Nigeria WT/TPR/S/147 
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I. ECONOMIC ENVIRONMENT 
(1) MAJOR FEATURES OF THE ECONOMY  
1. Nigeria is located on the west coast of Africa;  it is bordered by the Gulf of Guinea to the 
south, Benin and Cameroon to the west and east, resp ectively, and Niger and Chad to the north.  It 
occupies a total area of 923,770 km2 with a 4,047 km. land boundary and an 855 km. stretch of 
coastline.1  The climate varies between equatorial in th e south and tropical elsewhere, with average 
monthly temperatures of 22ºC to 36ºC.  The amount of rainfall remains the key climatic variable, as 
there is a marked alternation of wet and dry seasons ;  in general, the climate becomes progressively 
drier northwards from the coast.  The topography is characterized by lowlands in the south (though 
some mountains exist in the south-east), merging into  hills and plateaux in the central part, with the 
north covered with plains.  Nigeria is richly en dowed with natural resources, including petroleum, 
natural gas, bitumen, tin, columbite, iron ore, coal , limestone, and lead (Chapter IV(3)).  With an 
estimated population of 135.6 million in 2003, it rema ins the most populous country in Africa, and the 
annual population growth rate is 2.1%.2 
2. In 2003, Nigeria's gross domestic produc t (GDP) amounted to some US$55 billion 
(Table I.1).  The agriculture sector, comprising cr ops, livestock, forestry, and fishing, contributed 
26.4% to GDP and employed about 70% of the labour force (Chapter IV(2));  mining and quarrying (mainly oil) accounted for 44.7% of GDP and employed  5% of the total labour force (Chapter IV(3));  
and manufacturing contributed 4.7% to GDP (C hapter IV(4)).  The services sector, including 
wholesale and retail trade, real estate, government services, transportation, financial, communication, 
and hotel and restaurant services, accounted for the remaining 24.2% of GDP.  The main service 
subsectors, in terms of contribution to GDP, are the wholesale and retail trade (14.1%);  real estate (3.8%);  and finance and insurance (1.0%).  Gove rnment's involvement in direct productive activities 
spans both the industrial and services sectors, but is concentrated in the petroleum subsector, and in 
the provision of key infrastructural facilities.  
Table I.1 
Economic performance, 1999-03 
 1999 2000 2001 2002 2003a 
General       
GDP at current market prices (US$ million)  35,104 42,668 47,248 44,559 55,277 
GDP at current market prices (N  million) 3,440,179 4,676,394 5,339,063 5,632, 308 7,545,263 
Real GDP growth, annual percentage variation  3.5 5.4 3.1 1.5 10.7 
Consumer price index, percentage changes (end-of-period ) 4.8 14.5 13.0 12.9 14.6 
Average exchange rate (N  /US$) 98.0 109.6 113 126.4 136.5 
Nominal effective exchange rate (% change)b -51.9 -2.0 -4.5 -10.2 -15.7 
Real effective exchange rate (% change)b -49.3 2.5 11.0 0.5 -6.7 
Monetary sector Per cent 
Minimum rediscount rate  20.0 14.0 20.5 16.5 15.8 
Treasury bill rate 14.0 13.0 20.3 15.2 15.1 
Savings deposit rate 5.2 4.9 5.0 5.0 4.2 
Prime lending rates 22.5 19.5 26.0 21.2 20.5 
Broad money growth  30.7 48.2 27.2 21.6 24.1 
GDP by sector  Per cent of GDP 
Agriculture 34.2 26.4 30.7 31.3 26.4 
Table I.1 (cont'd)
                                                      
1 It shares a 773 km. land border with Benin, 1,690 km. with Cameroon, 1,497 km. with Niger, and 
87 km. with Chad.  
