In its recent release, Nigeria’s national statistics agency revealed impressive trade data for the first quarter of this year. A trade surplus of N6.52 trillion was recorded, signaling a significant reversal from the N1.4 trillion deficit recorded in the fourth quarter of the previous year. President Bola Tinubu’s enthusiasm is palpable, holding up the figure as proof that his economic reforms are bearing fruit. While any trade surplus is preferable to a deficit, beneath the surface, there is little cause for celebration.
A closer look reveals that Nigeria’s export structure has not changed, remaining heavily reliant on crude oil and natural gas exports. These products alone account for 91% of the country’s total exports, leaving non-oil exports with a paltry 9%. Tinubu’s economic reforms have failed to diversify Nigeria’s export portfolio, raising questions about the sustainability of this positive trade performance.
A key factor that has contributed to this trade surplus is the massive devaluation of the naira. This devaluation has had the effect of increasing the value of Nigerian exports in naira terms, thereby fuelling the growth of export earnings. However, this strategy raises concerns about its long-term effects, including imported inflation and the competitiveness of Nigerian products in the global market.
It is crucial to stress that an economic strategy focused primarily on the export of raw materials cannot lead to the sustainable wealth of a nation. As Adam Smith pointed out, the export of manufactured goods and services is essential to ensure stable economic growth. Finished goods have a higher value-added and generate more foreign exchange than raw materials, which is vital to ensure the prosperity of a country.
Unfortunately, Nigeria remains entrenched in its dependence on the export of crude oil and raw materials, which exposes it to major economic risks. The excessive concentration on these products exposes the country to an uncertain economic future and makes it vulnerable to fluctuations in global markets. The urgent need for Nigeria is to diversify its economy and invest in higher value-added sectors to ensure long-term growth.
In conclusion, while the trade surplus recorded may appear positive at first glance, it highlights the persistent challenges Nigeria faces in economic diversification and promoting higher value-added exports.It is time for the country to rethink its trade strategy and adopt more ambitious economic policies to ensure its future prosperity.