Nigeria’s import bill rose by 63.3 percent year-on-year to N14.7 trillion in the third quarter of 2024, up from N9 trillion in the same period a year earlier, according to the Nigeria Economic Summit Group’s (NESG) Q3 2024 Foreign Trade Alert. The surge underscores the country’s growing dependence on foreign goods amid stalled local production efforts.
The NESG attributed the sharp rise to increased spending across critical sectors, led by mineral fuels, which accounted for 35 per cent of total imports—the largest share across all categories.
“This breakdown underscores Nigeria’s structural dependence on foreign goods, particularly energy products,” the NESG said in the report. “The delay in the full operationalisation of the Port Harcourt refinery and persistent crude supply issues at the Dangote Refinery continue to undercut local refining.”
Machinery and transport equipment made up 25.8 per cent of imports, chemicals accounted for 13.5 per cent, food and live animals 10.1 per cent, and manufactured goods 9.0 per cent. Other goods contributed the remaining 0.7 per cent.
The NESG warned that Nigeria’s continued reliance on imported refined petroleum products is putting sustained pressure on foreign exchange reserves in an environment of limited dollar inflows.
“The ongoing importation of refined petroleum products will sustain pressure on Nigeria’s FX reserves, especially in a market already experiencing limited foreign exchange inflows,” the group said. “Until local capacity issues are resolved, the demand for FX to finance imports will remain elevated.”
Import substitution, a strategy aimed at replacing foreign goods with locally manufactured ones, is gaining traction among Nigerian policymakers and economists as a short-to-medium-term solution.
“Export-led growth requires the development of competitive industries that can meet global standards, and this is a significant hurdle for Nigeria,” said Moses Igbrude, President of the Independent Shareholders Association of Nigeria (ISAN). “The country’s industrial base is underdeveloped, with many sectors operating at low levels of productivity and struggling to meet international standards.
“Nigeria’s infrastructure remains a significant impediment to exports. Issues such as inadequate power supply, inefficient transport networks, and poor logistics infrastructure add to the cost of production and make Nigerian products less competitive on global markets,” Igbrude added.
Despite its oil wealth, Nigeria imports the majority of its refined petroleum products and continues to rely heavily on foreign goods, including food, machinery, and chemicals. Apart from crude oil and gas exports, the country records a trade deficit in nearly all other sectors.
Dr. Muda Yusuf, chief executive of the Centre for the Promotion of Private Enterprise (CPPE), said the Dangote Refinery and the Nigeria Liquefied Natural Gas (NLNG) project have filled major gaps in the country’s energy needs, but more needs to be done.
“Apart from crude oil and natural gas, Nigeria has been doing poorly in terms of exporting finished products,” Yusuf said. “The Dangote Refinery and NLNG have filled a huge space in import substitution. And now with Dangote’s investment in a soon-to-come-onstream urea plant, we expect it to meet domestic demand for plastics and fertiliser.”
He added, “While the energy sector has seen some progress, there is a pressing need to improve import substitution in agriculture and manufacturing. Export promotion should not be jettisoned either. It remains a key source of foreign exchange that our economy desperately needs.”
Chief executive of AntHilln Concepts Limited and a member of NATIONAL ECONOMY Board of Economists Dr. Emeka Okengwu, emphasised the need for balance between export and import policies.
“Nigeria may not be succeeding at exporting goods because of poor agricultural standards and high production costs in manufacturing,” Okengwu said.
“We must focus on improving quality and reducing costs while simultaneously developing a sound import substitution strategy.”
A development economist at Adeleke University, Professor Tayo Bello, on his part,
argued that import substitution offers a more immediate and manageable path for economic transformation, especially in the face of structural weaknesses.
“By focusing on producing goods domestically that are currently imported, Nigeria can reduce its reliance on foreign products and stimulate local industries,” Bello said. “This not only conserves foreign exchange but also creates jobs, stimulates demand for local raw materials, and builds domestic value chains.”
“The development of industries such as agro-processing, textiles, cement, and pharmaceuticals would provide employment opportunities and contribute to the diversification of the economy,” he added. “With the right policies in place, import substitution could lead to the establishment of competitive industries that can eventually cater to both domestic and regional markets.”
Bello also warned that success will depend on meaningful government intervention.
“First and foremost, the government must create a conducive environment for industrialisation. This includes investing in infrastructure such as reliable electricity, improved transport networks, and logistics systems. Without reliable power and efficient transportation, even the most competitive industries cannot thrive.
“The government must also prioritise the development of human capital by investing in education and vocational training to ensure that the labour force is equipped with the skills needed to operate in modern industries,” Bello added.
He called for targeted trade protection measures to help fledgling industries compete.
“The government should implement selective tariffs and trade policies to protect nascent industries,” he said. “These measures would help shield domestic producers from cheap imports and allow them the space to grow. However, these protective measures should not be permanent; they must be phased out as industries mature and become more competitive.
“The government should support the private sector by providing incentives such as tax breaks, low-interest loans, and access to credit, which would make it easier for businesses to invest in the necessary technology and infrastructure to boost production capacity,” Bello added.
A financial economist at Auchi Polytechnic, Zakari Mohammed, said Nigeria’s agriculture sector holds untapped potential for import substitution.
“A critical step for Nigeria is to strengthen its agriculture sector, as it has the potential to supply the raw materials needed for many industries,” he said. “By supporting farmers through subsidies, better access to finance, and technology, Nigeria can increase its agricultural output and create a more sustainable supply of locally sourced raw materials for domestic industries.”
“The country’s vast arable land and natural resources should be leveraged to ensure food security and provide feedstock for manufacturing,” he said.
Mohammed also urged reforms to reduce the cost and complexity of doing business.
“The government must address regulatory challenges that hinder business operations,” he said. “Complex bureaucracy, corruption, and inconsistent policy implementation deter investment and make it difficult for industries to thrive. Streamlining regulatory processes, improving transparency, and ensuring consistency in policy enforcement are essential steps toward fostering a more favorable business environment.”
Igbrude added that the government must actively promote local content.
“Nigeria should focus on improving its local content policies,” he said. “By mandating the use of locally produced goods and services in public procurement and government contracts, the government can stimulate demand for domestic products and services.
“This would create a more direct and immediate market for locally produced goods and incentivise companies to invest in increasing local production capacity,” he said.
While export promotion has long been regarded as a more glamorous path to economic growth, experts say that import substitution offers Nigeria a pragmatic route to reduce dependency, conserve foreign exchange, and build resilience.
“With the right policies, strategic investments, and institutional reforms, import substitution could serve as a key driver of Nigeria’s long-term economic transformation,” Bello concluded.