2 World Bank (undated). WT/TPR/S/147 Trade Policy Review 
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 1999 2000 2001 2002 2003a 
Mining and quarrying (mainly oil) 30.9 48.2 42.9 38.3 44.7 
Manufacturing  5.4 4.4 4.7 5.4 4.7 
Services 29.5 21 21.6 25.0 24.2 
National accounts  Per cent of GDP 
Consumption 74.8 58.7 68.3 74.2 68.2 
 Government 18.0 20.6 26.5 24.7 23.3 
 Private 56.8 38.1 41.8 49.4 44.9 
Gross fixed investment 27.7 20.6 22.8 26.1 22.7 
 Government  7.6 8.6 12.1 10.2 9.3 
 Private 20.1 12.1 10.7 15.9 13.4 
Imports of goods  27.1 23.1 24.1 28.9 29.3 
Exports of goods  34.6 52.0 41.1 38.3 47.5 
Government finances   
Total revenue  (N  million) 711,449 1,368,233 1, 362,701 1,155, 688 1,470,637 
Total expenditure (N  million) 957,960 1,220,744 1, 625,255 1,420, 406 1,559,726 
Overall balance (N  million)  -246,511 147,489 -262,554 -264,718 -89,089 
Overall balance (in per cent of GDP) -8.7 4.3 -5.6 -5.0 -1.2 
Primary balance (in per cent of GDP)c 0.6 9.8 1.8 -0.9 2.0 
a Preliminary estimates. 
b Minus sign indicates depreciation. c Public deficit (-) or surplus (+). 
Source: IMF (2004a), Nigeria: Selected Issues and Statistical Appendix ; and IMF (2004b), Staff Report for the Article IV 
 Consultations . 
3. In 2003, consumption expenditure account ed for 68.2% of GDP, of which private 
consumption contributed 45%;  and gross invest ment expenditure accounted for 22.7% of GDP, of 
which gross private investment contributed 13.4 %.  Government consumption and investment 
expenditure represented 33% of GDP.  The share of merchandise trade (exports plus imports) in GDP 
was 76.8% in 2003, with exports of goods alone accounting for 47.5% of GDP.  Crude petroleum and 
natural gas accounted for some 96.7% of total merc handise exports (section(3)(i)).  Total external 
public debt is US$30.4 billion:  83.4% is owed to the Paris club, 9.3% to multilateral lenders, and 
7.3% to commercial banks.  The external debt to  GDP ratio was 56.9% and the debt service to GDP 
ratio was 5.2% in 2003.  Nigeria is not eligible for debt relief under the enhanced highly indebted 
poor countries (HIPC) initiative, though it continues to campaign for such relief to assist in its 
developmental efforts. 
4. In 2003, per capita income was about US$400.  However, the Nigerian economy is observed 
to be dichotomized:  one part is middle-income oil-producing, with a per capita income of about 
US$2,200 for some 4% of the population;  and the other non-oil producing, with an average per capita 
income of about US$200 for the rest of the population.  As of 2000, total income for the top 2% was the same as that of the bottom 55%.
3  In 2002, Nigeria ranked 151st out of the 177 countries covered 
by the United Nations Development Programme  (UNDP) Human Development Index (HDI).4  About 
70% of the population live on less than US$1 a day;   the literacy level is 66.8%; about 30% of 
children are malnourished;  infant mortality rate is  5.1 per 1,000, and life expectancy at birth is 
51.6 years.5  Nigeria faces a daunting task to achie ve the Millennium Development Goals (MDGs)6, 
                                                      
3 World Bank (2002b). 
4 The HDI measures development by combining indicators of life expectancy, educational attainment 
and income. 
5 World Bank (undated).  
6 These are:  the eradication of extreme poverty a nd hunger; universal primary education; promotion of 
gender equality and empowering women;  reduction of child mortality;  improvement of maternal health, Nigeria WT/TPR/S/147 
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and the size of its population means that its progress will influence Africa's ability as a whole to 
achieve the MDGs.  
5. The national currency is the naira (N ).  Nigeria maintains a system of four foreign exchange 
markets:  the official Dutch Auction System (DAS),  which is a sealed bid multiple price auction used 
by the Central Bank of Nigeria (CBN) in transac tions with participati ng banks and bureaux de 
changes (BDC);  the inter-bank market, which a llows for freely negotiated foreign transactions 
amongst authorized dealers and through which fore ign exchange is obtained from non-CBN sources 
(e.g. foreign oil companies and non-oil exports);  th e bureaux de change;  and the non-official market.  
The DAS is the largest of the four markets.   
