• Monday, May 20, 2024
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Shifting from import dependent economy to export oriented economy

Nigeria trade balance declines as import jump 73.8% in Q3

Sunny Nwachukwu

International trade plays an important part in national economies and therefore, should not be overlooked. This fact is obvious judging from records and developments of the increasingly interdependence of national economies. Nigeria’s imports increased astronomically from 1970s till date. This observation and trend invariably mounts a threatening and monumental incremental pressure and stress on the nation’s current account; for the simple reason that we operate a mono-economy(where oil exports accounts for about 90% of our trade proceeds and accruals), at the same time, is an import dependent economy. Interestingly, the current global financial crises(the recession and financial meltdown) has opened a window of opportunity for the nation to exploit/capitalize upon for equalization as a way to world income realization through proper and prudent utilization of our abundant natural resources in the oil & gas, and the solid minerals sub-sectors of our economy, including other factors of production like cheap labor-force. This pertinent strategy for improved manufacturing-base shall shift our perceived economic status eventually to an export-oriented and a pseudo closed-economy; when our large market size is equally put into consideration.

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Situation analysis of Trade and Commerce in the country puts Nigeria at the receiving end(as a ‘consumer-nation’) of the global economic activities where, the nation’s productive capacity(domestically) does not impact positively enough on the nation’s current account. This is largely due to our very poor performance in improving our GDP through diversification of exports(manufactures from our resource base) other than our “black gold” at the international market(our export earnings). A clear effect is the present position of our foreign reserves that dropped from about USD 82 billion to as bellow USD 50 billion within a pace of six months.
Country analysis report with respect to trade and commerce is indicative of brighter future when the dogged efforts of the FG to fix efficient transportations(good roads and railways), steady supply of adequate power and electricity, diversification through exploits on land reform and our solid minerals development as export commodities, mechanized commercial agriculture and provisions of storage facilities in the six geopolitical zones for agricultural produce during post harvest periods; various plans of fully functional local refineries and adequate provision of petroleum products and cooking gas for domestic consumption. These expected socio economic standard services and infrastructure being in place would no doubt, drive our economic growth progressively unhindered through commercial activities in the sector to an impressive high productivity and GDP that would indicate an overall surplus trade balance in the national economy.
The development imperatives, resource requirements & key success factors for the sector dwell mostly on exchange and areas of specialization when the international differences in trade and commerce; with great emphasis on availability of raw materials, labor, technology(other factors of production) lead to international competitiveness in prices of goods and costs of production. This involves supplies of commodities and manufactures that are cheaply produced relatively through international exchange in the world economy for demand of imports from other countries with relative low prices. This is the primary essence and basis for trade(i.e. to eventual economic growth) by countries benefiting from the cost reductions in the trade flows; obviously reinforced by economies of scale in production. Mapping our strategies and plan in our country on how to reap great benefits, our resource base in oil & gas reserves, in addition to solid minerals and certain agricultural commodities need to be extensively exploited in terms of value additions through domestic productions like petrochemicals(for instance) that will diversify our export base greatly. The great vision attached to this strategy is that, this sector will simultaneously conserve huge savings in our nation’s current account culminating from efforts made through reduced and restricted imports; improved domestic productions of goods we have comparative advantage, and lastly success resulting from an eventual shift as an export-oriented economy. We are already at the threshold by the vivid signs of recent bilateral agreements Nigeria is currently entering into with other nations.
It is therefore essential that we implement the following:
“Relative productivity on domestic manufactures based on relative factor endowment/abundance for effective competitiveness in the international trade requires much more emphasis on domestic productions of petrochemicals, judging from our abundant oil & gas reserves and modern gas technologies in the industry.
“Based on the above recommendation, the gain from trade should be extended through expansion of markets(both from within and internationally) because of reduction in costs that this enables. This could be achieved easily through promoting our Export Processing Zones(EPZs), with full encouragement, adequate and full security support for protection of life & investments given to foreign investors. These investors(mostly cottage industries in the Asian countries) could be attracted down to establish through their ‘big accounts’ (Nigerian traders/importers). With the present Global Economic Meltdown, if strategically and diplomatically pressured; could open shops in our EPZs and produce for our local markets that may be controlling about 75% of their total outputs, just for them to still remain in full business while our GDP and economy improves. The Federal Ministry of Trade & Commerce could take a statistics of the volumes of finished goods; for instance films, molded articles(especially children’s toys), synthetic rubbers and adhesives made from Styrene that are imported annually.
“Imports should be discouraged through tariffs for domestic production to thrive.