Global trade is an immutable part of the global economy. International trade allows many countries to participate in the global economy by creating goods that are important for the people living in other countries at competitive prices. The relevance of global trade routinely manifests when people living in the UK visit supermarket chains like Tesco and purchase bananas made in Costa Rica, wines made in South Africa, coffee made in Brazil and many other goods made in different countries.
Global trade allows people across the world to gain access to a variety of goods at competitive prices. For the Nigerian economy, trade is not a less important venture. In 2020, the World Bank reported that trade contributed 25.4% to Nigeria’s Gross Domestic Product (GDP). This means that trade contributed a quarter to Nigeria’s total economic product in the 2020 economic year. Further, trade contributed 16.81% to Nigeria’s economy in the second quarter of 2022, a significant contribution to the Nigerian economy.
Given that trade is a hugely important component of Nigeria’s economic architecture, some critical things are still needed to fully develop the sector to its full potential and one of them is security. It has been estimated that poor security caused Nigeria’s oil production to drop by 55% between 2011 to 2015. In 2020, the Nigerian Economic Summit Group (NESG) noted that insecurity negatively affected Foreign Direct Investment (FDI) to Nigeria by as much as $40.6 billion. It must be noted that trade is a significant facilitator for foreign direct investment to Nigeria.
These are the ways that improved security can help Nigeria’s international trade with other countries:
Smoother Access to Nigerian Ports and Waterways
According to the stakeholders present at the opening ceremony of the Chartered Institute of Transport Administration of Nigeria (CIOTA)’s 3-day summit, Nigeria needs to redirect substantial investment towards the security of Nigerian waterways and the safety of Nigerian ships. Indeed, stakeholders in Nigeria’s marine industry have concluded that lax security on Nigerian waters has raised the cost of doing business at Nigeria’s ports, and cargo bound for Nigeria is now forced to pay a “war-risk insurance” in the event that any risky eventuality befalls them.
Emmanuel Jime, the executive secretary of the Nigerian Shippers Council (NSC) has also voiced out his concern over the fact that cargoes meant for the Eastern ports of Calabar and Port Harcourt are now being redirected to Lagos ports due to the high rate of insecurity in the Niger Delta waters. He stated that shippers of goods to Nigerian ports pay freight rates of between $1,000 and $1,500 when shipping goods to ports located in Eastern Nigeria. He further added that cargos bound for Lagos pay about $2,500 at the Lagos Anchorage Zone before the oncoming of the “Deep Blue Project” which was a project to secure Nigeria’s waterways up to the Gulf of Guinea.
Aside from the security costs associated with berthing cargo at Nigerian ports, it must be noted that the financial costs manifested in freight rates are borne by Nigerian end-users, including Nigerian importers and exporters. Thus, improved security will immeasurably help to straighten the waters of Nigeria’s global trade.
Fewer Border Closures and Freer Cross-border Trade
In August 2019, Nigeria closed all its land borders with its neighbours due to insecurity challenges arising from smuggling and illegal cross-border trade. The border closures were imposed without warning and they generated a tirade from Nigeria’s trading partners in Benin and other neighbouring countries in Cameroon, Chad and Niger. At the time, Nigeria’s President, Muhammadu Buhari, gave the reason for closing the borders to include the curtailing of illegal inflow of goods like rice and textiles and small arms into Nigeria. The land borders were eventually reopened in December 2020, but the cases of smuggling and other illegal trading activities across Nigeria’s land borders have not been totally extinguished.
It has been estimated that intra-African trade has the potential to reach a value of $70 billion by 2040 if the necessary legislative and security infrastructures are put in place. Unfortunately, this rich economic future of intra-African trade may be snuffed out if the security impediments relating to cross-border trade with Nigeria and its neighbours like illegal smuggling are not vehemently addressed. Already, the border closure that Nigeria enforced with its neighbours due to security concerns necessitated serious economic hardships for many Nigerians and Benionise. This is not unconnected from the fact that 80% of imports from Benin are destined for neighbouring Nigeria while Nigeria also exports electricity, refined petroleum products, rolled tobacco products and other goods in the opposite direction.
Insecurity challenges exacerbated by smuggling and the inflow of illegal firearms undoubtedly constitute an impediment to Nigeria’s global trade efforts, beginning with its next-door neighbours. The situation can only be improved with better security architecture across Nigeria’s land borders.
In August 2022, the Nigerian Bureau of Statistics (NBS) reported that the value of agricultural goods imported into Nigeria exceeded the value of agricultural goods exported out of Nigeria in the first quarter of 2022. The NBS Statistics on Foreign Trade in Goods stated that the value of agricultural imports into Nigeria in the first quarter of 2022 ₦443.36 billion while the value of agricultural exports out of Nigeria during this same period was ₦201.59 billion. These figures showed that Nigeria recorded a trade deficit of more than ₦200 billion during the Q1 2022 economic quarter.
The NBS attributed the challenge of Nigeria’s dwindling exports to poor infrastructure. However, the body noted that the challenges were surmountable if they were carefully addressed by the government.
By addressing lingering issues frontally, Nigeria’s exports can be increased to meet up with imports, thereby reducing the burgeoning trade deficit and helping to cement Nigeria and its citizens on a smoother economic path.
Poor security continues to challenge Nigeria’s trade structures, much to the detriment of the economy. The range numbers highlighted above show that Nigeria’s economy can receive a significant boost if the security apparatus of the country is well ironed out. To this wise, the Federal Government of Nigeria is enjoined to put in place all mechanisms needed in ensuring a safer country, including implementing the option of community policing, as this will significantly boost Nigeria’s global trade efforts.