In just six years, Nigeria’s imports increased from $31 billion in 2017 to $56 billion in 2023, an 80.65% increase, according to the World Trade Organization’s (WTO) Trade Policy Review released on Wednesday.
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The import of refined petroleum, which accounted for 38.3 percent of all imports, was the main driver of this increase.
According to the WTO, the Nigerian government’s trade and economic policies have historically been inconsistent, which has hampered the accomplishment of its lofty objectives.
According to the research, several of Nigeria’s interventionist and restrictive policies appeared to work against larger government initiatives to encourage economic diversification and the incorporation of more successful manufacturing companies into global value chains.
The importance of trade in Nigeria’s economic growth strategy is emphasized in the country’s sixth Trade Policy Review, which is based on reports from the Government of Nigeria and the WTO Secretariat.
Nigeria’s nominal GDP of $363 billion makes it one of Africa’s greatest economies, according to the WTO, mostly because its portfolio is still dominated by oil and gas exports.
Of commodities exported, 80.6 percent came from crude oil alone, while 10.5 percent came from petrol. Over the past six years, exports have increased by over 50% to $65 billion.
“Exports of products remain dominated by crude oil (80.6%) and petrol (10.5%). Between 2017 and 2023, they increased by nearly 50% to USD 65 billion.
Services exports, which account for around 6% of total exports, are led by transport and travel (58.2%) and, increasingly, financial services (22.9%, mostly transferred digitally).”
“The share of non-oil exports in overall exports more than doubled between 2017 and 2023, with agricultural products, fertiliser, and metals accounting for the majority. Imports also grew strongly from USD 31 billion to USD 56 billion, with refined petroleum accounting for the largest share (38.3%).
Transport and travel services account for 63.7% of overall services imports, followed by other business services (20.1%, primarily transacted digitally),” according to the report.
The study highlights the ambitious Agenda 2050 plan of the Nigerian government, which seeks to diversify the economy and lessen dependency on oil through the expansion of the home market, the promotion of manufacturing, and the connection of domestic raw materials with industry.
Despite these efforts, the WTO’s study indicates that some restrictive regulations appear to undermine the goal of economic diversification. For instance, between 2017 and 2023, the proportion of intermediate goods in non-oil imports decreased from 44% to 32%, suggesting that manufacturing’s economic contribution has not increased significantly.
“Government strategies and policies at times seem to lack consistency and, in the past, did not fully achieve their ambitious objectives. Some restrictive and interventionist policies seem to counteract broader government strategies to support economic diversification and the integration of more productive manufacturing enterprises into global value chains”
“Nigeria’s trade in intermediate goods expanded little between 2010 and 2021, and its share of overall non-oil imports fell from 44% to 32% between 2017 and 2023. Few disaggregated numbers are available, but FDI has essentially stopped in 2022 and has continued its downward trajectory,” the report stated.
Nigeria has been undergoing economic reforms, according to the WTO, which includes reorganizing the foreign exchange rate system and eliminating fuel subsidies. The story claims that Nigeria abolished its intricate, multi-tiered exchange rate system in 2023 after it caused severe shortages of foreign currency.
“In 2023, the Government initiated important reforms regarding the foreign exchange rate, fuel subsidies, and fiscal discipline. In June, it eliminated a complex exchange rate system using multiple windows and rates which had led to significant foreign exchange (FX) shortages.
The largely inaccessible official rate of the naira rapidly aligned with the parallel rate at which most FX transactions had effectively taken place and by March 2024, the official exchange rate had lost around 70% of its value in USD terms. In 2023, the Central Bank of Nigeria (CBN) also removed restrictions on the use of FX for the import of 43 groups of commodities, affecting more than 900 tariff lines that had been in place since 2015.”
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“A price verification system for imports and exports to avoid under- or over-invoicing was in place between August 2023 and June 2024. However, some FX restrictions remain in place, including repatriation requirements,” it said.
The paper also stated that, following a failed attempt in 2020, the government removed costly and inefficient fuel subsidies in mid-2023 but created retail price caps for fuels at the end of 2023, thereby returning some form of support. In 2022, these subsidies made up around 15% of all government spending.
The Nigerian government also made the decision to stop using the Central Bank of Nigeria (CBN) to finance a sizable portion of its expenditures, a practice that had led to the country’s debt reaching 30% of GDP.
Nigeria’s revenue-to-GDP ratio is still extremely low at less than 9%, and the government wants to raise it considerably by 2025.
By March 2024, the naira had rapidly depreciated to the point where the official exchange rate matched the parallel rate. In an effort to facilitate access to foreign currency, Nigeria also lifted long-standing prohibitions on 43 categories of imports in June 2023.
Although some foreign exchange limitations, such as requirements for firms to repatriate, still exist, these reforms were meant to create a more stable economic environment.
According to the WTO assessment, Nigeria’s continued dedication to regional integration is shown in its membership in international trade organizations such as the Economic Community of West African States (ECOWAS) and the African Continental Free Trade Area (AfCFTA).
Nonetheless, there is still room for improvement in terms of informing the WTO about trade agreements and regulatory changes, including pending notifications in the areas of import licensing, subsidies, and anti-dumping.
“On June 12, 2023, we will become the second African WTO member to do so.
While Nigeria submitted 49 notifications across various agreements between 2017 and 2023, a large number of regular notifications remained pending in the areas of anti-dumping, agriculture, subsidies, state trading enterprises, quantitative restrictions, and import licensing. Some regulatory changes outlined in the Review may also be communicated.”
Nigeria has made efforts to stabilize and diversify its economy, according to the WTO analysis, but there are still obstacles to overcome.
The WTO emphasizes the need for a more cohesive policy framework to support long-term objectives and strengthen Nigeria’s position in international trade, even though recent policy changes show an attempt to stabilize trade and promote growth.
