As the federal government intensifies its campaign to halt the export of raw materials and push Nigeria firmly into value addition, the Centre for the Promotion of Private Enterprises (CPPE) has raised a red flag, warning that good intentions could backfire if policies are poorly sequenced.
In a policy brief released yesterday, CPPE, through its Director General, Dr Muda Yusuf, said that while domestic value addition is crucial for industrialisation, jobs, export diversification and foreign exchange earnings, forcing local processing without the right capacity in place could end up hurting farmers, exporters and the wider economy.
CPPE acknowledged that Nigeria must move up the value chain, but stressed that compulsory value addition should only come after adequate and competitive domestic processing capacity has been built. According to the group, reversing this order risks distorting commodity markets and inflicting hardship on millions who depend on primary production.
The warning comes against the backdrop of impressive gains recorded by Nigeria’s non-oil export sector over the last two years. These gains, CPPE noted, were driven largely by foreign exchange reforms that improved incentives and boosted competitiveness. The organisation cautioned that premature export restrictions could undo these hard-won improvements.
CPPE’s key argument is a simple but powerful economic principle where compulsion must follow capacity, not precede it. Domestic processing, it said, should emerge organically when conditions are right, not through force.
For value addition to be sustainable, CPPE listed key requirements: sufficient installed and operational processing capacity; competitive production costs compared to global standards; reliable infrastructure, especially power and transport; access to long-term, low-interest finance; modern technology; skilled labour; and efficient commercial linkages between producers and processors. Crucially, processors must also be able to pay primary producers prices that reflect international market realities.
Where these fundamentals are missing, CPPE warned, export bans and restrictions become economically dangerous. One of the most immediate risks is the suppression of domestic prices for raw commodities. Blocking exports without enough local processing demand often leads to excess supply, pushing farm-gate prices down.
“This effectively transfers value from farmers to processors,” the group argued, not through productivity or efficiency, but through policy-induced price depression.
In plain terms, farmers end up subsidising processors. CPPE described this outcome as unfair, distortionary and ultimately unsustainable.
The consequences for rural Nigeria could be grave. Primary producers form the backbone of commodity value chains and support millions of livelihoods.
Policies that cut them off from export markets weaken incentives to produce, discourage long-term investment, threaten rural jobs and deepen poverty in farming communities. Over time, the very supply base needed for industrial processing is eroded.
CPPE also warned that forced value addition could weaken Nigeria’s competitiveness in global markets.
Processing only delivers real benefits when finished goods can compete on price, quality and reliability. Where processing survives mainly because raw exports are blocked, costs tend to rise, demand remains weak and inventories pile up. Foreign exchange earnings fall, while smuggling of primary products across borders becomes more attractive.
Investor confidence is another casualty.
According to CPPE, sudden or arbitrary policy shifts raise regulatory risk and scare off investment across both farming and processing sectors. For a country trying to diversify away from oil, credibility and predictability in policy are critical.
Rather than compulsion, CPPE proposed a smarter, phased approach. First, the government and the private sector must deliberately invest in building processing capacity and improving utilisation so factories can absorb domestic output without distorting prices. Second, structural cost barriers must be tackled head-on through reliable power, efficient logistics, affordable finance, technology upgrades and skills development.
Third, industrial policy must protect primary producers. Farmers should earn fair, market-aligned prices, and value addition should not depend on depressing rural incomes. Finally, any move toward compulsory processing should be gradual, selective and market-responsive, based on clear capacity benchmarks and extensive stakeholder consultation.
