The Impact Of Nigeria Import Restriction On Nigerian Economy

Project and Seminar Material for Economics

The Impact Of Nigeria Import Restriction On Nigerian Economy


Foreign trade plays a very important role in the formation of economic and social attributes of countries around the world. Foreign trade is the exchange of goods and services across national borders. In most countries, it represents a significant part of Gross Domestic Product (GDP). Foreign trade has been in existence for quite awhile, its economic, social and political importance have increased in recent centuries, mainly because of industrialization, advanced transportation, globalization and multinational corporations. Yet most economic policies sees import restriction as a viable tool of improving the quality and quantity of locally produced goods in the country. This is the main premise in which this study is based

Chapter One


1.1 Background of the Study

The Nigeria economy has undergone structural changes in the past three decades form a predominantly agricultural economy in the 1960s to an economy mainly reliant on oil form the mild 1970 the result was that the consumption to rationalize imports when the oil boom gave way to an oil glut led to the emergence of trade arrears. A growing debt burden also surface in the early 1990 as a result of jumbo loans acquired form the international capital market.
Most less developed countries including Nigeria have turned to import substitution policy in order to become self-sufficient and to help develop indigenous industries that will need raw materials in order to production these products most of these imputs are not locally available.

Consequently the industries depends heavily on imported inputs of raw materials machinery capital equipment and general consumer goods it requires therefore a complementary development in the agricultural sector which provides the earning necessary to finance the minimum level of imports required to sustain the continued growth of the local industries.Foreign trade has been and is today an economic force that has spurred commerce, promoted technology and growth, spread cultural patterns, stimulates exploration and brings prospect for world peace and international relationships. Foreign trade in its early beginnings was necessary, not just because it provided one society with products such as cowries from Africa to other areas; foreign trade also formed the basis for cultural interchange, thus trading not only on product, but also on lifestyles, customs and technology. It has helped to improve the living standard of nations and also, the national income. Foreign trade means the exchange of goods and services across international borders or between nations of the world. The analysis of an economy in terms of growth rate and per capita income has been based on the domestic production, consumption activities and in conjunction with foreign operation of goods and services. Foreign trade plays a vital role in reorganization of economic and social attributes of countries around the world, particularly, the less developed countries. Foreign trade has been an area of interest to decision makers, policy makers as well as economists. It enables nations to sell their domestically produced goods to other countries of the world (Adewuyi, 2002). Foreign trade is achieved when it facilitates the national and international mobility of factors of production, the exchange of ideas and improved technology which leads to international allocation and distribution of resources. Foreign trade leads to steady improvement in human status by expanding the range of people’s standard of living and preference. Foreign trade plays a vital role in reforming economic and social attributes of countries around the world, particularly, the less developed countries because no country is self sufficient to trade alone. Before the discovery of oil in 1960’s, the Nigerian government was able to carry out investment project through domestic savings, earning from agricultural product exports and foreign aids. Since the discovery of crude oil in 1956 and its exploration in commercial quantity in 1958 however, the oil sector gradually became the dominant sector in the economy, and almost the sole source of export earnings. For instance in 1970’s petroleum constituted of about 78% of Federal Government revenue and more than 95% of export earnings (World Bank, 2002). With the oil boom in 1973, the country’s foreign exchange earning raised immensely, which translated into higher economic growth, to the extent that there was no fear of expenditure in the part of government even on necessary issues. Since the advent of oil as a major source of foreign exchange earning Nigeria in 1974 the image has been almost that of general stagnation in agricultural exports. This led to the loss of Nigeria’s position as an important producer and exporter of palm oil produce, groundnut, cocoa and rubber (CBN annual report, 2006). Between the year 1960 and 1980, agricultural and agro-allied exports constituted an average of 60% of total export in Nigeria, which is now accounted for, by petroleum oil export, (CBN Annual Report and Account, 2004). Furthermore, by 1977, export stood at N7, 881.7million. Between 1960 and 1977, value of export grew by 19%. It should be noted that before 1972, most of the export were agricultural commodities like cocoa, palm produces, cotton and groundnut. Thereafter, minerals, especially crude, petroleum, became significant export commodities. Imports also increased in values during the period. By 1960, import were valued at N432 million. They increased to N758.99 million and N813.2 million in 1970 and 1978 respectively, rising to N124, 162.7 million in 1992 and N681, 728.3 million in 1997. Non-oil GDP recorded a growth rate of 8.9%, compared with 8.5% in 2010. The improved performance in the sector was driven largely by the agricultural sector which grew by 5.7%, underpinned by robust growth in all its components. However, from 1974, food import became obvious in Nigeria’s foreign trade. The country had an unfavorable trade balance from 1960 to 1965, partly because of the aggressive drive to import all kinds of machinery to stimulate the industrialization strategy pursued immediately after independence. Thereafter, export of crude petroleum guaranteed a favorable trade balance. The oil sector dominates export while the non-oil sectordominates import. Between 1960 – 1970 oil export grew by 31.6% and 44.6% respectively. Also, for this period, nonoil export showed marginal growth of 1.2% and 6.6%. Nigeria experienced a growth transition in 2011, which highlighted a gradual shift away from primary production to secondary and tertiary activities. Primary production activities, comprising agriculture, crude petroleum and natural gas, and solid minerals dominated economic activities in 2011 with a share of 55.30% of GDP, compared with 57.09% in 2010. By contrast, secondary production activities of manufacturing, building and construction which have a greater potential to expand the country’s productive base recorded a share of 6.25% of real GDP in 2011. The tertiary sectors have shown an upward trend in the last five years, accounting for about 39% of the GDP during 2011 compared with about 37% in 2010. The development of secondary and tertiary sectors showed a gradual expansion of the productive base, resulting in reduction in the dominance of primary activities in the economy. In the merchandise trade, crude oil export continued to dominate total exports, accounting for 92% by end 2011 as against 93% in 2010. Equally, crude oil exports amounted to US$79.81 billion compared to US$63.73 billion during the period. It was equally noted that the United States of America was the dominant destination of Nigeria’s exports, accounting for 53% of total exports, while Europe and Asia accounted for 23% and 12%, respectively during the period (Annual Performance Report of The Nigerian Economy by NPC 2011). Although, foreign trade is not perfect in promoting economic growth because the Nigeria economy still experience some element of economic instability and this trade has also turned the country into an import dependent economy.