(2) RECENT ECONOMIC DEVELOPMENTS  
6. During the 1999-03 period, real GDP growth rates averaged 4.8% a year, up from 3.5% over 
the 1995-98 period.  Increased investment flows to the oil sector have played an important part in the 
improved performance (Chapter IV(3)(i)).  However,  annual growth performance since the last Trade 
Policy Review (TPR) of Nigeria has been inconsiste nt, due in part to the heavy dependence of the 
economy on the oil subsector;  this has rendered it sus ceptible to developments in the international oil 
market.  Real GDP growth rates rose consiste ntly between 1998 and 2000, supported by rising 
international oil prices, but dipped in both 20 01 and 2002 as the prices were relatively lower.  A 
rebound in international oil prices and increases in Nigeria's OPEC quota in 2003 contributed to a 
sharp rebound in real GDP growth to the highest level in over a decade.7  Robust growth in the non-oil 
economy has also contributed to the recent growth performance.  However, unlike growth in oil GDP, 
which has fluctuated widely, the non-oil sector has been relatively consistent in its performance.  
7. In 2003, agricultural output increased by 6.1% (up from 4.0% in 2002) against the backdrop 
of favourable weather, various government initia tives seeking to address certain supply bottlenecks, 
as well as high tariffs and import prohibitions imposed on specific agriculture goods.  Nonetheless, the agriculture sector remains underdeveloped (Cha pter IV(2)).  Manufacturing, though diverse, 
remains uncompetitive;  in 2003, output in the sect or grew by 1.1%.  The sector benefits from 
government efforts to address supply-side constr aints and certain manufacturing subsectors are 
shielded by high protective border measures.  The increased protection accorded to both the 
agricultural and manufacturing sectors (Chapter III(2)( iii) and (2)(vii)) during the period under review 
is likely, however, to have further distorted effi cient resource allocation, thereby hindering overall 
growth rates.  Growth in the services sector has been buoyed mainly by increased activity in 
wholesale and retail trade, and in the communi cations subsector, which benefited from recent 
deregulation reforms.  Nonetheless, the privatization of certain key services is delayed (Chapter IV(5)). 
8. Economic growth remains influenced by main ly consumption and exports.  Over 2000-03, 
export growth averaged some 8.4% in real term s.  However, the yearly export performance has 
fluctuated widely in line with developments in  the international oil market.  Growth in real 
consumption expenditure also averaged some 5.4% over 2000-03, with growth in public consumption 
(16.6%), buoyed for several years by increased re venue from favourable oil prices, far outstripping 
growth in private consumption (3.9%);  the lower growth in private consumption may reflect lower 
income growth in the non-oil economy as it employs some 95% of the labour force.  Rising investment, a reflection of the increasing confidence in the economy, also contributed to the growth 
process;  gross fixed investment (private and public) increased by 6.7% on average over 2000-03.  
                                                                                                                                                                    
 
combating HIV/AIDS, malaria and other diseases; ensuring  environmental sustainability;  and developing global 
partnership for development. 
7 Total oil production increased by 25% to 2.45 million barrels per day in 2003.  WT/TPR/S/147 Trade Policy Review 
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The growth performance of the economy in 2003 occu rred alongside an end-of-period inflation rate of 
14.6%, interest rate (prime lending rate) of 20.5%, and a depreciation of the real effective exchange 
rate by 6.7%  (Table I.1). 
9. Fiscal policy continues to be influenced by de velopments in the oil subsector, as petroleum-
related taxes alone account for over 70% of public re venues;  the fiscal situation is susceptible to 
developments in the international oil market.  In  general, Nigeria's overall public deficit averaged 
about 3.2% of GDP during 1999-03.  However, on an annual basis, the situation has varied widely, with improvements in the fiscal balance occurring during years of improved performance in the oil 
subsector and vice versa.  In 2003, federally coll ected revenue increased by 48.7%, on account of the 
increase in national production of crude oil and its  price in the world market, and of the removal 
(towards the end of the year) of the subsidy on domestic crude sales to the Nigerian National Petroleum Corporation (NNPC) (Chapter IV(3)(i)(b)).  This contrasts with the fall of 22.4% in 2002 
due to lower crude oil production, as well as lower than expected privatization proceeds.  Public 
revenue from company income tax, customs and exci se duties, and value-added tax also increased in 
2003 by 28.2%, 7.8% and 23.9% respectively;  and aggregate public expenditure rose, by 20.4%, of 
which 80% on recurrent items and 20% on capital items.  As a result, the public deficit fell from 5.0% 
in 2002 to 1.2% of GDP in 2003;  over 50% of  the deficit was financed by the domestic banking 
system.  
