Nigeria’s efforts to increase local production have yielded little gains.
Findings from the recently released foreign trade report by the National Bureau of Statistics (NBS) show that import of machinery and transport equipment rose by 43 percent to N2.49 trillion in Q1 2021 compared to N1.74 trillion recorded in the same period last year.
But the increase has not translated to reduced importation of manufactured goods, as its imports rose by 90 percent to N588.7 billion in Q1 2021 compared to N308.6 billion recorded in Q1 2020.
“This just shows that the protectionist policies of the government, which are aimed at boosting local production, are yet to produce desired outcomes,” Damilola Adewale, a Lagos-based economic analyst, notes.
The country imported goods worth N6.9 trillion in the first three months of 2021, the highest since 2008 when NBS started tracking the trade data. Lower exports of N2.9 trillion than imports also meant the country recorded its sixth consecutive quarter of trade deficits.
The widening deficit position has dire consequences for the economy as it will weaken the external reserve position, fuel external imbalances and further intensify the Foreign Exchange (FX) demand pressure at a time dollar inflows from oil and foreign investment inflows is tepid.
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Africa’s biggest economy being import-dependent has made the economy vulnerable to inflation and other external factors, which have made the present administration to be more aggressive towards local production.
Some of the government’s policies are the restriction of FX on the importation of 41 items, non-oil Export Stimulation Facility (NESF), Export development Funds (EDF), Zero oil plan by Nigeria Export Promotion Council, etc.
Further findings from the report also show that the value of imports rose by 15.6 percent in Q1 2021 compared with Q4 2020 and 54.3 percent compared with Q1 2020, while its exports in Q1 2021 decreased by 8.9 percent against the level recorded in Q4 2020 and 29.3 percent compared with Q1 2020.
The surge in imports can be largely attributed to the increase in the value of petrol imports, which rose by 19.9 percent to N687.7 billion in Q1 2021 compared with N573.7 billion in Q4 2020. Of the total import in Q1 2021, premium motor spirit – petrol – accounted for 10 percent of the total import while other antibiotics, durum wheat (not in seeds) and used vehicles accounted for 3.7 percent, 2.54 percent and 1.76 percent, respectively.
“Nigeria as a nation is still relying on foreign products more than before. To reverse this trend, there is a need to start refining petroleum products domestically, to invest in the pharmaceutical industry for capacity expansion and to kick-start the automobile policy that has been on ground for a while,” Moses Ojo, a Lagos based economic analyst, says.
The value of total trade was 6.9 percent higher in Q1 2021 compared with Q4 2020 and 14.1 percent higher than the value recorded in Q1 2020.
Analysts at CSL Research attribute the increase in total trade to the gradual recovery in the global economy following the removal of the movement restrictions that characterised the second to fourth quarters of 2020, and the widespread rollout of vaccines across the globe that has hastened recovery from historic economic blows caused by the COVID-19 pandemic.
The top 10 countries that accounted for 72.9 percent of the total imports recorded during that period was China with N2 trillion, accounting for 29.3 percent of the total, followed by the Netherlands with imports valued at N726.1 billion, and the USA with N608.1 billion. India accounted for 8.6 percent with N589.1 billion, Belgium (N238.5bn).
Others on the list include Germany (N190.1bn), Russia (N189.6bn), Italy (N178.3b), UK (N133.4bn), and South Korea (N129.6bn).
