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Nigeria External Economy and the White Noise of Import Dependency

Proshare

Wednesday, November 29, 2017 09:45AM / Proshare Research 

Executive Summary
The activity of any economy trading in the international market is often accompanied with costs and benefits. Nigeria being an open economy is not left out of this especially as it seeks to balance the dynamics of its exports and imports. 

In this edition of our Proshare Confidential report we carried out an in-depth study of the Nigerian external economy in order to understand the reverberating effect of the export and import dynamics of Nigeria.
 

The bitter spill of 2015 taught an important lesson, that when external injections (exports) wean they automatically force the trio of government revenue, spending and consumption to readjust to the new reality. Thus, identifying the nature of Nigeria’s external economy has become important especially in relation to:
 

  1. How diverse our imports are? And
  2. The ratio of Nigeria’s total import to GDP as an open economy?

By doing this, it allows us either validate the long held perception that Nigeria is truly a neither import dependent nation or not.  The conclusion arrived at provides the needed hindsight on the nation’s external leakages and how best to curb it. 

In addition, an analytical study on external injections and weather we have gotten it right with regards export diversification was carried out thereby taking an holistic view at both external injections and how best to improve. At the same time considering the ripple effect of weak revenue injection coupled with crude pegs on the nation’s current account.
 

In similar vein, the study takes a look at the cash flow direction at the factor that affects both inflows the Central bank and invisibles, given its chunk of autonomous. We further took a cursory look at the global and sub-regional economies and likely falls out from the lack of policy Conesus, Nigeria’s budget for 2018 and weather it can provide the needed V recovery and a study of Morocco is able to attract foreign direct investment. 
 

Download PDF Here
 

Introduction
The ability of an economy to achieve a balance between its domestic (government spending consumption and investment) and external components is very important in achieving targeted objectives. For developing economies that are commodity dependent, exports are becoming more inelastic while demand for capital goods keeps growing. This compounds the task of determining the best means of managing the domestic economy as it contends with the reality of leaner revenue and growing population.  

Countries that have resisted the need to readjust have jolted their domestic economies as weaker invisibles affect their current account adversely. Sadly such countries are once again experiencing the bitter pill of a   revolving door scenario. Whereby the inward shift by the external economy has left the domestic economy weakened and hard pressed.
 

Therefore this edition of Proshare confidential will take a look at both the export and import components of Nigeria. It becomes pertinent, especially now when expenditure policies are been adopted.  Besides it allow us by take an in-depth look at diversification, if such is deep enough to address the weak export to GDP ratio. 
 
   

Objective of the study
Understanding the dynamics between exports and imports is critical especially for a country like Nigeria whose foreign exchange inflow is largely from crude oil. 

Thus, the essence of this study is:

·         To take a cursory look at the global economy

·        
Provide a brief analysis of the sub-regional economy while taking a provide a cue from Morocco on how it improved its external economy

·        
Take a critical look at the budget  

·        
Provide an hindsight on the export dynamic

·        
Compare Nigeria’s exports to GDP ratio with other nations

·        
Analyse the import component

·        
Compare Nigeria’s import to GDP ratio with other countries

·        
Determine the factors responsible for the shift in both exports and imports in Nigeria

·        
Show the revenue and expenditure streaming from the external economy

·        
Show the aggregate foreign exchange through the economy

·        
Ascertain the health status of the nation’s  current and capital account

·        
Provide an analysis of the country’s balance of payment

·        
Diversification and the measures needed

·        
Provide an analytical study of Foreign Direct Investment 

For further details contact 
research@proshareng.com 

Download PDF Here 

Previous Proshare Confidential Report (s)

1.       States and the Rising Weight of Debt – Oct 2017

2.      Money Supply: Reeling from Policy Response – Sep 2017

3.      How Rail and Energy Will Deliver a Robust Economy for Nigeria – Aug 2017

4.      Too Big Government: The Hysteria of Developmental Quagmire – Jul 2017

5.      The Nigerian Debt Conundrum and the Need for Automatic Stabilizers – Jun 2017

6.      Article IV vs. ERGP - The Third Way – May 2017

7.      Lifting The Veil off The Financial Sector – Apr 2017

8.     Towards An Economic Model for Nigeria; Going Beyond Symptomatic Responses - The Panama Model – Mar 2017

9.      FX Utilisation in January 2017-Symptoms of An Opaque Structure – Feb 2017

 
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