Nigeria: Misdiagnosing The Trade Problem
You already know the line. “We import $xbn worth of y commodity. It is unsustainable and a drain on scarce foreign exchange. We must stop importing y and look inward”. So the question is: what is “y”?
Government apparatchiks and other players looking for some kind of government patronage will have you believe it is rice or toothpicks or fancy dresses. The data shows that they are all wrong. What products do we import the most? Refined fuels, machinery, and chemicals. Those three items account for almost 60% of all our official imports. In fact, food imports for household consumption account for only about 6% of total imports. It rises to 14% if you add food and beverage imports for industrial use. What is the single largest imported item? Premium motor spirit, aka fuel at 18%.
I know. Some will say that a large portion of our imports are smuggled in through Benin Republic. So what does Benin import, if we assume that everything imported to Benin eventually ends up in Nigeria even though they actually do carry-trade for other countries. But lets simplify things. In 2014 Benin imported $675m worth of rice. Or about 0.15% of our total imports in 2014. Or 9% of our official food imports. ONLY. The numbers for poultry and palm oil are even smaller. In fact Benin’s entire imports were equivalent to about 13% of Nigeria’s imports in 2014.
Bottom-line: Our official import numbers are probably close to the truth. And looking at the official number we do not have an import problem. In terms of diversity of imports we look like a very normal country. If there is anything to worry about its that we import PMS but even that is not really an issue (more on that another day).
So if we do not have an import problem, what is source of our trade problem? It should be so obvious I don’t understand how it is even a debate. But in case you haven’t figured it out just scroll up and take a look at the infographic again. Yes, you see it. That elephant in the room. Crude oil and other minerals account for 97.3% of our exports. And so once anything happens to the price of crude oil we immediately end up in hospital.
Solving our trade problem is all about diversifying our exports away from crude oil and other minerals. Some will argue that the self-sufficiency policy is a step in that direction but that goes against everything we currently know about African firms. Businesses in Africa rarely transition from domestic players to exporters. The firms that export are “born global”, they start exporting from the get go. So self-sufficiency is a path down the rabbit hole to nowhere. If you have data and want to learn a bit about what it takes to build firms that export you can watch these videos. Warning: there are a lot of them. Or you can watch the closing panel
As the doctors will tell you, if you treat a patient for malaria when they actually have some other serious disease then they will probably end up dead.