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An evaluation of Nigeria's trade policy since the 1960s reveals a typical pattern of uncertain and unpredictable trade regimes known worldwide. Trade policy since the 1960s has observed great policy changes from high protectionism in the 1960s and 1970s to the present more liberal position (Briggs, 2007). At different times tariffs were used to raise fiscal revenue and restrict imports to maintain foreign exchange and protect the local industries from unfair competition. In the same vein, different

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types of non-tariff restrictions like quotas, licensing schemes and prohibitions were used at various times to restrict imports of certain items.

The general pattern depicts the long-held conviction that trade policy can be used to influence the businesses in directions that can stimulate economic growth. Efforts were made to use trade policy to encourage export of manufactured goods. These were done with the intention of improving the links in the local economy. Furthermore, to raise and stabilise export revenue, and reduce the country's overdependence on the oil sector, trade policies were therefore geared towards achieving the goals of improving the balance of payments; protecting foreign exchange; and generating fiscal revenue (Briggs, 2007).

i. Trade Policy Trends between 1960 and 1970s

In 1960s Nigeria followed an import substitution industrialisation strategy. The strategy then involved the use of trade policy to provide protection to local manufacturing industries, using measures like quantitative restrictions and higher duties on import. Consequently, several items were placed on import prohibition list. During the period, all imports, particularly from Japan, were put under import license. Machinery and spare parts imports were controlled, and exchange controls on dividends and profits repatriation were enforced. Restrictions were similarly imposed on non-essential imports, spare-parts and capital goods.

Even though the import substitution industrialisation strategy was sustained up to the end of Nigerian civil war in 1970, trade policy from 1970 to 1976 took a less restrictive stance, apparently due to the increased demands caused by the post-war reconstruction. Therefore, only items regarded as non-essential consumer goods were restricted, while raw materials import tariff rates were reduced and limits on

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spare parts, agricultural implements and machinery were relaxed. Likewise, the reconstruction surcharge on imports was reduced from 5 percent from the previous 7.5 percent rate and later entirely removed, whereas profit repatriation and exchange control relaxed. In the 1960s and beginning of 1970s, there were also export duties ranging from 5 to 60 percent of agricultural exports such as cocoa, cotton, groundnuts, palm kernel, palm oil, and rubber. However, in 1973 these duties were ultimately eliminated, as a result of the oil boom and as a requisite to encourage agricultural exports. However, the shot of relaxing restrictions came to an end in 1977, when import of various finished goods was imposed excessive duties and some placed under a ban. The reintroduced of restrictive trade policy heightened in 1979 by putting a ban on 82 items; while additional 25 items were placed on import license (Briggs, 2007).

Figure 2.7: Export and Import of goods and service (percent of GDP)

0 10 20 30 40 50 60 1970 1975 1980 1985 1990 1995 2000 2005 2010 Exports of goods and services (% of GDP)

Imports of goods and services (% of GDP)

P e rc e n ta g e (% ) o f G D P Year

Source: Constructed based on World Bank data

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From 1986 when Nigeria embraced the liberal trade policy the export exceeds import apart from 1998 when the oil price significantly dropped, as oil is the main export product of the country it affected the export rate.

The gap between the export and import as a percentage of GDP widens in favour of export since 1986.

ii. Trade Policy Trends between 1980 and 1985

From 1981, there was a paradigm shift in trade policy towards exports promotion and a move to step-up the use of local raw materials in industrial production. However, the rise in the imports led to a deterioration of the balance of payments. Also, there was a collapse in world oil prices during the same time which compounds the problem and compelled the government to promulgate the Economic Stabilization Act in early 1982. Under the Act, import duties were increased on about fifty commodities; gaming machines and frozen poultry were put on the list of prohibition. Some other thirty items were moved from the general import license system to specific license list. Between 1983 and 1985, some 152 commodities were placed on specific import license, while foreign exchange regulations strengthened. The fundamental trade policy objective then was to provide protection for local industries and decrease the apparent reliance on imports. The expected outcome of the policy was a drop in unemployment levels and more revenues from the non-oil sector. Hence, tariffs on intermediate capital goods and raw materials were reduced (Briggs, 2007).

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iii. Trade Policy under SAP and Post SAP Era (1986 - 2003)

With the implementation of Structural Adjustment programme from 1986, there was a significant shift in trade policy towards more liberalised policy. In 1988 the Customs, Excise, Tariff, etc. (Consolidation) Decree was enacted. The decree provided for a seven-year tariff regime starting from 1988 to 1994 to achieve transparent and predictable rates of the tariff. Hence under the regime Imports attracted ad valorem rates applied on the basis of Most Favoured Nation (MFN) principle. Another seven-year tariff regime to cover period 1995 to 2001 was established by Decree No. 4 of 1995 to replace the previous the 1988 to 1994 regime. The tariff arrangement during 1988 to 2001 raised tariffs on raw materials, and intermediate and capital goods, though duties on consumer goods were marginally decreased. The action was aimed at removing resource allocation distortions and fighting smuggling. Both the two tariff regimes had provisions for reviews and amendments. Nevertheless, they upheld the commonly mixed trends in tariff regimes. The three common forms of changes in the regimes were a rate increase, rate decrease and addition or removal from import prohibition list (Briggs, 2007).

iv. Trade Policy under the NEEDS Era (2004 - 2007)

Nigeria's trade policy regime from 2004 to 2010 is contained in the National Economic Empowerment and Development Strategy (NEEDS) and trade policy documents. The National Economic Empowerment and Development Strategy (NEEDS) 2004 – 2007 is a reform based medium-term plan for economic recovery, growth and development. NEEDS was conceptualised in 2003 and launched in 2004, as a reaction to various challenges confronting the economy. The trade policy

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under the plan was directed at improving the competitiveness of local industries, with the aim of among others, stimulating value addition and diversification of exports. The strategy chosen to this end was gradual liberalisation of the trade regime. Therefore, the government proposed to liberalise the trade regime. That was to be done in a way, which will guarantee that the resulting local costs of the change do not outweigh the benefits. That was the central base on which to scale the direction and implementation of the policy. The policy packages were then planned to permit some level of protection of local industries.

Consequently, that resulted in tariff rise, with high effective rates in various sectors and lesser import duties on raw materials and intermediate goods unobtainable locally. The policy standpoint also led to the imposition of comparatively higher import duties on finished goods (NPC, 2009).

v. Trade Policy under Vision 20:2020 (2010 - Date)

The Nigerian trade policy regime from 2010 to date is contained in trade policies and strategies under the Vision 20:2020 programme. Nigeria Vision 20:2020 is a national programmeaimed at growing and developing Nigerian economy and bringing her to the league of the world’s 20 leading economies by the year 2020. The two primary objectives of the programme are: to efficiently utilise the abundant human and natural resources to achieve fast economic growth and; to transform the economic growth into equitable social development for all populaces.

A shift in the structure of production in the direction of processing/manufacturing activities was envisioned under the Nigeria Vision 20:2020. Prominence is placed on the export of processed and manufactured goods that will assist the country to diversify the economy, increase employment opportunities, and realise the

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significant growth rates for achieving the Vision. The vision also plans an industrial development policy that is aimed at making Nigeria a global hub for certain specialised products in which the country has both competitive and absolute advantages.

The vision recognises that the country’s impact on non-oil global trade is insignificant. Specifically, the country’s non-oil exports account for only 2 percent of its trade. Accordingly, the Vision foresees diversification from primary products and growing the market share in new export markets; particularly higher value processed and refined products. The Vision aspires to make the manufacturing, processing, and exportation of value-added goods the crucial point of country’s trade strategy (NPC, 2009).