As Nigerians contend with the fallout from fuel subsidy removals, rising food prices, and a weakening naira, the conversation has expanded beyond the immediate challenges of everyday expenses like bread and transportation. In the last year, Nigeria’s import habits have also drawn significant scrutiny. The largest economy in Africa, Nigeria, is still mostly dependent on imports. In the first quarter of 2024 alone, Nigeria’s overall goods trade was valued at ₦31,810.59 billion. Imports reached ₦12,643.23 billion, signifying 39.75% of total trade. The value increased by 39.65% from ₦9,053.78 billion in Q4 2023 and 95.53% from ₦6,466.10 billion in Q1 2023. These import patterns raise alarms regarding economic stability, self-sufficiency, and inflation. Let’s have a look into some of these contentious imports and the implications they have for the country.
The unexpected surge in imports from Malta
Recently, there has been a lot of conversation around the Nigerian National Petroleum Company Limited (NNPC). This conversation emerged after the founder of the Dangote Petroleum Refinery, Alhaji Aliko Dangote, placed some allegations about the organization, including how some officials of the NNPC have blended plants in Malta. Shortly after a report revealed that Malta was a significant trading partner for Nigeria in 2023, with imports totaling N1.03 trillion. This is a stark increase from previous years when trade between the two countries was virtually non-existent. Nigeria imported fuel worth $2.25bn from Malta in 9 years. Nigeria imported petroleum oils obtained from bituminous minerals worth $2.8bn in 2023, jumping by a 342 percent increase from $47.5m in 2013. Nigeria imported fuel worth $59.98m in 2014; $117.01m in 2015 and $13.32m in 2016. It was observed that from 2017 to 2022, there was no fuel importation into Nigeria from Malta.
The significant trade with Malta, a country not typically known for large-scale oil refining, has raised eyebrows. Why Malta? Malta is a country not typically known for large-scale oil refining. This import surge also points to issues in trade monitoring and economic strategy. This development suggests possible middleman arrangements or re-exports, where Malta acts as an intermediary. Such transactions have sparked debates about transparency and the potential for inflated import costs, which could exacerbate the economic burden on Nigeria.
Nigeria’s food import conundrum
Nigeria has struggled with food self-sufficiency, largely due to underdeveloped agricultural infrastructure, inconsistent government policies, and security issues that disrupt farming activities. The country’s agricultural sector, which could potentially mitigate these issues, remains underdeveloped. For instance, despite favorable climatic conditions and a large agricultural workforce, Nigeria has not capitalized on its potential to grow its wheat. According to the National Bureau of Statistics (NBS) Nigeria imported wheat worth approximately $2 billion in 2023. However, wheat is not the only food import raising alarms. The NBS also revealed that imported food inflation in Nigeria hit 36.38% in June 2024. This spike has been driven by the weakening of the naira, which has made imports more expensive and contributed to a surge in the prices of essential food items like wheat, which is crucial for bread and other staples.
The consequences of Nigeria’s food import inflation are dire. Food costs consume a substantial portion of household budgets. According to Picodi, an international e-commerce organization, the average Nigerian household spends about 59% of its income on food. Moreover, the country is on the edge of a food crisis. The latest CPI report from the National Bureau of Statistics (NBS) puts food inflation at over 33%, the highest in about two decades. A few months ago, a revolt erupted in Niger state due to soaring food prices and starvation in the state.
The relentless petroleum imports
For as long as many can remember, Nigeria’s petroleum sector has been mired in inefficiencies, which is perplexing given Nigeria’s status as a major oil producer. According to the Nigerian National Petroleum Corporation (NNPC) despite having a combined refining capacity of 445,000 barrels per day, the actual production has been negligible. Consequently, Nigeria imports most of its refined petroleum needs, costing the country billions of dollars annually and exerting immense pressure on its foreign exchange reserves. The most recent concern is hinged on a report by Statisense, that the country spent about $18.7 billion on petroleum imports in 2023 alone. The bulk of these imports consists of refined petroleum including premium motor spirit (PMS) also known as fuel. Interestingly, Nigeria imported most of its petroleum products in 2023, from other African countries. For context, Nigeria recently maintained its position as the top crude oil producer in Africa. For more context, Nigeria has more refining capacity and oil reserves than these other African countries. For example, Nigeria imported over $100 million worth of petroleum products from both Togo and Tunisia, countries with considerably smaller oil sectors.
The high cost of these imports is also concerning given the removal of fuel subsidies, the volatility of global oil prices, and the ongoing depreciation of the naira. The Central Bank of Nigeria has pointed out that a significant portion of the country’s foreign exchange is used to import petroleum, putting additional pressure on the naira. The entire situation just creates a vicious cycle of currency depreciation and consistent inflation.
A silver lining with Nigeria’s capital importation?
Amidst these concerns, there has been a notable rise in capital importation. In Q1 2024, Nigeria saw a 210% increase in capital importation, totaling $3.37 billion. This influx is primarily due to foreign investments in sectors like banking, production, and information technology. This surge in capital importation may reflect a growing confidence among foreign investors in Nigeria’s long-term prospects. However, the recent trends in Nigeria’s imports still buttress critical vulnerabilities in the country’s economic structure.
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Publish date : 2024-07-29 07:00:00
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