NIGERIA’S FOREIGN TRADE FRAMEWORK
Nigeria was declared Africa's largest economy in 2014 largely as a result of a tremendous economic growth in the last decades fuelled by foreign trade. Nigeria's Gross Domestic Product stood at over $510 billion in 2013. Nigeria also topped African countries in the last three years in Foreign Direct Investment which stood at an average of over $7 billion per year between, 2011-2013 amounting to a total of over $20 billion USD in this period. Economic growth has consistently exceeded 6% per year in recent years. With over 177 million people, the Nigerian market has continued to attract foreign investors. Foreign trade continues to play a significant role in Nigeria’s development. In the pre-independence era, foreign trade in mineral resources (tin and columbite, coal, etc.) and raw and processed agricultural products (timber, rubber, groundnuts, cotton, cocoa, palm produce, hides and skins, etc.) was the main engine of growth of the economy and this was achieved through exports. Indeed, the agricultural sector’s contribution to export revenue was then about 65% of total government revenue.
This benefited over 80% of the population who were engaged in the sector. The oil and gas industry has displaced the agricultural sector as the prime mover of the economy, rising from less than 30% total export receipts in the 1960s to over 96.8% in 2012 (Central Bank of Nigeria, 2012). The importance of oil in the Nigerian economy became more visible during the oil boom of the early 1970s when the international price of oil rose gradually from $10 to about $40 before peaking at over $100 per barrel in some periods in the last decade. The dominance of oil resulted in the gradual shrinking of agriculture and consequently made the country more dependent on food imports, costing the nation over $11 billion per year as of 2012 (National Bureau of Statistics, 2012).
NIGERIA’S EXPORTS AND IMPORTS
Exports -Predominance of the Oil and Gas
Nigeria's total exports stood at 15,003 billion Naira (96 billion USD) in 2012, which rep- resents a growth of 1.2% over the figure for 2011 (Central Bank of Nigeria Report 2012). Nigeria’s export continues to be dominated by oil. The non- oil exports consist mainly of agricultural produce, manufactured and semi-manufactured goods, minerals and textiles.
Agricultural products consisting mainly of cocoa beans, palm kernels, rubber, crustacean, and hides and skin contributed just above 47% of the non-oil exports, while semi-manufactured goods accounted for 30% and solid minerals 3.8% in 2012. Manufactured goods contributed almost 15% of total non-oil exports (CBN 2012). It is clear that Nigeria’s export structure is monoculture. The challenge facing the nation is therefore that of diversification of the economy. This will require a significant reduction in the cost of production in the country and a better implementation of exports incentive schemes to strengthen the nation's manufacturing base and make it more competitive. Nigeria’s main export markets are the United States of America (USA) and the European Union (EU).
Other important destinations of Nigeria’s exports markets are Canada, Brazil, and some African countries. Europe as a group, with a share of 35.8%, constituted the largest buyer of Nigeria's crude oil in 2002, followed by the Americas, with 30%. However, on a country by country basis, the USA remains the single largest importer, with about 17.9%, followed by India, with 14.9%. It is noteworthy that the share of Nigeria's oil exports to the America's decreased from 351 million barrels in 2011 to 248.6 million barrels in 2012 (Central Bank of Nigeria) and this trend is likely continue due to the increased exploitation of shale oil and gas reserves particularly in the USA and Canada.
In 2012, exports to India and Indonesia dominated Nigeria's exports to Asia and the Far East, although China remained a major destination. In the context of the Economic Community of West African States (ECOWAS) as well as the African Economic Community (EAC), Nigeria’s exports to African countries are also increasing with Cote d’Ivoire, South Africa, Senegal, Cameroon, and the Democratic Republic of Congo as the major export markets. Crude oil exports to African countries remains among the least in the regional groupings, standing at 10% in 2012, with South Africa being the first destination, followed by Côte d'Ivoire.
