RESTRICTED  WORLD  TRADE  
ORGANIZATION  WT/TPR/S/147 
13 April 2005   
 
(05-1463) 
Trade Policy Review Body  
   
 
  
 
TRADE POLICY REVIEW 
 
NIGERIA 
 
Report by the Secretariat 
 
  
 
This report, prepared for the third Trad e Policy Review of Nigeria, has been 
drawn up by the WTO Secretariat on its own responsibility.  The Secretariat has, 
as required by the Agreement establishing the Trade Policy Review Mechanism 
(Annex 3 of the Marrakesh Agreement Establishing the World Trade 
Organization), sought clarification from Nigeria on its trade policies and 
practices. 
 
Any technical questions arising from this report may be addressed to 
Mr. Jacques Degbelo (tel: 022/739 55 83;  fax:  022/739 57 65). 
 
Document WT/TPR/G/147 contains the policy statement submitted by Nigeria. 
 
 
 
Note: This report is subject to restricted circ ulation and press embargo until the end of the first 
session of the meeting of the Trade Policy Review Body on Nigeria. Nigeria WT/TPR/S/147 
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CONTENTS 
Page 
SUMMARY OBSERVATIONS vii 
 (1) T HE ECONOMIC ENVIRONMENT  vii 
 (2) I NSTITUTIONAL FRAMEWORK  vii 
 (3) T RADE POLICY INSTRUMENTS  viii 
 (4) S ECTORAL POLICIES  ix 
 (5) T RADE POLICY AND TRADING PARTNERS  x 
I. ECONOMIC ENVIRONMENT 1 
 (1) M AJOR FEATURES OF THE ECONOMY  1 
 (2) R ECENT ECONOMIC DEVELOPMENTS  3 
 (3) T RADE PERFORMANCE AND INVESTMENT  5 
 (i) Trade in goods and services 5  (ii) Investment 10 
 (4) O
UTLOOK  10 
II. TRADE AND INVESTMENT REGIMES 12 
(1) I NSTITUTIONAL FRAMEWORK  12 
(2) T RADE POLICY FORMULATION AND IMPLEMENTATION  13 
(3) T RADE POLICY OBJECTIVES  15 
(4) I NVESTMENT REGIME  16 
(5) T RADE AGREEMENTS AND ARRANGEMENTS  19 
(i) Multilateral agreements 19 
(ii) Regional agreements 20 
(iii) Other trade agreements 23 
III. TRADE POLICIES AND PRACTICES BY MEASURE 26 
(1) I NTRODUCTION  26 
(2) M EASURES DIRECTLY AFFECTING IMPORTS  27 
(i) Customs procedures and valuation 27 
(ii) Rules of origin 28 
(iii) Customs tariffs 28 (iv) Duty exemptions and concessions 32 
(v) Preferential tariffs 33 
(vi) Other duties and taxes 33 (vii) Import prohibitions, quantitative restrictions, and licensing 34 
(viii) Contingency trade remedies 36 
(ix) Balance-of-payment measures 37 (x) Countertrade arrangements and buy-back schemes 37 
(xi) Government procurement 37 
 (3) M
EASURES DIRECTLY AFFECTING EXPORTS  39 
(i) Registration and documentation 39 
(ii) Export taxes, charges and levies 39 (iii) Export prohibitions and controls 39 WT/TPR/S/147 Trade Policy Review 
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 Page 
 (iv) Export incentives 40 
 (v) Export processing zones (EPZs) 41 
 (4) M EASURES AFFECTING PRODUCTION AND TRADE  42 
(i) Incentives 42 
(ii) Standards and other technical requirements 42 
(iii) Intellectual property rights 45 (iv) Public enterprises and privatization 47 
(v) Competition policy and price controls 48 
(vi) Local-content requirements 49 
IV. TRADE POLICIES BY SECTOR 50 
(1) I
NTRODUCTION  50 
(2) A GRICULTURE  51 
(i) Main features 51 
(ii) Policy developments 52 
(iii) Key subsectors 55 
 (3) M INING AND ENERGY  61 
 (i) Petroleum and natural gas 61 
 (ii) Solid minerals 67 
 (iii) Electricity  68 
 (4) M ANUFACTURING  69 
 (5) S ERVICES  72 
 (i) Financial services 74 
 (ii) Telecommunications 77  (iii) Transport 80 
 (iv) Tourism 83 
REFERENCES    85 
APPENDIX TABLES  89 
 
