Despite the hues and cries about Nigeria being an import-dependent economy over the years, and importing goods worth over N20 trillion last year alone, economists say that Nigeria is importing too little compared to its African and Asian peers.
Nigeria’s imports were worth N20.84 trillion in 2021, representing an increase of 64% compared to N12.7 trillion recorded in the preceding year, with Nigeria’s Petrol exports being the largest at N3.97 trillion, followed by Durum wheat – N1.29 trillion and used vehicles – N770.13 billion.
But imports make up less than 10% of GDP, and Nigeria’s largest import being refined Petroleum (which should reduce significantly once the Dangote Refineries and Port Harcourt refinery renovation come onboard).
According to Wale Smit, Nairametrics Columnist and Financial Analyst, “Nigeria’s import relative to the size of the economy is not large, relative to our export earnings which we need to finance those imports is not enough.”
Olumide Adesina, Financial Market analyst at Quantum Economics said, “The major challenge is that the biggest economy in Africa lacks significant purchasing power for large imports and production potential to increase exports.
“Despite being the most populous country on the continent, Nigeria is not the biggest importer. More imports are consumed by South Africans and Egyptians than Nigerians, but neither nation describes itself as an import-dependent nation.
Adesina therefore, urged that a globalized economy must import in order to capitalize on the comparative advantages of various nations, and the false belief that its economy is import-dependent has had significant repercussions. In an effort to balance its meagre export revenues with its import cost, Nigeria has attempted for years to forcefully reduce it.
Why Nigeria needs more imports
A quick look at Nigeria’s import per capita rate, compared with the rising export powerhouses of South East Asia, shows the true picture of how little Nigeria imports for its export goals.
According to data from OEC World, Nigeria’s import per capita stands at $252 billion, with exports of $42 billion for year 2020, which pales in comparison with Vietnam, which is the largest exporter in the Association of South East Nations.
The exporting Association of Southeast Asian Nations (ASEAN) region in 2020 had imports of $1.27 trillion and exports of $1.41 trillion. Vietnam’s Import per capita is ten times Nigeria’s at $2,770, contributing to exports of $300 billion. Also, compared with Nigeria major imports (fuel, wheat and used cars), Vietnam’s largest imports are integrated circuits ($34 billion), which is a major component for electronic manufacturing, which is no surprise as Vietnam’s largest exports are broadcasting equipment ($42 billion) and Telephones ($21.4 billion).
Comparing Nigeria with ASEAN countries with similar resources like Malaysia, which recorded imports per capita of $6000 and exports of over $266 billion, which includes refined petroleum ($15.9 billion for the period of 2020), palm oil ($10. 6 billion), and also high technology devices including integrated circuits ($65 billion) and semiconductor devices ($8.6 billion), with its largest import being integrated circuits at ($27.8 billion).
- Comparing Nigeria with Vietnam and Malaysia is in line with analysts’ views that in order for Nigeria to be a globalized economy, it must import to capitalize on the comparative advantages of various nations.
- Although Nigeria’s foreign trade rose to N13 trillion in the first quarter of 2022, increasing by 11.1% from N11.7 trillion recorded in the previous quarter and 65.4% higher than the N7.86 trillion recorded in Q1 2021, the improvement in Nigeria’s merchandise trade was due to increases in crude oil export receipts in the quarter.
- However, this is not enough to diversify our exports earnings potential as more imports are needed for manufacturing and food processing. Imports that aide industrialization include machines, semiconductors and integrated circuits.
- Nigeria needs to import more to be a globally competitive market for trade and economic development.