Declare services export sector priority sector — Dr Obiora

By Gabriel Ewepu

As the Buhari-led administration continue to harp on diversifying the economy to non-oil sectors, the National President of the Association of Outsourcing Professionals of Nigeria, AOPN, Dr Madu Obiora, in this interview tasked the government on declaring the services export sector a priority sector and also showcase Nigeria as reliable and quality service destination in Africa, as he spoke on other salient issues that would boost the economy.

Excerpts:

Services Export, what is it about?

Let us start by defining what service export is and who is a service exporter. You export service and are a service exporter when the person paying for the service is not a resident in your country. Let me also explain the difference between services export and export services. Services export are services that is bought by a foreign client while export services are services that are offered locally to facilitate export like freight forwarding and others

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Mode 1: Cross‑border; A user in country A receives services from abroad through its telecommunications or postal infrastructure. Such supplies may include consultancy or market research reports, telemedical advice, distance training, or architectural drawings.

Mode 2: Consumption abroad (Tourism); Nationals of A have moved abroad as tourists, students, or patients to consume the respective services.

Mode 3: Commercial presence; The service is provided within A by a locally-established affiliate, subsidiary, or representative office of a foreign-owned and – controlled company (bank, hotel group, construction company, etc.)

Mode 4: Movement of natural persons; A foreign national provides a service within A as an independent supplier (e.g., consultant, health worker) or employee of a service supplier (e.g. consultancy firm, hospital, Construction Company).

Can you give an insight into the role services exports play in economic growth and development?

Let us start by defining what service export is and who is a service exporter. You export service and are a service exporter when the person paying for the service is not a resident in your country. Let me also explain the difference between services export and export services. Services export are services that is bought by a foreign client while export services are services that are offered locally to facilitate export like freight forwarding and others

Let us start by defining what service export is and who is a service exporter. You export service and are a service exporter when the person paying for the service is not a resident in your country. Let me also explain the difference between services export and export services. Services export are services that is bought by a foreign client while export services are services that are offered locally to facilitate export like freight forwarding and others

Talking about Nigerian services exports, can you give an overview of it for better understanding?

A lot of services export takes place in Nigeria but unfortunately because it is a sector we generally regard as information we are not gathering statistics. So it is very difficult to determine size. However, services constitute about 57 per cent the GDP but less than 10 per cent of that is currently being exported. This means that the opportunity is still a virgin. I will just take two examples. A company called Kobo360 is moving into 18 African countries. It’s a tech company revolutionising the haulage component of the Supply chain. On the last count, the company is worth about $300 million. Paystack, a young Nigeria start up-sold their company to the tune of $200 million. There are several outsourcing companies serving only foreign clients. There are also education services firms that offer certifications and serving students outside the shores of Nigeria

Can you give an insight into the role services exports play in economic growth and development?

The service sector is an important component of any country’s economy. It makes a direct and significant contribution to gross domestic product (GDP) and job creation and provides crucial inputs for the rest of the economy. In the process, services exert significant effects on economy-wide performance and on the overall investment climate. Some service sectors, such as health, education, water, and sanitation, are also directly relevant to achieving important social development objectives.

The services sector is key to economic growth, competitiveness, and poverty alleviation. Comprising more than two-thirds of the world economy, services are now commonly traded across borders, helped by technological progress and the increased mobility of persons. In recent years, a number of developing countries have looked at trade in services as a means to both respond to domestic supply shortages and to diversify and boost exports. Any country can tap into the trade potential of services, but not every country can become a services hub across sectors. The opening of the services sector potentially comes with large benefits, but also fears and costs that should not be overlooked.

What is the participation level of the private sector in services exports?

Both the private and public sectors participate in services export but it is always expected that there will be more private sector participation. The challenge is that so many organisations that are exporting services do not know that they are exporting services. For example, any government agency that offers services to international customers is a services exporter. An example is in the aviation industry where international flights land and pay landing fees and other charges.

What are the major services exported currently from Nigeria?

Under the General Agreement on Trade in Services (GATS), services are divided into 12 sectors as follows:

Business services (including professional services, information-technology-related services, research, and development);

  • Communication services;
  • Construction and related engineering services;
  • Distribution services;
  • Educational services;
  • Environmental services;
  • Financial services (banking, insurance and all services related to securities);
  • Health-related and social services
  • Tourism and travel-related services;
  • Recreational, cultural and sporting services
  • Transport services;
  • Other services not included elsewhere.

A lot of these services are being exported from Nigeria the strongest being in financial services.