    Nigeria WT/TPR/S/147 
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CHARTS 
Page 
I. ECONOMIC ENVIRONMENT 
I.1 Structure of merchandise trade, 1999-03 8 
I.2 Direction of merchandise trade, 1999-03 9 
III. TRADE POLICIES AND PRACTICES BY MEASURES 
III.1 MFN tariff distribution by sector, 2003 30 
III.2 Tariff escalation by ISIC 2-digit industry, 2003  32 
IV. TRADE POLICIES BY SECTORS 
IV.1 Natural gas exports, 1999-03 67 
IV.2 Mobile market share, as at March 2004 78 
TABLES 
I. ECONOMIC ENVIRONMENT  
I.1 Economic performance, 1999-03 1 
I.2 Balance of payments, 1999-03 5 
II. TRADE AND INVESTMENT REGIMES  II.1 Selected trade and trade-related legislation, December 2004  14 
II.2 Investment incentives 17 
II.3 Selected notifications to the WTO, March 2005 19 
III. TRADE POLICIES AND PRACTICES BY MEASURES 
III.1 Structure of the MFN tariffs, 1997/98-03 29 
III.2 Summary analysis of the MFN tariff, 2003 30 
III.3 Goods and services exempt from VAT, 2004  33 
III.4 Excise duties, 2004 34 
III.5 Import prohibitions, November 2004 35 
IV. TRADE POLICIES BY SECTORS  
IV.1 Agricultural production, by type of activity, 1999-03 54 
IV.2 Estimated output of main cash crops, 1998-03 55 
IV.3 Estimated output of main staples, 1998-03 56 
IV.4 Livestock numbers, 1998 and 2003 57 IV.5 Estimated output of main livestock products, 1998-03 58 
IV.6 Estimated catches in the fishery sector, 1998-03 59 
IV.7 Estimated output of main forestry products, 1998-03 60 IV.8 Basic data on the petroleum subsector, 1999-03 61 
IV.9 Crude oil production and exports, 1998-02 62 
IV.10 Gas production and utilization, 1998-02 66 IV.11 Manufacturing production, 1998-02 70 
IV.12 Average manufacturing capa city utilization rates, 1998-02 70 
IV.13 Summary of GA TS commitments 73 WT/TPR/S/147 Trade Policy Review 
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Page 
IV.14 Growth in telecommunications services, 2000-04 79 
IV.15 Connected lines and teledensity, 1999-04 79 
APPENDIX TABLES 
III. TRADE POLICIES AND PRACTICES BY MEASURES 
AIII.1 Privatization programme, December 2004 91 
 
