Nigeria’s attempts to increase its production have yielded little gains. Recently, a foreign trade report was released by the National Bureau of Statistics (NBS) shows 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.
Yet, that increase has not converted to reduced importation of manufactured goods, because 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, said.
Despite that 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 heightening deficit position has serious consequences for the economy because it will weaken the external reserve position, fuel external imbalances and go further to intensify the demand pressure of Foreign Exchange (FX) at a time when dollar inflows from oil and foreign investment inflows are stagnant.
Because Africa’s biggest economy is import-dependent, it has made the economy susceptible to inflation and other external factors, which have made the present administration to be more hostile 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 rise 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 imports 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 credit the increase in total trade to the gradual recovery in the global economy that followed the removal of the movement restrictions that characterized the second to fourth quarters of 2020, and the widespread provision of vaccines across the globe that has fastened the recovery from the 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).