Imports - Non Oil Goods in the Lead
Nigeria's imports are more diversified than her exports. As expected, the imports are dominated by non-oil import. Non- oil imports comprise imports in broad categories of food and beverages, primary and processed industrial goods and capital goods. Major imports by Harmonised System of classification (HS) are boilers, machinery and chemical appliances, vehicles, base metal, paper, chemicals, animals, food and vegetable products.
Major sources of Nigeria’s imports are USA, EU, Japan, China, India, Korea and South Africa. The first two, USA and EU, are the traditional suppliers. The increasing importance of African countries as Nigeria’s source of imports such as South Africa, Swaziland, Cameroon, Benin, Mauritania, Togo, Gabon etc. should be stressed.
BALANCE OF PAYMENTS, EXTERNAL RESERVES AND EXTERNAL DEBTS (BOP)
Nigeria's balance of payment has remained globally positive over the decades except on rare occasions usually not unconnected with depressions in the international oil market, the depreciation of the Naira exchange rate and high level of indebtedness of the country as it was for quite some time. In 1992, during the Gulf War, the surplus reached a peak of N244.3 billion (about 9.4 billion USD), then declined gradually before becoming a deficit of N85.6 billion (about 1 billion USD) in 1998. Nigeria has recorded favourable trade balances from the year 2000, except 2002 and 2003. In 2012, the estimated overall balance of payments (BOP) position was in a surplus of 1,747.9 billion Naira (11.2 billion USD), amounting to 4.3% of the GDP (CBN, 2012).
The current account position registered a surplus of N3, 191.5 billion (20.4 billion USD) in 2012 compared to N1, 931.4 billion (12.7 billion USD) in the previous year. External Reserves and
Nigeria's external reserves which amounted to $9.39 billion in 2000 rose to $28.3 mil- lion in 2005 and increased even further to over $53 billion by the end of 2008 (CBN, 2008). The effects of global financial crises drove it down to $32.34 billion in 2010. It later improved in 2012 to $43 billion (CBN, 2012). Nigeria's external debts which stood at over 35 billion USD for several years, becoming a burden for the economy, were practically wiped out in 2005/2006. It gradually picked up a few years after- wards and amounted to 6.53 billion USD in 2012 (CBN, 2012).
However, this level remains sustainable; Nigeria is a signatory to various bilateral, regional and multilateral trade agreements. The bilateral trade agreements involve dozens of countries. At the regional level, Nigeria is a founding member of the Economic Community of West African States (ECOWAS), the Headquarters of which are located in Abuja.
ECOWAS aims at integrating the economies of West African States through trade, policy coordination, harmonization and infrastructure development. The Community is gradually transforming into a Free Trade Area (FTA) in the context of Economic Partnership Agreement (EPA). ECOWAS is one of regional economic com- munities (RECs) that will serve as pillars in the establishment of an African Economic Community (AEC). Nigeria is transiting to the ECOWAS Common External Tariff (CET) and this single act, which harmonizes the tariff rates by reducing tariff bands from 19 to 5 and tariff dispersion from between 0 and 150% to 0 and 50%, is a major development in the drive towards regional integration.
At the multilateral trade level, Nigeria is a Founding Member of the World Trade Organization (WTO), the successor to the General Agreement on Tariffs and Trade Organization (GATT). Nigeria participated in the Uruguay round of multi- lateral trade negotiations and was involved in the Doha development round negotiations. Nigeria is also participating in the US trade initiative African Growth Opportunity Act (AGOA) which grants favourable terms for the export of manufactured goods from African countries to the USA. African countries, including Nigeria, are currently pushing for the extension of AGOA initiative by a further 15 years to enable them to take full advantage of this arrangement.
Given more time, Nigeria, now stronger with over 17 million small and medium scale enterprises (SMEs), can improve its foreign trade performance from its current position as the 35th largest goods trading partner of the USA (in 2013, goods trade with USA totalled $ 18.2 billion, of which $ 11.7 billion in favour of Nigeria - according to AGOA sources). Foreign trade will continue to be a key contributor to Nigeria's economic growth and its role will be amplified by the policies of economic diversification now being aggressively pursued, particularly to boost the manufacturing sector.