Data released by the Nigerian Bureau of Statistics following the recent rebasing of the country’s Gross Domestic Product shows that the Nigerian economy is much more diversified than we had thought or acknowledged. But it was not altogether surprising. Efforts in structural transformation of the Nigerian economy have been ongoing for the better part of the last 10 years. The Transformation Agenda of President Goodluck Jonathan has provided additional fillip in the last four years of supporting private sector-led, non-oil sector growth.

So here we are. And this is what we now know about the Nigerian economy after the rebasing. Agriculture, largely subsistence farming, which used to contribute 35 per cent to the GDP now contributes 22 per cent. The oil and gas sector which used to account for 32 per cent of the GDP now contributes 14 per cent. Those are the headline downward adjustments. The structural adjustment that has taken place shows these sectoral gainers. Manufacturing, which had accounted for approximately 2 per cent of the country’s GDP jumped to 6.8 per cent. From 0.9 per cent, the contribution of the telecommunication sector has expanded to 8.7 per cent. The biggest leap was made in the services sector with a rise in contribution from 29 per cent to 52 per cent.

Past trade trend

Data provided by Central Bank of Nigeria (CBN) for the period 1981-2010 shows structural rigidity to Nigeria’s external trade. In 1981, crude oil accounted for 96.89 per cent of the country’s exports. All through the 30-year period, there was no noticeable change in the trade pattern; oil export stood at between 95 per cent and 98 per cent of total export merchandise. A 2004 data shows that roughly 60 per cent of non-oil exports from Nigeria consisted of cocoa and rubber – primary products as well.

In this period, the country’s very narrow export goods base invariably meant that Nigeria was trading with very few countries. Indeed, the United States received about 50 per cent of Nigeria’s oil export. A handful of developing economies, mainly China and Brazil also received Nigerian oil export. Nigeria’s imports are mainly in finished products. Thus, our imports are mainly from the industrialised world, again principally the United States and China, and from few countries in the European Union.

With this trend, Nigeria was not able to lift intra-Africa trade. Trade within the continent has been very low. At 11 percent of total trade volume by African countries, trade within Africa has been the lowest compared with trade within other regions of the world. An assortment of often discordant policy, tariff and non-tariff barriers to intra-Africa trade has been identified. In addition to this, lack of political will to integrate the economies of Africa beyond fruitless policy engineering to aid trade has been cited. However, many African countries have exactly the same economic structure as Nigeria; they export primary goods to the leading industrialised nations while they import finished products from the same countries. For this reason, the most knotty of the issues that constitute barriers to intra-Africa trade is the narrow base of economic activities of scale on the continent. This issue then expresses itself in the narrow external trade pipes.

Likely new trade scenario

The possibility that Nigeria will now influence a new trade scenario within Africa is established in the far-reaching structural adjustment in our domestic economy, as revealed in the new GDP data. The trade influencers are tied in both the absolute size of the country’s $509.9 billion GDP (which is by a wide margin the biggest in Africa), and the structural diversification that is revealed in the recent GDP rebasing. For example, the Nigerian services sector is now worth $265 billion. With the banks accounting for significant part of this economic value, little wonder that over the past few years, Nigerian banks have been playing big in international trade in banking services in Africa. Like it played out for the South African external sector performance, the widening footprint of Nigerian banks across sub Saharan Africa will pave the way for other sectoral trade in Nigerian goods and services in Africa. Financial market infrastructure is a facilitator of international trade. With the linkages the banks have established with other SSA markets through the operations of their subsidiaries, a key facilitator of Nigeria’s external trade within Africa has gained ground.

However, a unidirectional trade flow from any African country cannot, mainly because of geopolitical concerns, lift intra-Africa trade. What we now see with the Nigerian services sector’s value of $265 billion is that it will accelerate on foreign participation. While trade flows in the Nigerian services sector will be led by the Western countries because they are more able to tap the Nigerian opportunities, the sheer size of this sector leaves enough head room for other African countries to come in. We also expect the export of services from other African countries into Nigeria. Cross-border trade in research and legal services are immediately contemplated to influence trade flows into Nigeria. Several foreign acquisitions which Nigerian businesses are expected to make in Africa makes this quiet imaginable.

The Nigerian manufacturing sector, now worth $35 billion and constituting 6.8 per cent of GDP, has also assumed scale. Gradually, we have begun to see the outflow of Nigerian manufactured products into our sub-regional markets. From cement, sacks to biscuits, Nigerian manufactured products are making a showing outside our borders. Now that the sector has become recognized again with its 6.8 per cent contribution to GDP, coupled with the consumption profile of Nigeria’s over 170 million population, Nigeria will evolve to be a major manufacturing hub, attracting investments as well as merchandises from other African countries, thus maintaining desired two-way directional trade flows.

The big lesson

The most important structural adjustment to note in the Nigerian economy is that it is now dominated by the private sector. Indeed, further transfer of public sector assets through the ongoing privatization programme, including in the power sector, will unlock resources, accelerate growth and broaden the economic base. Therefore, policies supporting private sector development and broader economic base are critical to opening the clog in intra-Africa trade pipelines. As we look to leverage Nigeria’s diversified economic base to boost trade within the continent, the example Nigeria has set is worth emulating by other African states.

Why DFIs are relevant

Nigerian Export-Import Bank (NEXIM Bank) is the designated trade policy bank of the Federal Government of Nigeria. As a development finance institution, NEXIM Bank has been supporting the process that is leading to  a more diversified Nigerian economy. In the last five years, NEXIM Bank has pushed forward, through its communication programme, the policy agenda which accentuated the big sectoral gainers in the structural adjustment that was revealed by the GDP rebasing. Through our “MASS Agenda”, we have presented Manufacturing, Agro-processing, Solid minerals and Services as the key sectors for economic diversification and job creation. This being the case, the bigger contribution we now see from services and manufacturing, as well as the strong showing of the entertainment industry in the Nigerian GDP basket, is a big plus for this Administration.

While policy support for economic transformation is very important, it is not enough. Accordingly, NEXIM Bank and other DFIs in the Nigerian space have received institutional reinvigoration and financial backing from the Federal Government so as to be able to effectively intervene in the sectors that made good showing in the GDP data. Moving forward, financial intervention in SME manufacturing, services and the other areas of our focus at NEXIM will be critical to maintaining growth momentum. As we know, lower cost credit, which development banks provide is important for lifting businesses in these sectors to the point where they can afford and therefore attract commercial credit. NEXIM Bank has lifted a number of firms to this position, helping them to realize export potentials.