Unfortunately the policies adopted to reserve the market for the domestic product primary tariffs is some how based in its effects against production for export countries who rely on import substitution as a means of developing their economics the system of protection is adopted and consist primarily of the use of import restrictions which take various forms including outright ban or total prohibition of imports high import duties or tariffs in the form of complicated customs administration or the placing of specific commodities on license. These restrictions are used either to shut out competition entirely or its give domestic producers a significant cost advantage our foreign producers the scope of this paper covers the year between 1995 and 1999 the focus as on the impact of restrictions or measures introduced by the federal government during these years and whether these measure have actually achieved their primary objectives.

1.2 Statement of Problem and Purpose of Study

Most developing countries like Nigeria which depend more on importation has been affected strongly due to the import restriction on the economy. For the fact that the standard of living of the economy is proportional to the rate of importation of goods into the country. One of the greatest impact of restricting importation in the country like Nigeria will be gradual declining of the standards of living. Which we known that its efficacy will result to many adverse effect such as increase the death rate fast decrease in population emigration and other effect which may come up later on the course of this project.For this purpose this project seeks to identify the impact of Nigeria import restriction on the economy and to discus its effect on industrialization market and other commercial areas. Also to ascertain the volume and the structures of these effect on the standard of living of Nigeria citizens

1.3 Objective of the Study

The main objective of this study is to ascertain the impact of Nigerian import restriction on the Nigerian economy, to aid the successful completion of the study, the researcher intends to achieve the following specific objectives;

  1. To ascertain the impact of import restriction on the growth of Nigerian economy
  2. To examine the effect of import restriction on the price of locally produce goods in Nigeria
  3. To examine the role of import restriction on Nigeria’s economic development
  4. To examine the relationship between import restriction and economic growth

1.4 Research Hypotheses

To aid the successful completion of the study the following research hypotheses were formulated by the researcher

  1. H0: import restriction has no impact on the growth of Nigerian economy
    H1: import restriction has impact on the growth of Nigerian economy
  2. H02: there is no significant relationship between import restriction and economic growth?
    H2: there is a significant relationship between import restriction and economic growth?