10. The Central Bank of Nigeria (CBN) is responsible  for the formulation of monetary policy;  
the principal objective is price and exchange rate stability.  Its main instruments are open market 
operations and cash reserve requirements.  In recent years, inflation rates have remained above the 
single digit target as a result of, inter alia , excessive increases in monetary growth;  this has adversely 
affected the competitiveness of the economy.  In 2003, broad money supply (M2) rose by 24.1% to 
some 9.1 percentage points above the programme d target, whereas narrow money (M1) grew by 
15.7% percentage points above the prescribed target  growth rate of 13.8%.  The growth in money 
supply was largely due to an incr ease in net foreign assets and, to a lesser extent, in overall banking 
system credit.  In the absence of an adequate st erilization policy, this has sustained high inflation 
levels.  The reduction of the minimum rediscount rate  in 2003 also played its part.  The increases in 
money supply and in the pump-price of petroleum pr oducts fuelled inflation in 2003, despite the 
stability of food prices due to good harvest.  This le d to negative real short-term interest rates by 
end 2003 and early 2004. 
11. The nominal exchange rate has been adjus ting (through persistent depreciation, and a 
devaluation in 1999) to the potential misalignmen t of the naira on currencies of major trading 
partners.  Nevertheless, Nigeria's high inflation rates (compared to its major trading partners) 
somewhat dampen the impact of the depreciati on on the competitiveness of its exports of non-oil 
products in particular (measured by the real effective exchange rate).  Furthermore, due to restrictions 
in the exchange rate market
8, there is still a premium between the official and the non-official 
exchange rates, which serves as an indirect tax on non-oil exports.  The trade account balance, largely 
influenced by developments in international cr ude oil prices and domestic crude oil production, has 
been mixed, with improvements occurring in years of  favourable oil prices, such as in 2000 and 2003, 
and vice versa.9  Fiscal policy has also fed into the tr ade account situation due to the high import 
content of expenditure.  On account of rising foreign direct and portfolio investment, mainly in the oil 
                                                      
8 Existing restrictions in the foreign exchange market include:  the prohibition of transferability of 
funds between the Dutch Auction System and the inter- bank market;  the requirement for repatriation of 
proceeds from non-oil exports within 90 days from the day of shipment;  and cumbersome documentation 
procedures.    
9 Though the current account recorded a deficit of 2.7% of GDP in 2003, this was a significant 
reduction from the previous year's deficit of 11.1% of GDP.  Nigeria WT/TPR/S/147 
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subsector, the current account deficit in recent ye ars (since 2002) has, in varying degrees, been 
covered by surpluses in Nigeria's capital account , despite huge external debt repayments.  
Nevertheless, in 2003 gross reserves fell to 3.8 mo nths of imports, from a high of 7.6 months in 
2001.10  
12. Structural reforms embarked on by Nigeria si nce its last TPR include deregulation in the 
petroleum, electricity, and telecommunication sectors; privatization of public enterprises; consolidation efforts in the banking industry;  and efforts to strengthen market-oriented institutions, 
including those dealing with corruption (Chapter  (IV)).  Alongside the recent moderate progress in 
macroeconomic reforms, these have contributed to the improved performance of the economy.  
Nonetheless, significant challenges remain, such as:  meeting th e millennium development goals;  
sustaining high levels of growth;  maintaining macroeconomic stability;  improving the competitiveness of the economy; and the diversifi cation of the export base.  To address these 
challenges, the Government has recently intr oduced the National Economic Empowerment and 
Development Strategy (NEEDS).  This development programme rest s on four key strategies:  
reforming the way government work s and its institutions;  enabling the private sector to serve as the 
engine of growth;  implementation of a social charter, taking into account health, education, 
employment, poverty-reduction, security, and participation; and value re-orientation.