  Nigeria WT/TPR/S/147 
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SUMMARY OBSERVATIONS 
 (1) T
HE ECONOMIC ENVIRONMENT  
1. Macroeconomic and structural 
reforms implemented by Nigeria since its last 
Trade Policy Review (TPR) in 1998, together with higher oil prices, have resulted in an annual real GDP growth rate of 4.8% (on average) over the 1999-03 period, compared 
with 3.5% over 1995-98.  The overall public 
deficit declined from 5.6% of GDP in 2001 to 1.2% in 2003.  Nonetheless, annual increases in money supply, mainly on account of increases in net foreign assets from oil exports, have sustained high levels of inflation 
(above 10%) and negative real interest rates 
on deposits.  
2. The naira (the national currency) has 
been depreciating rapidly against the currencies of Nigeria's major trading partners.  
Nevertheless, restrictions in the foreign 
exchange market result in a continued premium between the official and non-official exchange rates.  These restrictions and Nigeria's increasing barriers to trade have fuelled informal trade with its neighbouring 
countries.  In general, Nigeria's external trade 
account has recorded surpluses and its external current account has been in deficit, though fluctuations in oil export earnings tend to influence their annual size. External debts 
also remain high (144% of merchandise 
exports in 2003).  
3. Exports have remained a major driver 
of economic growth, with merchandise exports alone equivalent to between 34% and 52% of 
GDP during 1999-03.  Crude oil and, more 
recently, natural gas account for over 95% of total merchandise exports;  this renders export performance susceptible to the vagaries of the international oil market.  Nigeria's imports comprise mainly manufactured goods 
(73.9%);  and it remains a net importer of 
food, as well as services.  The United States is Nigeria's main single trading partner.  The majority of Nigeria's exports are to industrialized countries;  its import sources are more diversified, with industrialized 
countries accounting for just over half. 
(2) I
NSTITUTIONAL FRAMEWORK  
4. Nigeria is constitutionally a federation 
of 36 states.  The Federal Ministry of 
Commerce (FMC), in collaboration with other ministries, government agencies, and the private sector, is responsible for the formulation of trade policy.  During the period 
under review, the bulk of Nigeria's trade 
legislation has remained largely unchanged, except for ad hoc revisions of its tariff and import ban schedules.  Nigeria's trade policy aims to enhance the competitiveness of its domestic industries with a view to, inter alia, 
encouraging local value-added, and 
promoting and diversifyi ng exports. Its trade 
agenda is being pursued at the multilateral, regional, and unilateral levels. 
5. Nigeria became an original member of 
the WTO on 1 January 1995, but is not a 
signatory to any of the plurilateral Agreements.  It accords at least MFN treatment to all its trading partners and has undertaken commitments in four of the 12 service subsectors. It has not been involved in 
any trade-related disputes under the WTO 
Agreements. Nigeria's interests in the ongoing multilateral negotiations include the liberalization of trade in agricultural products (through the dismantling of subsidies and 
domestic support), increased market access for 
non-agricultural products of particular interest to developing countries, and greater opportunities in services, mainly through movement of natural persons.  Nigeria also 
seeks more technical assistance, including in 
capacity building, in favour of developing 
countries.  
6. Nigeria's regional integration efforts 
are mainly through its membership of the Economic Community of West African States 
(ECOWAS).  Nigeria lags behind other 
members in implementing the trade liberalization scheme.  It has established a schedule to fully adopt the ECOWAS common external tariff (CET) by 1 January 2008.  WT/TPR/S/147 Trade Policy Review 
Page viii 
 
