Muda Yusuf says compulsory local processing without competitive capacity could distort markets, hurt farmers and weaken non-oil export gains…..
The Centre for the Promotion of Private Enterprise (CPPE) has cautioned policymakers against enforcing mandatory domestic processing of raw commodities without first ensuring that Nigeria has sufficient and competitive local processing capacity.
In a policy statement issued on February 8, 2026, CPPE Chief Executive Officer, Dr Muda Yusuf, said while the growing national focus on domestic value addition is commendable, forcing local processing ahead of capacity could distort commodity markets and impose serious hardship across the primary production value chain.
He acknowledged that domestic value addition remains a key pathway to industrialisation, job creation, export diversification and stronger foreign-exchange earnings, noting that efforts to move Nigeria up the value chain are consistent with the country’s broader economic transformation agenda.
However, Yusuf stressed that policies mandating compulsory local processing before export must be guided by a fundamental economic principle, processing capacity must come before compulsion. According to him, imposing export restrictions without adequate domestic capacity risks undermining Nigeria’s commodity markets and disrupting production incentives.
He noted that this concern is particularly important at a time when Nigeria’s non-oil export sector has recorded strong momentum over the past two years, largely supported by foreign-exchange reforms that improved export competitiveness. Premature or poorly sequenced value-addition policies, he warned, could reverse these gains.
Yusuf explained that sustainable domestic processing should evolve organically from key enabling conditions, including sufficient installed and operational processing capacity, competitive production costs, reliable infrastructure such as power and transport, access to affordable long-term finance, modern technology and skilled labour, as well as efficient commercial linkages between producers and processors.
He added that processors must also have the capacity to purchase primary commodities at prices aligned with global market realities, stressing that without these conditions, compulsory value addition through export restrictions could become economically damaging rather than beneficial.
Highlighting the risks, Yusuf warned that restricting exports without adequate domestic demand could create excess supply in local markets, driving down farm-gate prices and reducing incomes for farmers, aggregators and rural communities. He said such outcomes effectively transfer value from producers to processors through policy-driven distortions rather than productivity gains.
He further cautioned that these policies could weaken the entire primary production value chain by discouraging investment, threatening rural employment, deepening poverty in agrarian communities and undermining the supply base required for future industrial processing.
On global competitiveness, Yusuf noted that value addition only delivers economic benefits when processed goods are competitive in price, quality and reliability. Processing sustained mainly by protectionist export restrictions, he said, often leads to high production costs, weak global demand, unsold inventories, declining foreign-exchange earnings and smuggling of primary commodities.
He also warned that sudden or poorly designed value-addition mandates could undermine investor confidence by increasing regulatory uncertainty and weakening trust in Nigeria’s non-oil export environment.
To achieve sustainable domestic value addition, Yusuf recommended a gradual and capacity-driven strategy anchored on coordinated public- and private-sector investment to expand processing capacity and improve utilisation. He also called for decisive action to address structural cost challenges such as unreliable power supply, inefficient logistics, limited access to affordable finance, outdated technology and skills gaps.
He emphasised that policies must protect the economic interests of primary producers by ensuring fair, market-based pricing, warning that industrial policy should not rely on depressing farm incomes to support downstream industries.
Yusuf recommended that any transition toward compulsory value addition be gradual, predictable, selective and guided by measurable improvements in domestic processing capacity, with strong stakeholder engagement. He added that trade restrictions should remain flexible fiscal and trade-policy tools administered by relevant authorities rather than rigid legislative mandates.
He concluded that while domestic value addition is essential for Nigeria’s long-term industrial transformation, the sequence of policy implementation is critical, stressing that capacity, efficiency and competitiveness must precede compulsion to avoid weakening export performance, rural livelihoods and overall economic growth.
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