Analysts Seek Revamp of Nigeria’s Trade Policy to Unlock FX Inflows

Obinna Chima

The federal government has been advised to take urgent steps to overhaul the country’s trade policy in order to enhance foreign exchange (FX) inflow and achieve exchange rate stability.

Economists, who spoke with THISDAY, attributed the current scarcity of FX in the economy, partly, to delayed release of an updated trade policy for the country.

Minister of Trade, Industry and Investments, Mr. Niyi Adebayo, had said his ministry was working towards producing an updated trade policy. But several attempts by THISDAY to confirm from the minister when the policy document would be ready were unsuccessful, as he did not to respond to enquiries.

However, speaking in a chat with THISDAY, a former Director General, West African Institute of Financial and Economic Management, Professor Akpan Ekpo, stressed that trade policy was very crucial for any economy. Ekpo said trade policy helped in creating opportunities for entrepreneurs to manufacture and export non-oil products.

He stated, “The country needs an updated trade policy as soon as possible. But one thing is having a trade policy, another thing is implementation. So, we need a trade policy that will take into account the present situation in the economy.”

Senior Lecturer at the Department of Economics, Pan-Atlantic University, Lagos, Dr. Olalekan Aworinde, also emphasised the need for the federal government to have a practical trade policy in place.
Aworinde said, “When you have a trade policy, the implication is that the direction as well as the volume of your trade will go to a particular country or a particular part of the world. This has a lot of implications on the FX market.

“Lack of trade policy could be one of the reasons why we have been seeing the continuous devaluation of the naira. If you have a trade policy in place, you will be looking at a situation of export expansion because it is the expansion of exports that would bring in the FX earnings.

“The implication is that you are likely going to see a situation where the naira is stable, if you have more goods from your country being exported to other countries, because you will be receiving dollars in exchange. This improves the dollar supply. But in Nigeria today, the reverse is the case. We now have a situation whereby we now have more imports than exports, which is one of the reasons we have the constant pressure on the naira exchange rate.”

Former Deputy Governor of the Central Bank of Nigeria (CBN), Professor Kingsley Moghalu, in a recent interview on Arise News Channel, stressed the importance of export diversification. Moghalu pointed out that there was need for the country to have education, industrial and trade policies that are in alignment to support the growth of the economy.

He also said there was need to focus on productive knowledge in Nigeria, saying many people go through schools, but only a few have the kind of skills that can drive an industrially powered economy.
Moghalu stated, “We find that the oil sector still continues to be the main source of revenue for the country, whereas export diversification should focus on value added manufactured goods that are competitively produced in the country, traded in the international market, and bringing us forex back into the country. That means you need to deal with trade policy. Why should goods that are imported from China be cheaper than goods manufactured in Nigeria?

“That is a practical problem for industrial production in Nigeria. So, these are things we need to look at with trade policy, to export finished products. The way you benefit from devaluing the naira is that your foreign trade becomes more beneficial to you.
“But we still continue to be an import-dependent economy and the gap between our export and import is so huge. So, trade policy is very important. We conduct monetary policy, fiscal policy, forex policy, without an alignment with trade, so there is broken connection.”