1.5 Significance of the Study

This topic the impact of Nigeria import restriction on the economy is so unique such that it is affecting both the economy and the masses in general. To run with issue of import restriction through has both the good and bad effect or impact on this country of our. Community to the bad impact it has led to increase in the cost of buying what was formal cheap to obtain hence has led to high cost of living. Wherefore coming form the good impact it has cause our locally made good to be appreciated in our economy rather than run towards the foreign made one.
Hence this study will be of great importance to Nigeria the economy general public student and everybody that comes across the material. And will be of great usefulness to student that may want to go into the study.

1.6 Scope and Limitation of the Study

The scope of the study covers the impact of Nigerian import restriction on the economy. But in the cause of the study, there were some factors which limited the scope of the study

a) Availability of Research Material:

The research material available to the researcher is insufficient, thereby limiting the study.

b) Time:

The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.

c) Finance:

The finance available for the research work does not allow for wider coverage as resources are very limited as the researcher has other academic bills to cover.

1.7 Operational Definition of Terms


When we buy goods from any foreign country it is called importing. When we sell our products to any foreign country it is called exporting.

Import Restriction

Also called import controls, the primary import restrictions are: Tariffs (import duties) or taxes levied on the imported goods to make them costlier, (2) Import licenses or import quotas that limit the total quantity of goods imported

Economic Growth

Economic growth is the increase in the inflation-adjusted market value of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real

1.8 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows

  • Chapter one is concern with the introduction, which consist of the (overview, of the study), statement of problem, objectives of the study, research question, significance or the study, research methodology, definition of terms and historical background of the study.
  • Chapter two highlight the theoretical framework on which the study is based, thus the review of related literature.
  • Chapter three deals on the research design and methodology adopted in the study.
  • Chapter four concentrate on the data collection and analysis and presentation of finding.
  • Chapter five gives summary, conclusion, and recommendations made of the study.

Chapter Five

Summary, Conclusion and Recommendation

5.1 Introduction

It is important to ascertain that the objective of this study was to ascertain impact of Nigeria import restriction on Nigerian economy.

In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of import restriction on Nigerian economy.

5.2 Summary

This study, as one of the empirical investigations on the impact of Nigeria import restriction on Nigerian economy. The economic growth in Nigeria has provided a good understanding of the level of impact that import restriction has on the growth of Nigeria’s economy with particular reference to oil and non-oil sector. The result arising from our findings indicates that oil export positively and significantly impacted on the growth of Nigeria’s economy. It was also shown in the result that non-oil export has a positive and significant impact on GDP.

5.3 Conclusion

The result derived from the estimated model showed that import restriction has a significant relationship with Nigeria’s economic growth , while the variables individually shows that Nigeria’s oil imports has no significant relationship with her economic growth for the past three decades. This study has examined the impact import restriction in relations to economic growth. In the view of this research, the conclusion that foreign trade exerts positive effects upon Nigeria’s economic growth could be drawn.

5.4 Recommendation

Based on the analysis carried out during this research work and the conclusion drawn from it, the following recommendations are made regarding the research to the Nigerian economy.

The government should encourage export diversification i.e. Non-oil sector exports should be encouraged and concentration on oil sector export should be minimal.

Nigeria is rich both in terms of resources and agricultural produce and as such, the locally based sources of raw materials should be strengthened to avoid the use of relatively expensive foreign raw materials.

Excise duties should be lowered so as to encourage local industries to export their goods and services.

The primary goods such as crude oil should be refined within the country so as to oppose the current situation of having to import the refined crude oil from countries, whereby the crude is exported and this will enhance the economic growth of Nigeria.

The Manufacturing industries should improve on their production so that their output would be competitive in the global market.

As at now, devaluation of the naira should be de-emphasized, such that the high exchange rate value of the naira would promote export and discourage import

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