11  Under 
NEEDS, the core economic refo rm programme has five components:  achieving macroeconomic 
stability to create a conducive environment for gr owth and development, including the reduction of 
debts to sustainable levels; fighting corruption a nd improving transparency and accountability, mainly 
in the oil sector and government procurement, and through strengthening ins titutions responsible for 
dealing with corruption; improving governance a nd institutions; undertaking public expenditure and 
public service reform to, inter alia , improve fiscal discipline at all tiers of government, speed up 
customs clearance and re-professionalize the pub lic service;  and accelerate privatization and 
liberalization reforms.12  
(3) TRADE PERFORMANCE AND INVESTMENT  
(i) Trade in goods and services 
13. Nigeria has recorded consistently surpluses in its trade balance.  However, this has fluctuated 
widely along with petroleum export earnings.  The balance on services and income, on the other hand, 
has consistently been in deficit, reflecting Nigeria' s position as a net importer of services.  The current 
account balance remained mixed during the period u nder review, with improvements during years of 
favourable petroleum exports.  The current account deficit was reduced from US$5.1 billion in 2002 
to US$1.6 billion in 2003 (Table I.2). 
Table I.2 
Balance of payments, 1999-03 
 1999 2000 2001 2002 2003 
 US$ millions 
Current account      
Trade balance 2,802 13,208 8,116 4,331 10,531 
 Exports 12,907 23,761 19,598 17,672 27,416 
  of which:  oil and gas 12,178 23,093 18,927 16,935 26,607 
Table I.2 (cont'd) 
                                                      
10 Since 1999, Nigeria has been campaigning for the cancellation of some of its bilateral foreign debts. 
11 Nigerian Economy online information.  Available at:  http://www.nigerianeconomy.com/needs.htm. 
12 Federal Ministry of Finance online information.  Available at:  http://www.fmf.gov.ng. WT/TPR/S/147 Trade Policy Review 
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 1999 2000 2001 2002 2003 
 Imports -10,105 -10,553 -11,482 -13,342 -16,885 
  of which:  non-oil and gas -7,817 -8,276 -9,084 -8,868 -11,039 
Services and incomes balance -7,169 -10,082 -8,138 -10,836 -13,746 
 Factor services balance -3,440 -6,308 -4,258 -6,401 -8,444 
  of which:  interest due on public  debt -1,972 -1,719 -1,535 -1,557 -1,619 
 Non-factor services balance -3,729 -3,774 -3,880 -4,436 -5,302 
Private transfers (net) 1,288 1,703 1,303 1,421 1,677 
Official transfers (net) -57 -135 -25 -22 -20 
Current account balance -3,137 4,694 1,255 -5,107 -1,559 
Capital account      
Official capital (net) -2,031 -1,552 -1,642 -1,268 -1,291 
 Disbursements 136 164 70 106 76 
 Amortization due -2,168 -1,715 -1,713 -1,373 -1,368 
Other capital flows (net) 1,171 1,236 2,051 2,481 3,246 
 Direct and portfolio inve stment 1,171 1,236 2,051 2,481 3,246 
 Private borrowing (net) 0 0 0 0 0 
Short-term capital (net) -184 -294 -648 -431 -39 
Capital account balance -1,045 -610 -239 782 1,916 
Errors and omissions 91 -1,847 -1,114 -177 -1,963 
Overall balance -4,091 2,238 -98 -4,503 -1,606 
Financing 4,091 -2,238 98 4,503 1,606 
Net reserves (increase -) 1,666 -3,959 -1,023 2,742 213 
Exceptional financing 2,425 1,721 1,121 1,761 1,393 
 Net accumulation of arrears (d ecrease -) 2,425 - 20,381 375 1,900 1,177 
 Reschedulinga 0 22,102 746 0 0 
 Recovered fundsb .. .. .. .. 216 
 Debt buyback (net) .. .. .. -139 .. 
