Growth And Direction of External Trade

Posted by on 1/5/2004 11:22:57 AM
Post Comment Growth And Direction of External Trade Nigeria

A. H. Ekpo & 0. J. Umoh


This section examines the growth and direction of external trade in the Nigerian economy. An investigation into the direction of external trade could provide answers on how to enhance Nigeria's non-oil exports in the 21st century.


Before looking at the structure and composition of Nigeria's external trade, it is necessary to have an overview of the country's basic trade profile.

Export earnings which stood at M339 million in 1960 rose steadily in Naira terms for most of the period under review. By 1977, exports stood at N7,881.7 million. Between 1960 and 1977, value of exports grew by 19 per cent. It should be noted that before 1972, most of the exports were agricultural commodities like cocoa, palm produce, cotton and groundnut.

Thereafter, minerals, especially crude petroleum, became sig nificant export commodities. Imports also increased in value during the period. By 1960, imports were val ued atM432 million. They increased to N756.0 mil lion and M8.132 million in 1970 and 1978 respec tively, rising to N124,612.7 million in 1992 and N681,728.3 million in 1997.

The bulk of the imports were finished and semi-finished goods. However, from 1974, food imports became noticeable in Nigeria's external trade. The country had an unfavourable trade balance from 1960 to 1965, partly because of the aggres sive drive to import all kinds of machinery to stimu late the industrialisation strategy pursued immedi ately after independence. Thereafter, export of crude petroleum guaranteed a favourable trade bal ance. Regarding the structure and composition of trade.

Based on the oil and non-oil dichotomy, the oil sector domi nates exports while the non-oil sector overwhelms imports. Between 1960-1970 and 1970-1978, oil exports grew by 44.6 per cent and 31.6 per cent respec tively. For the same period, non-oil exports showed marginal growth of 1.2 per cent and 6.6 per cent. It is clear from Table 4.12.8, that during structural adjustment, imoortation of consumer ooods.

durable consumer goods, capital goods and raw materials continued to be on the increase. One of the aims of the present economic reform pro grammes is to reduce imports. However, exported manufactures registered remarkable growth for the period 1988-1990 (almost 39 per cent).

The growth of the import of capital goods demonstrates the desire of the nation to industrialise. Table 4.12.9 is a summary of Nigeria's balance of payments since 1960. Three measures are epit omised:

(1) the merchandise trade balance;

(2) the current account balance; and

(3) the overall balance of payments.

Looking at the merchandise trade balance, sur pluses were recorded in 24 out of 32 years. The largest deficit was in 1982, a period when the econ omy was in a recession. The current account balance showed surplus in 13 out of 32 years.

Its largest deficits were in 1978 and 1989. Surpluses were recorded in 1973, 1975 and 1976. These were the oil boom years. From 1981 to 1983, the economy showed declining growth and several government austerity measures were put in place to reverse the impending crisis.

The overall balance of payments measure also shows the ups and downs of the economy from 1960 to 1997. The surpluses of the 1960s were not enough to offset the deficit in the current account. In the era of structural adjustment, surpluses were recorded in the balance of payments for the years 1987 and 1989.


The destination of Nigeria's exports is shown in Table 4.12.1. Four major partners are highlighted namely United Kingdom, European Union (EU), the United States of America and Japan. Most of the exports to these countries include petroleum, agri cultural products and other minerals.

The United States is the major importer of Nigeria's crude petroleum. More than 80 per cent of Nigeria's exports are destined for markets in Western Europe, North America, Japan and other industri alised countries.

Nigeria's export to the UK, which was valued atM694.9millionin 1975,declinedtoM112.1 million in 1980 and rose to N2.282.9 in 1992. There were marginal increases in 1981 and 1982. It is appar ent that the country's export to U.Ka traditional partner because of past colonial ties is che quered.

In percentage terms, Nigeria's export to U.K. declined from 14.1 per cent in 1975 to almost 2 per cent in 1988. It rose to about 3 per cent in 1990 and declined to 1.4 per cent in 1992. The determination to find new markets and the will to export to brotherly African countries partly explain the decline.

Also, U.K's import of Nigeria's crude has declined steadily over time. The evidence in Tables 4.12.1 and 4.12.2 indicates that Nigeria's exports to Japan are very marginal. From 1975 to 1988, the country's exports to Japan amounted to about 0.1 per cent of total exports.

In the 21st Century, it is necessary to find ways and means to ensure that Japan imports some of its raw material requirements and crude petroleum from Nigeria. Apart from the fact that Japan is an industrial giant, it is also vital for Nigeria to enlarge her trading part ners.

Though not provided in the tables, Nigeria exports both raw materials and finished products to other African countries (excluding ECOWAS) and Eastern European countries. However, the magni tude of exports to these regions is quite insignifi cant.

Nigeria's imports from U.K., EEC, USA and Japan increased steadily in value terms from 1975 to 1992. During the oil boom, imports were possible because the economy had no 'problem' with foreign exchange. What is dis turbing is that imports from these sources continue to be over 70 per cent despite the adjustment and stabilisation programme.

The analysis of the direction of trade also reveals that, for the U.K., Nigeria had a trade deficit for the period 1984-1992 while for the EEC, a favourable trade balance was recorded for the same period. The same situation holds for Japan.

Furthermore, the direction of trade seems to confirm Nigeria's dependence on Western Europe, North America and Japan. Nigeria's exports go to the same sources where her imports come from. There is need to open up new markets especially in the Far East, Pacific and the Caribbean as well as in promising African countries like South Africa.


The direction of Nigeria's trade could also be traced to other West African countries. The volume of trade with Ghana, Cote d'lvoire and Senegal has increased substantially in recent years. Trade with Niger Republic is very large.

From 1970 to ' 1992, Nigeria had a favourable trade balance with ECOWAS. Both exports and imports increased remarkably between 1980 and 1992. It is important that the volume of trade between Nigeria and ECOWAS be increased. It is possible that most cross-border transactions are not properly record . ed. Nonetheless, the charter of ECOWAS stipu i lates that member countries must enhance trade I among themselves.


This section has examined the direction of Nigeria's external trade. A discussion of the coun try's trade structure and composition revealed that Nigeria exports about 80 per cent of her commodi 1 ties to countries in Western Europe, North America and Japan. The bulk of her imports come from the same sources.

It was noted that exports to Japan I are still very low. This is one market which the country should try to penetrate. Given the present i global arrangement, Nigeria may not be able to I drastically alter her trading partners. What is need i ed is to implement appropriate domestic policies so that Nigerian exports, preferably in manufactured/ semi-manufactured form, will be competitive in the world market.