Nigeria’s import expenditure has surged by 80.65% in the past six years, climbing from $31 billion in 2017 to $56 billion in 2023, according to the latest Trade Policy Review from the World Trade Organization (WTO). This significant increase is largely attributed to refined petroleum imports, which accounted for 38.3% of Nigeria’s total imports. Despite efforts to diversify the economy, restrictive policies and inconsistent trade strategies have hindered the country’s ability to reduce its dependency on oil, according to the WTO’s findings.
Rising Imports Driven by Fuel and Services
The WTO report underscores the critical role that imports, especially in fuel and services, play in Nigeria’s trade balance. The country’s oil and gas exports, which make up over 90% of total exports, continue to dominate Nigeria’s trade portfolio. However, imports of refined petroleum have spiked, exacerbating Nigeria’s trade deficit. Services imports, accounting for over 20% of total imports, are predominantly driven by transport and travel services (63.7%), with business services (20.1%) increasingly being traded digitally.
Economic Diversification Efforts Face Obstacles
Despite the Nigerian government’s ambitious Agenda 2050 to diversify its economy away from oil and expand manufacturing capabilities, the WTO report notes limited progress. The share of intermediate goods in non-oil imports fell from 44% to 32% between 2017 and 2023, signaling challenges in building a more robust manufacturing sector. Moreover, foreign direct investment (FDI) into Nigeria has declined sharply, with FDI inflows virtually ceasing in 2022.
The WTO report also highlights Nigeria’s inconsistent trade and economic policies, which have impeded efforts to achieve the country’s long-term diversification goals. The review points out that restrictive and interventionist policies have, at times, undermined broader strategies aimed at integrating more productive manufacturing enterprises into global value chains.
Trade Reforms and Economic Stabilization Efforts
On a positive note, the Nigerian government has undertaken significant economic reforms, particularly in the foreign exchange and fuel subsidy sectors. In 2023, Nigeria eliminated its multi-tiered exchange rate system, which had been a major source of foreign exchange shortages. This move, along with the removal of fuel subsidies, marks an attempt to streamline Nigeria’s fiscal and monetary policies. However, some foreign exchange restrictions remain in place, including repatriation requirements for companies.
Additionally, in a bid to stabilize the economy, Nigeria has restructured its fiscal approach, moving away from financing a significant portion of its budget deficit through Central Bank overdrafts. This shift is expected to curb the rising national debt, which currently stands at 30% of GDP.
Export Growth: Oil and Gas Dominate
Exports have shown growth, rising nearly 50% over the past six years, from $44 billion in 2017 to $65 billion in 2023. However, crude oil remains the dominant export, making up 80.6% of total goods exports, while gas accounts for 10.5%. Non-oil exports have also seen growth, with agricultural products, fertilizers, and metals comprising a growing share of exports.
The WTO report emphasizes the need for a more coherent and consistent policy framework to support long-term economic diversification and enhance Nigeria’s competitiveness in global trade.
Regional Integration and Global Trade Participation
Nigeria’s participation in regional trade initiatives, such as the African Continental Free Trade Area (AfCFTA) and the Economic Community of West African States (ECOWAS), demonstrates its commitment to regional economic integration. However, the country faces challenges in fully aligning its trade practices with global standards, with several regulatory changes still pending at the WTO, including in areas such as anti-dumping, subsidies, and import licensing.
Outlook
The WTO’s latest review paints a mixed picture for Nigeria’s economy. While recent policy adjustments signal efforts to stabilize the country’s trade environment and reduce reliance on oil, the report stresses the need for a more consistent and comprehensive approach to economic reform. The government’s continued push for diversification and industrialization will be critical in addressing the structural challenges facing the Nigerian economy and boosting its long-term trade performance.
As Nigeria aims to increase its revenue-to-GDP ratio by 2025, addressing these policy and structural challenges will be key to achieving its economic goals and improving its position in the global market.