Nigeria’s reliance on China as a primary source of imports has sparked fresh concern among economists and trade analysts, who warn that the country’s current import structure exposes it to serious vulnerabilities.
This call was made by the Group Managing Director of GMD, Cowry Asset Management, Johnson Chukwu, at the Cowry Quarterly Economic Discourse on Wednesday, themed ‘Thriving in a Volatile Economic Environment.’
The first quarter Foreign Trade in Goods Statistics released by the National Bureau of Statistics indicated that China remains Nigeria’s highest trading partner on the import side, followed by India, the United States of America, the Netherlands, and the United Arab Emirates. The most traded commodities imported during the quarter were gas oil, ordinary motor spirit, petroleum oils and oils obtained from bituminous minerals, crude cane sugar meant for sugar refineries, and durum wheat (not in seeds).
He said that a high volume of imports from China means that any disruption in China’s supply chains, like those seen during the COVID-19 pandemic, could trigger a new wave of inflation and economic instability in Nigeria.
Chukwu said, “You will observe that China has become so important to this country, and I hope the government finds ways to deal with this because, for me, it’s becoming a threat. So, if there is a shutdown or supply chain disruption in China today, we’re going to have a major inflationary impact on the country.
So, the government needs to consider that. I know Western countries are already doing a lot of things to diversify their productivity base from China, and they are moving to India and to Vietnam to make sure that after the COVID lockdown, what happened will not happen again.
“Interestingly, in terms of export, you can see India as our largest export partner, followed by the Netherlands. Of course, what we sell to these countries are largely crude and mineral-related items, and then you have the refined natural gas and other gas commodities, which account for 95 and 85 per cent of total exports. So, you can see the other contributors, our exports: vegetable products, about two per cent, and you have spirit tobacco, which is exported to West African countries, largely about seven per cent. Then our import of petroleum products is about 33 per cent of our total imports. That’s moderated slightly after Dangote started producing. The implication of improvement in balance of trade as well as the Central Bank’s active involvement in the sale of money market instruments has led to some appreciation of local currency.”
The financial analysts went on to peg the crude oil price for the second half of the year at about $67 per barrel, predicated on the fact that OPEC has committed to increasing crude production by about 548,000 barrels a day, at a time when Donald Trump is using tariffs to shrink economic activity.
“So, if you have a shrinkage in demand and at the same time, you are having an increase in supply, you are certainly going to see a moderation in crude prices. For the second half of 2025, crude price will average $67; of course, you could see some fluctuations. We think Nigeria’s crude oil production will increase to about 1.6 million barrels per day, and that will allow for the fluctuations that you may experience. With the acquisition of Mobil by Seplat and the Renaissance acquisition of Shell assets, we expect that they will reopen some of the shut-in wells.
“We expect the GDP to average 3.7 per cent this year and for inflation to moderate further by approximately 20-22 per cent. Why? We think exchange rate stability will subsist, and food production will only be the leg that we will need to deal with as we move out of the harvest season. We think the average exchange rate in the second half of the year will be in the region of 1525/$ as the Central Bank has been actively participating in the market and in the equities market. We think the returns will be in the range of 30 per cent this year, and we have already done 22 per cent,” he said on the outlook.
The founder/Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, during a panel discussion, called for caution.
He said, “The figure is not looking as good as we thought. When I look at the figures of our fiscals in the Central Bank report, the revenue performance has been very suboptimal, especially from the oil sector. In 2024, for instance, we had a revenue projection of close to N20tn, and when I looked at the numbers, we were seeing actual revenue at the end of December 2024 slightly less than N10tn. That is almost 50 per cent less than we expected. That is very disturbing. When we look at the ratios, especially the debt ratio, it is very disturbing.
“Contrary to what we have been hearing, debt ratios are getting close to 80 per cent. In fact, there was a quarter when it was over 100 per cent, debt service to revenue. If you have that kind of picture, that is a major risk even to the macro stability that we have been celebrating. We need to watch it properly.”
He added that the cost of operations and inability to pass on those costs to the final consumer were killing Small and Medium Scale Enterprises in Nigeria.
The Managing Director of Agusto & Co., Yinka Adelekan, echoed similar sentiments about the struggles of the SMEs, saying, “The SMEs are struggling, and their ability to absorb shock is not in the same category as the large corporates, and that is going to be our story in the near term unless there are fundamental changes in the economy.”
She added that investors need to pay attention to the political ideologies of the ruling class in the markets that they are investing in, as well as the inflation rate outlook.
Adelekan said, “I believe that there are huge opportunities for businesses in Africa. What would I tell an investor to look at? First and foremost, try to understand the political ideology of the ruling class of whatever country you are going to. If you look at Nigeria since 1999, we have had various ideologies, but you will find out that in the period when we had pro-market ideologies, Nigeria thrived, but in the periods when we had a statist economic view, those are the periods when there has been dissatisfaction.
“Secondly, political stability in those markets is a critical factor, as is the long-term inflation rate. Why is it important? You will see the impact on the different macroeconomic prices, whether it is the interest rate or the exchange rate.”