 In per cent, unless otherwise indicated 
Memorandum items       
Gross official reserves (in US $ millions) 5,441 9, 400 10,423 7,681 7,468 
 in months of imports (GNFS) 4.4 7.3 7.6 4.9 3.8 
Current account (in per cent of GDP) -8.4 10.3 2.6 -11.1 -2.7 
Non-oil current account (per cent of non-oil GDP) -39.9 -42.4 -41.3 -39.6 -42.6 
Primary balance/GDP -13.7 6.5 -0.6 -14.5 -5.5 
Non-oil trade balance/non-oil GDP -28.5 -33.1 -31.9 -29.5 -32.9 
Total external debt/GDP 76.9 66.1 62.3 67.2 56.9 
Total external debt/exports (GNFS)c 207.4 182.9 150.2 144.7 144.3 
Total external debt/consolidated  revenue 268.1 155.6 147.9 185.9 156.0 
Debt service due/GDP 11.1 3.7 5.2 6.4 5.2 
.. Not available. 
a In 2000-01, rescheduling agreements under the Paris Club, 13 December 2000. 
b For 2003, actual recovered funds received by CBN. 
c Three-year moving average of exports. 
Source: IMF (2004), Selected Issues and St atistical Appendix. 
14. Exports are pivotal to Nigeria's development prospects, as they have been a major driver of 
economic growth, employment, and government revenue, and they carry potential for poverty 
reduction.  Since 1999, merchandise exports have accounted for 34% to 52% of GDP; the share was 47.6% in 2003.  Nigeria's exports are dominated by crude oil and natural gas; together, these have 
accounted for 95% to 99% of total merchandise exports (Chart I.1), thus rendering export 
performance heavily susceptible to th e vagaries of the international oil market.  In 2003, Nigeria was Nigeria WT/TPR/S/147 
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the third largest oil exporter amongst the members of the Organization of the Petroleum Exporting 
Countries (OPEC) and the fifth largest in the world.13  Its oil exports increased from US$17.7 billion 
in 2002 to US$27.4 billion in 2003 on account of the incr ease in its OPEC quota and in international 
prices. 
15. Another important development is the signifi cant rise in exports of natural gas, from 
US$27 million in 1999 to US$1.7 billion in 2003, cont ributing to the diversification of Nigerian 
exports.  This could be attributable to the Govern ment's efforts to reduce the level of gas flaring 
associated with oil production, as well as measures to encourage the explo itation of Nigeria's huge 
natural gas resources, largely untapped until recently  (Chapter IV(3)(i)(c)).  Though relatively small 
compared to oil exports, non-petroleum exports ar e important for export diversification and as a 
channel for poverty reduction.  Non-petroleum e xports comprise agricultural products, such as palm 
nuts and kernels, sesame seeds, co coa beans (key export products prior to the discovery of oil);  and 
some manufactured products, including chemicals,  corrugated asbestos sheets, and machinery and 
transport equipment.  In general, export perfo rmance by the non-oil sectors is constrained by 
uncertainties in world commodity markets;  the unstable domestic macroeconomic environment; 
supply-side constraints (e.g. high cost of finance an d infrastructural facilities);  and by other factors 
affecting the competitiveness of exports, such as slow customs procedures and problems in meeting SPS standards set by some trading partners.  Non-oil exports increased from US$211.1 million 
in 1999 to US$735.1 million in 2003. 
16. Imports of goods have continued to play a role  in the growth of the Nigerian economy, by 
providing:  machinery and equipment to various sectors, in particular the capital-intensive oil 
subsector;  further competition in the economy;  a nd competitively priced products and wider choice.  
Imports of goods increased from US$7.7 billion in 1 999 to US$14.5 billion in 2003, in line with the 
growth in the GDP.  Imports are mainly manufact ured goods (73.9%);  machinery and transport 
equipment accounted for 23.8% of total mercha ndise imports in 2003, and chemicals for 21.4% 
(Chart I.1).  Nigeria is a net food importer; in 2003, the share of food and live animals in total 
merchandise imports was 11.6%.  The com position of imports is influenced by, inter alia,  trade policy 
measures, such as tariffs and import prohibitions (Chapter III(2)(vii)).  Adaptation to competition 
from imports remains one of the challenges to Nigeria's manufacturing sector.  
