Nigeria Needs More Reciprocal External Trading Relationships-FSDH
Nigeria needs more reciprocal external trades than what is currently obtainable, FSDH Research has said in a report.
The Merchant bank research stated that Nigeria’s external trade figures over the years and the relationships with her trading partners show that there is a need to negotiate more reciprocal trading relationships that benefit the country.
The firm explained that one of the principles governing international trade is that a country should concentrate on the production of goods that it can produce more cheaply than other countries, export those goods and import other items it cannot produce or could only produce relatively more expensively than other countries.
According to FSDH, Natural endowment in certain resources allows a country to be able to produce certain goods cheaper than other countries.
However, Nigeria has huge petroleum deposits which, over the years, it has been exporting in its crude form, since the local refineries are not operating at reasonable capacities.
FSDH Research is of the view that with the huge investments going into Dangote Refinery, this situation may change very soon.
It also expects the Federal Government of Nigeria (FGN) to sell the four non-functional refineries in the country to private investors.
In its review, the research arm of FSDH Merchant bank said that alternatively, the FGN may convert the refineries to a form of joint venture arrangements with the private sector so that the wasting assets are used to generate export earnings for Nigeria.
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“The country also has natural endowment in agriculture, but the country has not taken full advantage of this to increase its exports or to reduce its imports”, it noted.
FSDH Research analysis of the external trade figures that the National Bureau of Statistics (NBS) published for first quarter of 2019 shows that Nigeria’s exports and imports by destination are not well-aligned.
Therefore, Nigeria’s external sector is highly vulnerable.
It was stated that Nigeria did not export anything to the three leading countries which are China, Swaziland and United States of America.
Though they accounted for over 50% of its total imports.
China, which accounts for over 26% of Nigeria’s total imports, is not even among the ten leading countries buying goods from Nigeria.
“Remember, China is not an oil-producing country.
There should be high-level negotiations with Chinese authorities to buy goods made in Nigeria on a consistent basis to compensate for the large market China enjoys for its products sold in Nigeria. This will make the trading relationship between China and Nigeria a mutually beneficial one,
“Otherwise, the trading relationship will become one that drains away Nigeria’s hard-earned foreign exchange” FSDH Research advises.
The firm said that on a medium to long-term basis, Nigeria must develop strategies that will enable it to enjoy cost advantage in the production of many exportable goods from its natural resources.
“Although both the fiscal and monetary authorities have announced particular import-substitution measures, the Next Level agenda should include clear strategies on how to make the business environment more conducive for the manufacturing sector to thrive”, it added.
In the review, it stated that most export-led economies around the world that we can identify today formulated and implemented specific programmes at certain points in the past to invest in their local competitiveness.
“This generally included massive investment in infrastructure to enable companies to scale up production at low costs, maintenance of law and order that support the growth of businesses.
“This include entrepreneurial development, maintenance of security in the country to protect lives and property, and the development of the financial system that can act as catalyst for economic growth.
“There should be a system where producers of raw materials can interface with the industrial sector so that the necessary raw materials may be sourced in the local market. This would help to increase the quality of raw materials produced locally in order to meet specific needs of the industry.
“Ultimately, more job opportunities would be available for the growing population of the country, rural-urban migration would reduce, external reserves grow,
“…the value of the currency more stable, inflation rate remain within an acceptable region, and savings and investments would grow as more investible funds become available in the local financial system, bringing down the interest rate”, FSDH Research reckoned.
Nigeria Needs More Reciprocal External Trading Relationships-FSDH
