ABUJA — The World Trade Organization (WTO) has released a report detailing Nigeria’s trade policies and economic environment as the country seeks to boost economic diversification and enhance trade performance. The Trade Policy Review, conducted by the WTO Secretariat, underscores Nigeria’s evolving approach to trade, aiming for greater participation in the global economy while addressing internal challenges.
According to the report released on Wednesday, Nigeria remains one of Africa’s largest economies, with a nominal GDP of USD 363 billion in 2023. However, the country continues to face economic challenges, particularly in diversifying its economy beyond oil and gas, which still account for a significant portion of exports and government revenue.
“Trade and trade-related policies remain key components of Nigeria’s economic growth strategies,” the report noted, highlighting the new Trade Policy of Nigeria for 2023-2027. This policy emphasizes diversification, aiming to broaden manufacturing exports and strengthen domestic industries. The strategy is part of Nigeria’s broader economic agenda, known as Agenda 2050, which targets average real GDP growth of 7% and aims to create a more competitive and dynamic economy.
Focus on Economic Reforms and Foreign Exchange
One of the most significant economic reforms detailed in the report was Nigeria’s decision to streamline its foreign exchange rate system. In 2023, Nigeria eliminated a complex exchange rate structure that had led to shortages of foreign exchange. The shift brought the official naira rate in line with market rates, although it resulted in a 70% depreciation against the U.S. dollar by early 2024.
“Nigeria’s exchange rate reforms were long overdue,” the report stated. “They were necessary to restore predictability in the market and support long-term economic stability.”
The government also implemented reforms related to fuel subsidies, which historically constituted a heavy burden on public finances. In 2023, Nigeria removed costly subsidies, though it later introduced retail price caps to moderate the impact on consumers.
Challenges to Trade Facilitation and Investment
The WTO report noted that while Nigeria has made strides in trade facilitation, challenges remain. Import procedures, for example, are lengthy and often involve high physical inspection rates, with nearly 90% of consignments undergoing manual checks. These delays hinder Nigeria’s integration into global value chains, a critical step for achieving diversification.
“Nigeria’s business and regulatory environment continues to be complex and unevenly applied,” the report warned, citing corruption, weak enforcement of the rule of law, and high transport costs as significant barriers to investment.
Foreign direct investment (FDI) remains low, with a sharp decline in 2022, highlighting the need for a more predictable and transparent investment climate.
Manufacturing Sector: The contribution of the manufacturing sector to Nigeria’s GDP saw a significant increase, from 8.6% in 2017 to 15.7% in 2023. The most dominant industries remain food and beverages, cement, and textiles and apparel. The motor vehicle assembly industry notably expanded, moving from 0.6% of manufacturing activities in 2017 to over 3.4% in 2023. Despite this growth, manufacturing exports are still limited, primarily consisting of fertilizer and electrical energy. In 2023, Nigeria implemented a new Nigerian Automotive Industry Development Plan, yet the country still imports most of its vehicles, mainly second-hand ones.
Banking Sector: According to the IMF, the banking sector in Nigeria remains stable. In March 2024, the Central Bank of Nigeria (CBN) introduced new minimum capital requirements. In 2023, financial institutions and insurance companies contributed 3.7% to the GDP. About 64% of adults had access to financial services, and 3.1 million Nigerians held insurance policies. Nigeria’s fintech sector is providing innovative solutions to improve financial access. In 2020, Nigeria revised the Banking and Other Financial Institutions Act, establishing a Banking Sector Resolution Fund and broadening CBN’s oversight and authority, including the approval of chief executives and mandates for digital banks operating in the country. Efforts are ongoing to address the Financial Action Task Force’s money-laundering concerns after Nigeria was placed on the grey list in early 2023. Both domestic and foreign banks are held to the same standards for establishment, operation, and oversight.
Telecommunications: Nigeria’s telecommunications industry continued its robust growth, expanding by nearly 11% annually between 2017 and 2023. Despite this progress, market concentration remains high, and service costs are considerable, leading many subscribers to own multiple SIM cards. There are no restrictions on ownership, but the Nigeria Communications Commission (NCC) must approve ownership changes exceeding 10% of shares, as well as all tariffs and special offers. The first two 5G licenses were awarded in 2021, followed by a third in 2022. However, the Nigerian Postal Service retains a monopoly on certain postal services despite ongoing reforms.
Ports and Aviation: Nigeria’s port efficiency has seen improvements, with container dwell times reduced from 25 days in 2017 to around 14 days in 2023. Additionally, Lagos Port cut the average arrival time from 17 hours to 12 hours between 2021 and 2022, although the ports still face global ranking challenges. Issues with cargo handling, clearance processes (particularly the high physical inspection rate of 90%), lack of coordination among institutions, and inadequate port infrastructure continue to impede operations. The Lekki deep seaport, Nigeria’s first, was inaugurated in 2023, and there are currently 26 port terminals under concession. In the aviation sector, the Civil Aviation Act of 2022 modernized regulations to meet international safety standards, although no airport concessions were granted during the review period. Nigeria also finalized 4 bilateral air transport agreements and 10 Memoranda of Understanding.
Creative Industries: Nigeria’s cultural exports continue to flourish. The film industry, Nollywood, produced over 2,500 films in 2023, with a growing presence on international streaming platforms. In 2022, the Advertising Regulatory Council of Nigeria banned the use of foreign models and voice-over artists in local advertisements, reflecting a shift towards promoting homegrown talent.
Strengthening Regional and Global Trade
Nigeria’s involvement in regional trade agreements, such as the African Continental Free Trade Area (AfCFTA), was praised as a step toward greater economic integration. The country has also engaged in discussions with the Economic Community of West African States (ECOWAS) to strengthen regional cooperation.
As an active member of the WTO, Nigeria continues to participate in various global trade initiatives, including the Joint Statement Initiatives (JSIs) and the Services Domestic Regulation JSI.
“The government’s commitment to regional and international trade agreements is a positive development,” the report stated. “These agreements can serve as platforms to drive economic growth and attract investment.”
The report concludes by emphasizing that while Nigeria has made progress in some areas, more sustained efforts are needed to overcome persistent challenges. The country’s future growth prospects will depend on its ability to improve the regulatory framework for trade, attract foreign investment, and diversify its economy.
This Trade Policy Review marks Nigeria’s sixth assessment by the WTO.
Editor: Gabriel Ani
