Naira Depreciation Spurs Surge In Raw Material Imports To N3trn- NBS Reveals

Imports of raw materials into Nigeria surged by 25 percent to N3 trillion in 2023, driven by the depreciation of the naira against the dollar.

This increase was highlighted in the Foreign Trade Statistics data published by the National Bureau of Statistics.

According to Muda Yusuf, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, the depreciation of the naira played a crucial role in the spike in raw material imports.

He emphasized, “I think it is because of the naira depreciation. If you were importing something that was $1 million when the exchange rate was N450, now you are importing products worth $1 million and the exchange rate is N1,500. That is three times already if you multiply it in naira.”

Yusuf’s analysis underscores the impact of currency devaluation on the economy, translating into higher costs for imported goods in naira terms.

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This situation has led to a notable imbalance in trade, with Nigeria only managing to export raw materials worth N1.8 trillion between 2022 and 2023, resulting in a staggering N3.6 trillion trade deficit.

The manufacturing sector, a key player in Nigeria’s economic landscape, has long grappled with the challenge of over-reliance on imported raw materials.

Mansur Ahmed, the immediate past President of the Manufacturers Association of Nigeria (MAN), highlighted the detrimental effect of this dependency, stating, “Our manufacturing sector is weak because it is dependent on imported materials that we then process.”

Ahmed stressed the importance of backward integration, import substitution, and infrastructure development to bolster the resilience of the manufacturing sector. He advocated for public-private partnerships aimed at incentivizing local production and reducing the country’s reliance on imported goods.

In response to recent policy measures by the Central Bank of Nigeria, MAN expressed concerns about limited access to credit hindering efforts towards backward integration and innovation. The association urged for incentives to promote local sourcing and reduce the pressure on foreign exchange reserves.

As Nigeria navigates economic challenges, addressing the root causes of trade imbalances and enhancing domestic production capacities remain critical priorities for sustainable growth and development.