the government.

Most of the villagers do not even know that shea nuts, when processed to premium grade A butter (that has a shelf life of 12 months), can actually be used as a Cocoa Butter Equivalent (CBE – an industry that has an annual trade value of $100bn globally).

They do not realise that shea butter is increasingly being used by major cosmetic companies around the world as a natural substitute for the chemicals that were previously used for making skin care products, lipsticks, and lip glosses. Most of the villagers do not realise that shea oil is typically priced at $7 per kilogram on the international markets, and is increasingly being used as a more healthy alternative (free of cholesterol) for cooking and baking.

This is partly because under the Africa Growth Opportunity Act (AGOA) for instance, the US Government has succeeded in convincing the Nigerian government that it is doing it a commercial favour by allowing its raw materials easy access to US ports duty-free when in actual fact the companies in America return 38 times the value processing the raw shea nuts into derivatives like premium-grade A butter and oil.
What needs to change?

Just like the Cocobod in Ghana started a supply chain fight with European off-takers for the imperative to raise the price of a metric tonne of cocoa beans, more countries in Africa need to understand that it cannot unlock value, compensate its workers, industrialise the continent and strengthen its currency by selling its commodities, from shea nuts to crude oil, to cocoa beans and cotton, raw.

In a visit to Ladgroup in February 2017 (the largest oilseeds processing company in Africa, with a capacity to do 27,000 metric tonnes per annum), the managing director of Nigeria export-import bank (NEXIM) Mr Bashir Wali said: “NEXIM is interested in providing funding for increased proactive measures, such as shea, as part of its non-oil export sector interventions in the agro-processing sub-sector.’’

The question is, how do you balance providing funding for companies that are in the secondary layer of the value chain, with ensuring you create wealth for the villagers and farmers in the primary layer of the value chain?

The answer lies in the willingness of the fiscal authorities at the state and federal government levels to not only provide access to patient capital, and develop a seamless process for the exports of processed derivatives, but also to develop frameworks that ensure farmers and villagers can unlock the benefits of being part of special purpose vehicles designed to distribute profits from turning a raw commodity into a valuable derivative, a model developmental economists and experts tag ‘social impact’.

As the governor of the CBN said recently: “The Central Bank does not print dollars.’’ Stabilising the naira is key to implementing a stable macroeconomic policy around single-digit inflation, and this requires a revival of the non-oil sector and diversification away from oil and gas.