From the last round-table discussion on services exports, which indicated that the services exports were second after oil and gas in contribution to the nation’s Gross Domestic Product, GDP, how did you arrive at that, and on what parameters?

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The numbers are on the website of the National Bureau for Statistics, NBS, and it is real.

Are there issues slowing down services exports, and what areas do you want the government to support services exports?

The biggest challenge at the moment is a lack of awareness and the resultant lack of capacity. Even though the opportunities abound, if you can’t understand them, you cannot take advantage of it. We have a lot going for us to support our success. We are +1 GMT which is a time advantage, we have a huge population about 60 per cent of whom are youths and we are also English speaking.  For government, Infrastructure ranging from power to internet bandwidth and a restructuring of our education system to become 21st century compliant, Nigeria Export Promotion Council, NEPC, needs to assist services exporters in the area of capacity building and market entry efforts. The government must show the country as a reliable, quality service destination.

NEPC needs to organize a buyer-seller meeting and take the exporters to international events. There is a need also to activate incentives for service exporters.

What is the level of preparedness of Nigerians in the area of services exports ahead of the take-off of the African Continental Free Trade Area, AfCFTA?

There has been a flurry of activities in the country towards getting ready for AfCFTA but I haven’t seen much that is specifically addressing services export. There is, however, an ongoing discussion with the national action committee in this direction and hopefully, events will pop up in that direction.

 What is your advice to the government on services export?

The government should quickly use the services sector to create much-needed jobs in the country. They will start by providing the entire necessary infrastructure I have mentioned earlier and declare the services export sector a priority sector. It will also go a long way in poverty alleviation.

You are the National President of the Association of Outsourcing Professionals of Nigeria, AOPN, what have been your engagements with the government and the private sector on taking services exports to the next level?

AOPN is the Association of Outsourcing Professionals. As a professional BMO, our primary objective is the development of the Outsourcing sector in Nigeria and to promote Nigeria as a veritable Outsourcing hub in Africa.

We are of the opinion that issues to galvanize Nigeria on the path of the 4th industrial revolution must be a policy thrust for a developing economy and all the opportunities it portends. More developing countries are exploring the future of work which incidentally suddenly came as a result of COVID 19. Outsourcing is pivotal to these discussions and explorations because Nigeria and Nigerians are part of the global workforce.

Key role of outsourcing

Outsourcing is an integral part of services export and offers significant opportunities with the aim to: High potential of GDP earnings within the service sector (enhance competitiveness; stimulates economic development and growth)

  • High Foreign income earnings
  • National Image-maker and improved visibility of national capabilities
  • Key job creation industry within the service sector (improves welfare; and reduces poverty) and emphasis on creating and supporting a knowledge-based economy;

The AOPN Mission is captured in two broad objectives: Capacity Building and Job Creation, increasing the contribution of outsourcing to the national GDP as well as promoting Industry Standards.

  1. Capacity Building/Job Creation: this will be on 2 fronts; for the teaming Nigerian Youth, unemployed and under employed individuals.According to statistics from the National Bureau of Statistics (NBS), about 1.8 million youth enter the Nigerian labour market every year. In addition to the detrimental effects on the nation’s economy, unemployment and poverty are the primary causes of addiction and substance abuse by teenagers and young adults in Nigeria. A reduced unemployment rate will bring about improved human development and reduce poverty. It will also reduce crime and insecurity and attract foreign investment into the country.
  2. Job creation: Outsourcing and BPO is an enabler for economic growth. Capabilities in Outsourcing and positioning as an outsourcing destination create a significant surge in job creation and by extension, wealth creation. Countries that provide efficiencies and value, determine that Outsourcing is a major constituent of their GDP.

However, in all countries where immense success has been recorded such as India and the Philippines, Government played a critical role in ensuring that Outsourcing thrived.

It is therefore critical for the government agency (ies) with oversight function for this sector to champion the cause for Job creation through the following avenues:

  1. Promoting standardisation and regulation of the sector: This is imperative for sectoral growth and International recognition. Presently there is no minimum entry point and this encourages mediocrity. The professionalism of the sector to meet global standards is very critical and should be encouraged.
  2. Outsourcing policy review: For Nigeria to take a place of pride as an attractive Outsourcing hub, it is imperative to review without delay the Nigerian “National Outsourcing Policy & Institutional Framework 2007” document. We wish to congratulate NITDA on the public presentation of the draft copy of the new Outsourcing Policy believing that it will propel the industry to play its proper role in the economy.

We call on all the industry participants to own this project and respond quickly so that we can start looking forward to a final document produced and owned by the industry with NITDA as the catalyst.

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