Nigeria’s International Trade Problem.

Adapted from Clouut

In the past 15 years, the years 2016 and 2020 are two that stand out. In both years, Nigeria’s imports exceeded its exports (trade deficit). In 2016, It was by ₦290 billion ($1.1 billion), and in 2020 was by a staggering ₦7.4 trillion ($20.6 billion).

The reason: Exports have plunged. Nigeria exported $35 billion worth of goods in 2020, compared to an average of $109 billion between 2010 and 2014.  The pandemic didn’t help Nigeria’s oil-dependent economy, and its non-oil exports aren’t doing so well. 

Why it matters: In the first quarter of 2021, the trade deficit is already 3.9 trillion ($10.3 billion). If it continues at this rate then 2021 would have a wider gap than 2020.  

A widening trade deficit means that more dollars are flowing out of Nigeria than are coming in. Long-term, this means the currency will keep losing value, except Nigeria attracts dollars via other means. 

What’s the government doing about this? Hoping that oil prices and Foreign direct investments would increase, and when it doesn’t,  borrow but that’s not sustainable.

Why should you care? It’s easy to hope that the Naira to dollar exchange rate, which has crashed by 59% since 2014, would improve. A better option might as well be to convert your naira to an alternative currency that won’t drop in value like the Naira.