17. Exports are distributed across a large number of countries, but most are to industrialized 
countries (Chart I.2).  In 2003, 72% of merchandise exports were to industrialized countries, of which 
the United States alone accounted for 40% (mostly under the African Growth and Opportunity Act 
(Chapter II(5)(ii)).  Exports to the EU also benefit from preferences under mainly the Cotonou Agreement.  Exports to African and Asian countries accounted for 10%  and 11% of total merchandise 
exports respectively.  Nigeria's import sources are more diversified, with industrialized countries 
accounting for 55.3% of the total, and Asian and Afri can countries for 32.1% and 3.3% respectively.  
Figures recorded for African countries may be unde restimated, as there is a significant amount of 
unrecorded trade between Nigeria and neighbouring countries.  
18. Nigeria is a net importer of services; its most important service imports are factor services, 
such as skilled labour to the oil subsector.  In 2003, the balance on services (factor and non-factor) 
amounted to a deficit of US$13.8 billion.  Reforms planned in maritime services and in the tourism 
subsector (Chapter IV(5)(iii)(b) and (5)(iv )) could help increase exports of services.  
 
                                                     
 
13 OPEC (2004). WT/TPR/S/147 Trade Policy Review 
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0%20%40%60%80%100%
1999 2000 2001 2002 2003
0%20%40%60%80%100%
1999 2000 2001 2002 2003Chart I.1
Structure of merchandise trade, 1999-03
(a) Exports
(b) Imports
Source: Central Bank of Nigeria (2004), Annual Report and Statement of Accounts, 2003 .Mineral fuels Machinery and transport equipment Food and live animals
Animals and vegetable oils and fats Other manufactured goods Beverages and tobacco
Crude materials Chemicals Miscellaneous transactions unclassifiedGas Non-oil Crude oil
 Nigeria WT/TPR/S/147 
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0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%19992000200120022003Chart I.2
Direction of merchandise trade, 1999-03
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%19992000200120022003(a) Exports (f.o.b.)
(b) Imports (c.i.f.)
Note:
Source:Based on partner-country data.
IMF (2004), Country Report N° 04/242.United Kingdom
Other AfricaOther industrialized countries FranceKorea, Rep. of
China, P.R. The NetherlandsUnited StatesBrazilGermany
OtherUnited Sates
Other AfricaGhana SpainIndia
Indonesia JapanFranceOther industrialized countries
Brazil
Other
 WT/TPR/S/147 Trade Policy Review 
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(ii) Investment 
19. Foreign direct investment (FDI) inflow s increased from US$1.0 billion in 1999 to 
US$2.0 billion in 2003, making Nigeria the fourth largest recipient of FDI inflows amongst African countries.  Most FDI inflows are to the oil and na tural gas subsector.  However, telecommunications 
services have also benefited due to the ong oing privatization and deregulation reforms 
(Chapter IV(5)(ii)).   
20. Various measures are being undertaken to address fa ctors that hinder FDI inflows into Nigeria 
and create a favourable investment environment.  An Independent Corrupt  Practices and Related 
Practices Commission, and an Economic and Financial Crimes Co mmission (EFCC) were established 
during the period under review to, inter alia , curb the level of corruption, and protect national and 
foreign investments in Nigeria.  Moreover, macr oeconomic reforms are being pursued and steps are 
being taken to improve poor infrastructural faciliti es (e.g. power, telecommunications, water, roads).  
(4) O
UTLOOK  
21. The growth prospects of the Nigerian economy will likely continue to be dominated by 
developments in its petroleum subsector, at least in the short to medium term.  Given the relatively 
high world oil prices and the increase in Nigeria's OP EC quota, increased investments are expected to 
continue flowing to the upstream petroleum subsec tor, thus strengthening the growth of production 
and exports of crude oil and natural gas.  Moderate growth of agriculture is also expected, contingent 
on favourable weather conditions as well as the effe ctiveness of the various measures being taken to 
address the supply bottlenecks faced by the sector (Chapt er IV(2)(ii)).  In the short-run, growth in the 
manufacturing sector will continue to  be plagued by weak infrastructural facilities, in particular, 
shortage of electricity, as well as the high cost of finance (Chapter IV(4)).  Timely implementation of 
planned structural reforms in utilities subsectors and improvement in the delivery of services to 
businesses will improve the efficiency and competitive ness of Nigerian products, thereby enhancing 
the growth prospects of the economy.  The Govern ment projects real GDP growth to reach 7% per 
year by 2007.  