 
When implemented, this would significantly 
simplify and rationalize Nigeria's tariff structure, and eliminate all import prohibitions, thereby improving market access 
opportunities for third countries. Nigeria is 
also eligible for non-reciprocal trade preferences under, inter alia, the GSP schemes 
of several Members, the Cotonou Agreement with the European Communities (EC), and the 
U.S. African Growth and Opportunity Act.  
Utilization of these opportunities remains low with regard to non-oil exports:  this may be due to high domestic transactions costs, lack of information, burdensome rules of origin, and stringent standards and technical 
regulations.  
(3) T
RADE POLICY INSTRUMENTS  
7. Since its last TPR in 1998, Nigeria's 
trade regime has become generally more protectionist.  Its average applied MFN tariff 
rose from 24.4% in 1998 to about 28.6% in 
2003.  The tariff has some 19 bands ranging from 2.5% to 150%, the modal rate being 15%. The coefficient of variation is 0.78.  Agricultural and non-agricultural products (WTO definition) attract average applied MFN 
tariffs of 50.2% and 25.3% respectively. The 
overall tariff structure displays mixed escalation, due to high agricultural tariffs;  this is a source of anti-export bias.  
8. Some 19.2% of Nigeria's total tariff 
lines are bound, generally at ceiling rates.  All 
tariff lines on agricultural products are bound, in contrast with only 7% of non-agricultural lines (WTO definitions). Final bound tariffs range from a minimum of 40% to a maximum 
of 150%, with an average of 118.4%.  An 
increase in the share of tariff lines that are bound and a reduction in the gap between the bound and applied rates would improve the predictability of Nigeria's trade regime.  
9. Further border protection is accorded 
via the application of several other duties and 
charges, bound at 80%.  A wide range of exemptions and tariff concessions, mainly on raw materials and intermediate goods, are also in place to promote investment in specific sectors;  however, their impact is yet to show.  
A value-added tax (VAT) is paid on domestically produced or  imported goods and 
services at a rate of 5%, with the exception of 
goods and services on an exclusion list;  
exports are zero-rated.  Excise duties were re-introduced in 1999 on, inter alia, spirits, cigarettes, alcoholic beverages, and cosmetics at rates ranging from 20% to 40%. 
10. There has been an almost ten-fold 
increase in the number of items (at the HS four-digit level) subject to import bans during the period under review.  These restrictions, alongside increased tariff protection, are most likely to have further distorted the price 
incentive structure and led to inefficient 
resource allocation;  raised consumer prices, thereby undermining the Government's efforts to reduce poverty;  and increased the incentive for smuggling, with concomitant losses in 
customs revenue.  Nigeria has not notified the 
WTO of any action related to contingency trade remedies, though it has stepped-up surveillance efforts to eliminate imports of "sub-standard and dumped goods".  A bill on trade remedies is under preparation.  
11. Various incentives are in place in a 
bid to boost and diversify exports;  they include grants, credit facilities, duty drawbacks, manufacture-in-bond, and export processing zones. Though this may go some 
way in reducing the level of anti-export bias 
introduced by the trade regime, the impact on non-oil exports remains severely constrained by high transactions costs resulting from, inter alia, infrastructural deficiencies, lack of 
finance, macroeconomic fragility, and 
uncompetitive official exchange rates.  Export levies and bans are also imposed on certain agricultural products. 
12. Nigeria operates a preshipment 
inspection scheme, though it plans to replace it 
with a destination inspection scheme.  
Customs valuation is based on the Brussels definition of value;  efforts are being made to implement the WTO Agreement on Customs Valuation.  An acceleration of ongoing 
reforms should facilitate trade by addressing Nigeria WT/TPR/S/147 
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bottlenecks to customs clearance (e.g. long 
procedures, and corruption).  As part of the Government's efforts to fight corruption, certain guidelines to improve the public 
procurement regime have been adopted.  A bill 
on the legal framework on procurement and for the establishment of a public procurement commission has also been drafted. 
13. Nigeria has set several standards and 
technical regulations in accordance with 
international norms.  During the period under review, the institutions responsible for their enforcement stepped up their activities. Increased awareness of SPS standards imposed by importing countries and support 
towards meeting them could help boost 
Nigeria's agricultural exports, which would contribute significantly to poverty reduction efforts.  The privatization programme has lagged behind schedule, though plans are 
under way to accelerate it.  Nigeria does not 
have legislation on competition policy;  however, a bill is being drafted.  Efforts have also been under way to bring Nigeria's intellectual property legislation into conformity with the TRIPS Agreement.  
(4) S
ECTORAL POLICIES  
14. The agriculture sector accounts for 
about 26% of GDP, 70% of the total labour force, and about 67% of people living in poverty.  Nigeria's agricultural policy is aimed 
at, inter alia, ensuring food security and self-
sufficiency;  promoti ng export diversification; 
and enhancing access to agricultural raw materials.  The sector is highly protected;  the average tariff on agricul tural products (ISIC, 
Revision 2) increased from 26.7% in 1998 to 
