Over the years, trade and commerce continue to play a strong role in foreign exchange earnings for countries globally.
And this has been the driving force behind the federal government’s local content initiative that is aimed at positioning manufacturing, trade and commerce as revenue earners for the country; BENJAMIN UMUTEME writes.
Trade and commerce remain an important aspect of human civilisation. Over the years, it has led to the free flow and exchange of goods, technology, culture as well as ideas.
In some other cases, the emergence of human society has been attributed to activities associated with trade and commerce.
Trade and commerce have played a pivotal role in the development of economy of many nations.
Trade and commerce is not only conducted to earn profit and satisfaction of human wants, it is equally important for the provision of essential service to the consumers.
Trade and commerce is an important social activity because the society needs uninterrupted supply of goods and services to satisfy forever increasing and ever changing, but never ending human wants.
For Nigeria’s trade with Economic Community of West African States (ECOWAS) continues to be poor—as do aggregate trade flows among all the ECOWAS member-states.
Specifically, Nigeria’s export to the ECOWAS region, which averaged about 7 percent of its total exports between 2001 and 2006, plummeted to 2.3 percent in 2010. Even Nigeria’s intra African trade has not fared any better.
The vast majority of Nigeria’s exports to the ECOWAS are mineral fuel and oils, which reached 97 percent and 94 per cent, respectively, in 2009 and 2010.
Comparatively, the share of manufacturing in Nigeria’s total exports to the ECOWAS region climbed from 1 per cent in 2001 to 5.4 per cent in 2010, while the share of Nigeria’s agricultural exports, which stood at 3 per cent in 2001—plunged to nearly nothing in 2009 and 2010.
Likewise, the share of other ECOWAS countries in Nigeria’s imports dropped from 4.4 per cent in 2001 to less than 0.5 per cent in 2010.
Deficit trade balance
Data obtained from the National Bureau of Statistics (NBS) reveal d that Nigeria recorded a trade deficit of N807.2 billion in June of 2020 compared to a surplus of N410.4 billion in the same month of 2019.
It was the largest monthly trade shortfall since October 2019, as exports plunged 46.1 per cent to N782.9 billion, due to Covid-19 pandemic restrictions and lockdowns.
Meanwhile, imports jumped 52.5% to N1,590 billion. Considering Q2, the trade account shifted to a N1, 803 billion gap compared to a surplus of N591 billion a year ago.
Exports slipped 51.7% year-on-year, as shipments of mineral products which account for 84% of total shipments, tumbled 57%, mainly due to crude oil (-60.5%).
Meantime, imports went up just 0.4%, as a plunge in purchases of mineral products (-73%) outweighed increases in those of boilers, machinery & appliances (2.4%) and chemicals (98%).
China, Spain, the Netherlands, the US and India were the main trading partners in the second quarter of 20202.
It was the same experience in the first quarter of 2020 as Nigeria’s trade balance swung to a N162.2 billion gap in March of 2020 from a N450 billion surplus a year earlier.
Exports plunged 33.5 percent to N965.6 billion, the lowest value since March of 2017 while imports increased 12.6 percent to N1127 billion.
For an economy with a GDP of nearly $400 billion, Nigeria’s trade with the rest of Africa remains small. It accounted for only $7 billion in 2017, according to data from Afreximbank.
The countries top export destination continues to be India, US, China and Belgium.
Head, division of International economic relations at the Nigerian Institute of International Affairs, Eden Ubi, argues that deepening relations with African neighbours and other emerging markets may just be the solution.
“We’ll be good at South-South trade because it is easier for partners to understand us.”
While Chinese imports from Nigeria grew almost 10 fold in 2 decades– from $182.5 million in 1999 to $1.86 billion in 2019, China’s export to Nigeria grew geometrically from $396.4 million to $13.4 billion, data from the China Africa Research Institute at the John Hopkins School of Advanced International Studies in Washington stated.
According to Ubi, “This has turned Nigeria into a perennial importer of Chinese goods.”
Impediments to trade, commerce
Analysts have identified various roadblock to effective trade and commerce.
They opine that the country’s inability to cash in on its comparative advantage interns of manufacturing and trading in the West African sub-region continues to drawdown on the non-oil sector’s revenue generation potentials.
For Louis N. Chete of the Institute of Social Economic Research (NISER), there is need for the authorities to establish growth corridors and regional hubs that can serve as strategy points for driving trade and commerce.
While the country is yet to come up with a nationally recognised trade policy, authorities should come up with a national and regional industrialisation strategy should focus on transforming agricultural products into manufactured goods and the provision of high-technology services at competitive prices to enhance the potential for trade within the ECOWAS sub-region.
“Production sharing, cross-border input supply and conditional incentives for exports can foster the development of local and regional value chains and strengthen export competitiveness.
Certain agri-cultural products (e.g., bananas, sweet potatoes and sugarcane) could be processed, properly packaged and traded.
There is also considerable potential for trade in timber, limestone and marble. Regional value chains should be developed for products such as textiles and clothing,” he said.
With oil accounting for 75 per cent of Nigeria’s forex earning, balance of trade swing went into the negative territory.
And with the non-oil sector accounting for less than 10 percent of overall foreign exchange earnings, the government is working round the clock through various initiatives the enactment of the Local Content Act and the ‘buymadeinnigeria’ campaign which saw limited success.
Even the yearly trade fairs organised in various parts of the country continues to be a veritable source of boosting trade and commerce especially with the level of participation by foreign businesses.
At the last count, over 145 businesses had indicated interested to be part of th e ongoing Abuja International Trade Fair.
Large Informal trade
According to the West African Association for Cross-Border Trade in Agro-Forestry-Pastoral and Fisheries Products (WACTAF), about 80 per cent of trade between Nigeria and other West African countries is informal.
The President of the Executive Committee of the AOCTAH-WACTAF, Alasoadua Nassiru Salami, said most traders prefer to sell their products informally through local markets, because of government policy on incentives.
“Informal trade in export means goods of commercial value are taken outside a nation’s border unrecorded by appropriate authorities.
It is currently estimated that 80 per cent of trade between member countries are informal,” he said.
Other reasons for informal trade are lack of proper means of transportation and cargo distribution system, non-harmonisation of transit levy, and overloading of trucks; and non-implementation of ECOWAS protocol on free movement of goods, among others.
Trade Fairs’ as option
The Abuja Chamber of Commerce and Industry (ACCI) Director General, Chief Tonia Shoyele, said the multi-sectoral trade event had grown exceedingly in scope and strength as one of the biggest trade platforms for international and domestic exhibitors to promote new product lines, access new markets, build business relationships and grasp developing trend.
Describing Nigeria as an 80 per cent Small and Medium Enterprises (SMEs) based country; she said it was on this background that the chamber decided to have a 100 per cent focus on SMEs.
“Basically our mandate is to promote their businesses and handhold them till they get to the upper level.
There will be a roundtable which CBN, Bank of Industry and others that are SMEs based participate to form policies and strategies to promote the SMEs,” she said.
ACCI Vice President Dr Johnson Anele said the event would boost local content by encouraging the growth of indigenous companies and patronage of made-in-Nigeria goods.
“Our focus is mainly on the SMEs, which is the engine room for the economic growth and provides the bulk of employment in the country and quite a number of them constitutes the bulk of our membership,” he said.