22. With the anticipated favourable developments in the oil subsector in particular, public 
revenues are expected to increase;  this may en able the Government to increase financing of 
infrastructural facilities.  The Government projects overall fiscal deficits of between 1.9% and 3.2% 
of GDP in the 2004-07 period.  Investment expenditu re (including FDI) is also expected to increase, 
particularly in the oil and natural gas subsectors, as the anticipated privatizati on of public enterprises 
gathers steam.  The growth in the economy is al so expected to engender increases in consumption 
expenditure and imports.  Through higher growth rates of exports than of imports, the Government 
anticipates a gradual improvement in the current acc ount from a deficit of 2.9% of GDP in 2004 to a 
surplus of 0.3% of GDP by 2007; external reserve s are also projected to increase from US$7.7 billion 
in 2004 to US$10.7 billion in 2007.  
23. The downside of Nigeria's growth prospects is the risk associated with an economy heavily 
dependent on the oil subsector.  In the short-te rm, macroeconomic stability in the presence of 
excessive oil export earnings remains a key challenge.   The Government's perception of whether the 
increased international oil prices are permanent, a nd could thus sustain increases in expenditure, or 
are temporary, and thus require accumulation of reserves, is bound to affect the short- to medium-term stability of the economy.
14  The control of government expenditure  is particularly difficult in Nigeria 
                                                      
14 The Nigerian economy has been through a boom and bust cycle on account of  excessive government 
spending during periods of windfall oil gains and the accumulation of massive fiscal deficits and debts when oil prices have fallen. Nigeria WT/TPR/S/147 
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with the practice of fiscal federalism, which requires 30% of oil revenues to be transferred 
automatically to the States.  This has led the CBN  to take steps to mop up any excess liquidity that 
might arise from the excessive use of oil revenue s.  Furthermore, the boom in oil exports risks 
creating disincentives (the "Dutch disease" effect) through, inter alia , appreciation of the naira, to the 
detriment of other export sectors of the economy.15  Continued foreign exchange restrictions, along 
with the resulting gap between the official and non-o fficial market rate, will effectively continue to 
tax non-oil exports.  Efforts to achieve macroec onomic stability could enable Nigeria meet the 
convergence criteria required before entry into the West African Monetary Zone (Chapter II(5)(ii)), 
which may provide an anchor for a more stable monetary policy in Nigeria over the longer term.  
24. An issue of paramount importance, especia lly in the light of Nigeria's economic 
empowerment strategy (including the goal of signi ficantly reducing poverty), is that the anticipated 
growth is expected to be driven largely by the o il subsector, which employs only some 5% of the total 
labour force for salaries about ten times higher than the national average.  He nce, if the anticipated 
increase in public revenue is used neither to create real opportunities in other sectors – in particular, 
agriculture, which employs a large majority of the poor –, nor to address health, education, and other 
social concerns, the improved performan ce risks further marginalizing the poor.16  Under the NEEDS, 
some measures have been outlined to  address these concerns.  Trade, in particular the effective use of 
preferences available to Nigeria's non-oil products, could aid poverty reduction.  However, constraints 
to the competitiveness of these exports, for exampl e the unfavourable business environment, supply-
side constraints, poor marketing of products, a nd customs delays, need to be addressed.  Improved 
market access opportunities from Nigeria's trading part ners (including more liberal rules of origin, 
less stringent SPS requirements, and lower tariffs), particularly in agricultu ral goods, could make a 
significant contribution to Nigeria's poverty reduction efforts.  
 
                                                      
15 For instance, during the oil boom in the seventies, the naira appreciated, and agricultural exports 
plummeted by nearly 50% in value and volume;  employment in the agriculture sector also declined as there was a drift in labour from rural to urban areas.  
16 A recent case study on Nigeria proposes that, for Nigeria to succeed in its fight against poverty, it 
needs to promote broad-based growth, maintain macroeconomic stability, and target interventions in health, education and infrastructure (Thomas and Canagarajah, 2002).