41.4% in 2003, and several agricultural products (fruits, vegetables, grains) attract tariffs of 100%.  In add ition, import bans have 
been placed on products, such as wheat flour, sorghum, cassava, and poultry products.  
15. The sector has been supported 
through the development and supply of high yielding and disease resistant seeds; the supply of fertilizers and tractors at subsidized prices;  the operation of a strategic food reserve; and provision of credit facilities.  
These measures have contributed to the recent robust growth in the sector.  Nonetheless, the sector remains underdeveloped and is in dire 
need of further investme nt.  Given the share of 
poor who are dependent on the agrarian economy, the development of this sector remains critical if Nigeria is to succeed in its fight against poverty.  A boost in agricultural 
production could play a significant part 
towards this goal, as well as in diversifying its export base.  
16. The mining sector, specifically the 
petroleum subsector, dominates the Nigerian economy. It accounts for some 45% of GDP, 
95% of export earnings, and over 70% of total 
government revenue, but employs only 5% of the labour force.  Since 1999, efforts to revitalize the upstream petroleum industry have included increased government 
contributions under participation in joint-
venture operations with the multinational oil companies;  exploration of new oil blocks;  and attempts to improve transparency and reduce corruption.  These efforts, amongst others, have helped to attract further private 
investment, and to increase proven reserves, 
production capacity, and ex ports.  Natural gas 
production and exports have also been on the rise due to efforts to reduce flaring, as well as recent discoveries of abundant natural gas 
reserves.  Investment in the downstream 
petroleum subsector has been limited by low retail prices of petroleum products fixed by the Government, which grants huge subsidies to producers.  This policy also fuels a thriving 
informal trade in petroleum products, mainly 
with neighbouring countries.  The reforms envisaged include the unbundling of the Nigerian National Petroleum Company (the public enterprise with a dominant position in the sector) and the privatization of its 
downstream subsidiaries.  The mining law has 
also been revised to attract investment in the solid minerals subsector.  Tariffs in the mining and quarrying sector averaged 30.4% in 2003, with a maximum tariff of 150% on imports of 
gypsum.  There are import bans on certain 
solid minerals.  WT/TPR/S/147 Trade Policy Review 
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17. The manufacturing sector accounts for 
4.7% of GDP, and employs some 7% of the total labour force.  The average applied MFN tariff on manufactured goods (ISIC, Revision 
2) increased from 24.4% in 1998 to 28% in 
2003.   Annual changes to the tariff schedule 
since 2002 have increased escalation and thus the effective protection of several local industries.  Several industries have been 
further protected through the imposition of 
import bans.  Manufacturing has also benefited from various fiscal incentives and credit facilities.  Nonetheless, the competitiveness of the sector remains constrained by, inter alia , weak infrastructural 
facilities (in particular electricity), inadequate 
access to finance, and a fragile macroeconomic environment. 
18. In 2003, the services sector accounted 
for 24.2% of GDP. During the period under 
review, Nigeria signed the instrument of 
acceptance of the Fifth Protocol to the GATS.  Reforms in financial services include granting of new banking licences, privatization of government shares of banks, and adoption of universal banking.  Efforts are also under way 
to bring some consolidation to the banking 
system. Liberalization reforms and improvements to the regulatory environment in the telecommunications subsector have translated into significant growth in the 
subsector. Reforms are also under way to 
attract private investment to the transportation, ports operations, and tourism subsectors.  
(5) T
RADE POLICY AND TRADING 
PARTNERS  
19. Nigeria participates actively in the 
WTO, where it is a key proponent for more multilateral trade liberalization in areas of key 
interest to developing countries.  While Nigeria has generally made progress in implementing macroeconomic and structural 
reforms, its trade regime has become more 
protectionist.  This, somewhat, limits the positive effects of the reforms and Nigeria's benefits from its participation in the multilateral trading system.  Therefore, 
liberalization of Nigeria's trade regime, 
through the simplification of its tariff structure (e.g. reduction in the number and levels of tariff bands) and the removal of import prohibitions, would promote better allocation of resources in line with its comparative 
advantages. 
20. The establishment of the ECOWAS 
customs union should help Nigeria to substantially liberalize its trade regime.  An improvement in Nigeria's multilateral 
commitments in goods and services, through 
an increase in the scope of its binding commitments and a reduction in the gap between its final bound and applied MFN tariffs, would also help enhance the predictability of its trade regime.  These 
various steps, together wi th the pursuit of the 
ongoing reforms and measures to fight corruption, the elimination of the exchange rate premium, and improvement of infrastructure facilities (electricity in 
particular), should create a sound business 
environment conducive to the inflow of investment needed by Nigeria to further exploit its enormous economic potential.  Nigeria's trading partners could help by providing 
improved market access opportunities, for 
agricultural goods in particular, and by investing in Nigeria.