Exports and imports, as components of trade, measure a country’s trade openness to the rest of the world. The two metrics help countries to focus on their areas of comparative advantage just as they enhance industry competitiveness, innovation and help countries have access to the global markets.
Ahead of the flag-off of the campaigns for the general elections in 2023, Nigerians have started to lay before the presidential aspirants issues of national importance that demand urgent attention. One of these issues is the status of Nigeria in global trade. Nigeria is believed to be an import-dependent nation. But is this true?
According to IGI Global, import dependency is an “economic characteristic of a nation that cannot produce enough goods and services to sustain its citizens and must depend on importing the majority of its forms of sustenance.”
Is Nigeria truly an import-dependent nation as insinuated in many circles? Preliminary findings show the impression being created is that it is even harmful to import. Many unsuspecting readers are getting confused about the emerging scenario as if the only way out of Nigeria’s quagmire is to embrace autarky.
At this juncture, what do Nigeria’s trade data say? And what was the experience of other high-income nations during their quest for economic development?
Nigeria’s trade data as published by the National Bureau of Statistics (NBS) indicate that in 2018, the nation’s total trade amounted to N31.70 trillion, comprising N13.17 trillion imports and N18.53 trillion exports, with a trade surplus of N5.37 trillion. In 2019, Nigeria’s total trade amounted to N36.15 trillion, made up of N16.96 trillion imports and N19.19 trillion exports, with a trade surplus of N2.23 trillion.
But COVID-19 lockdown in 2020, whose impact was still felt in 2021, changed Nigeria’s trade dynamics. Total trade in 2020 fell to N25.22 trillion, consisting of N12.70 trillion imports and N12.52 trillion exports, resulting in a trade deficit of N178.26 billion. In 2021, total trade recovered as it rose to N39.8 trillion, comprising N20.84 trillion imports, and N18.91 trillion exports, leaving a trade deficit of N1.94 trillion.
Nigeria was not the only country that recorded a trade deficit in 2021. According to Country Economy, the world’s largest economy, the United States of America (USA), recorded a trade deficit of $1.18 trillion. The United Kingdom recorded $226.34 billion worth of trade deficit, as well as a deficit of $129.27 billion in France; $12.94 billion in Japan; $22.75 billion in Spain, and $22.39 billion in Portugal.
In Africa, Egypt ended 2021 with a trade deficit of $30.14 billion. The deficit was $11.71 billion in Ethiopia; $22.19 billion in Morocco; $3.18 billion in Mauritius; $2.19 billion in Malawi, and $4.64 billion in Senegal.
Another important metric is Nigeria’s imports as a percentage of its GDP. Based on the World Bank’s data on this metric, combined with those derived from NBS trade data, Nigeria was the 109th country in the world in 2021 on this ratio.
Put differently, Nigeria’s imports as a percentage of GDP ratio in 2021 was 28.40 percent. It was behind Ghana, which had 28.52 percent; Madagascar, 30.16 percent; Central African Republic, 30.50 percent; Guinea, 33.16 percent; Togo, 34.23 percent, and Rwanda, 34.79 percent.
High income economies with higher imports to GDP ratios than Nigeria’s are Hong Kong, 199.18 percent; Singapore, 153.47 percent; Netherland, 72.59 percent; Malaysia, 61.83 percent; Switzerland, 55.16 percent; South Korea, 38.04 percent; and Norway, 29.11 percent.
Nigeria’s position on exports as a percentage of GDP which was 25.8 percent puts the country in the 108th position in the world, according to the World Bank and NBS data. Cote d’Ivoire has a higher ratio of 26.0 percent. The ratio is 29.6 percent in Mali; 29.9 percent in Ghana; 30.5 percent in Mauritius; 31.1 percent in South Africa, and 31.9 percent in Namibia.
Countries with the highest ratios on exports as a percentage of GDP in the world as of 2021 included Luxembourg, 212.1 percent; Hong Kong, 203.9 percent; Singapore, 184.8 percent, Malta, 148.4 percent, and Ireland, 134.8 percent, according to the World Bank data.
Meanwhile, Australia, a high income economy, had an exports-to-GDP ratio of 22.2 percent as of 2021, which is far lower than Nigeria’s, according to the World Bank data. The ratio was 21.6 percent in Indonesia, and 20 percent in China.
The above import data give the impression that Nigeria’s trade with the rest of the world is normal. However, there is more to it because the sources of a country’s imports significantly influence its growth trajectory as found in South Korea.
According to the findings of the Asian Development Bank (ADB) when it investigated the impact of imports on South Korean economic development, whose findings were published in its ERD Working Paper Series No. 103, the Asian development finance institution established that for South Korea “imports from the developed G7 countries have a significant positive effect on productivity but imports from all other countries do not’’ because imports of capital goods from the developed countries encouraged technological transfers.
ADB added that imports encouraged local South Korean firms to compete with foreign products in the domestic markets, while absorbing advanced technology embodied in imported capital goods. Imports also helped them to know the quality of goods they would be competing with at the international market as South Korea implemented an export-oriented strategy.