By Seun Onigbinde, first published on SearsBusiness
I have a little obsession. Whenever the name of a country pops up in my head, I check the (OEC), a fantastic visualisation of trade built by the Massachusetts Institute of Technology (MIT) to check the “trading state” of every country. Nigeria’s economy may be the , but where do we stand in terms of global trade?
Recently, as I shopped for my daughters, I mapped the sources of GAP Clothing: Indonesia, China, Vietnam, Thailand, Cambodia, Sri Lanka, Bangladesh, and India. Vietnam caught my eye. In 1989, Vietnam was technically at war. We all know China’s export miracle, but how does Vietnam go from a country at war to $200 billion annual exports, and Nigeria, with all its famous oil revenues, could only squeeze out worth of exports in 2017?
And our low exports are accompanied by low imports—$31 billion in 2017. It is common to hear Nigerian leaders decry out addiction to imports, but what size of imports are we talking about here?
Singapore, population 8.6 million, exports $208 billion and imports $279 billion. Chile, with 18.6 million people, exports $62 billion and imports $57 billion. South Africa exports $103 billion and imports $77 billion. And countries with less than 20 million people—Qatar, Denmark, Sweden, etc.—all have larger exports than Nigeria. What would it take us to reach $100 billion in exports and $80 billion in imports, the same as South Africa?
Imagine this scenario: Nigeria exports $30 billion worth of oil, $5 billion in soybeans (Brazil: $20 billion), $5 billion from raw sugar (Brazil: $10 billion), $5 billion from telephones (Vietnam: $10 billion), $300 million from flowers (Kenya: $600m), $300 million in tourism, $10 billion from vehicle part production, and so on. For this to happen, need to lead the way in specialisation. In doing so, we integrate into the global economy in a way that allows us to create jobs and sustainable growth.
Paul Collier, one of the world’s leading experts on development, offers a useful illustration here. At independence, Singapore and Tanzania faced the same choice in the 1960s. But while Singapore opted for export-led growth and integration, Tanzania focused on import substitution, enabling protectionism and systemic economic collapse. Nigerian leaders must remember that managing the exchange rate by controlling imports does nothing to address the underlying economic structure.
To truly expand the economy, we must think: What am I going to sell to the world? The answer to this question may include increasing imports to facilitate the entry of raw materials, but export-led growth is what addresses structural issues like labour productivity and external reserves. When you compete against the world, you have to step up.
Nigeria’s weak connection to the global economy creeps up in many areas; one of these is government revenues. South Africa collected in taxes in 2018, and Nigeria collected under $20 billion even with three times the population. Part of the problem is the absence of a sophisticated private sector that creates jobs, expands growth, and provides taxable income. With nearly identical GDP’s, South Africa’s stock market capitalisation is over $1 trillion. Nigeria’s? About $31 billion. There is no magic to why Nigeria currently has the highest number of poor people in the world. How will we collect taxes when wealth isn’t available? How will wealth be available when people aren’t plugging into the global economy? We understood this in the 1960s when regions had that connected Nigerian farmers to the global supply chain. Of course, we lost all this once we .
We have a large population that is disconnected from the global economy. They don’t do agriculture, cut flowers, sew dresses, mine copper, or assemble phones. Our plug to the world is mainly oil, an industry that cannot produce jobs en masse. The question lingers: How can our large population benefit us and the world?
There is no other solution that Nigeria requires to grow its tax revenues or provide jobs than to take active steps to deepen its private sector in terms of infrastructure growth, financing, and ease of doing business—sure pathways to lifting Nigerians out of poverty. Through investments in skills and evolving into a state-backed private-sector economy, China grew its exports from less than $200 billion in 1995 to $2.1 trillion in 2017. Unfortunately, Nigeria’s non-oil sector exports declined from ₦1.16 trillion in 2015 to ₦630 billion in 2017, over 46% lower. Non-oil exports in the first nine months of 2018 were up to ₦960 billion (equivalent to Vietnam coffee exports), but this is still too low for Nigeria.
We have a country playing small in exports and imports; thereby playing small in jobs, taxes, and public revenues. Nigeria is a country of great potential but has not integrated with the global economy; we have not offered anything except oil. It is as if we have chosen to be content with little, with being an ant when we can be a giant.
A time will come when leaders will stop complaining about Nigeria importing fish and tomato paste, and will point to our exports of semiconductors, soybeans, and textiles. If you ever need a gauge of the health and future of Nigeria’s economy, look at the size and diversity of our non-oil exports.
The world keeps wondering what we will do with a population of 400m by 2050. It is time to start ideas that put them to shame; first by thinking beyond oil and by becoming an exports giant, trading in several products. That is the only way to get the engine of the nation running, putting our vast population to use, and plugging into the global economy.