NON-OIL AND GAS EXPORTS OF NIGERIA

Source: Vanguard News

Date: 07/03/23

Word count: 799

THE GLOBAL ECONOMY

Key concept: Interdependence

UK cuts tariffs on Nigerian exports

The UK government on Monday said it had cut tariffs and extended duty-free trade in goods
exported from Nigeria

Mr Ben Llewellyn-Jones, Deputy British High Commissioner to Nigeria said this at the
launch of the Developing Countries Trading Scheme (DCTS) which took place at Eko Hotel
and Suites, Victoria Island, Lagos.

Llewellyn-Jones said the scheme would help to boost Nigeria’s non-oil exports in line with
the Federal Government’s wider trade policy objectives and take off in April 2023.

He noted that the scheme would reduce import costs by over £750 million per year, thereby
reducing prices, and increasing the choice of UK consumers and businesses as well.

“ The Uk Government has reduced the tariffs of 90 per cent of goods that Nigeria would
export to our country and has also provided a preferential trading scheme for range of other
exports that the country might have.

“ We have reached out to small and large businesses in different parts of the country and
this is intended to help exporters and other people in the trading business to make the
United Kingdom an export destination.

“This would also serve as an opportunity to grow the non oil and gas sector in Nigeria and
create jobs in the country, and most importantly, we are reaching out to people at the
grassroot level so they can know what we are doing.

“The DCTS is much more generous and simpler than the existing Generalised Scheme of
Preferences (GSP),” he said.

Llewellyn-Jones revealed that the trade volume between both countries for the year 2022
was 2.2 billion pounds, noting that the oil and gas sector accounted for the majority of the
trade.

He stressed on the importance of expanding the market and diversifying into other sectors
including exportation.

“We have to change focus to non-oil sector but this takes time, but we are working with
experts from Nigeria Export Promotion Council and the Federal Government to grow the
economy through expanding of its export.
Commentary:

My article speaks about the cutting of tariffs and extension of duty-free trade by the UK on the

goods that are exported from Nigeria. To explore this policy, we can use the Economic concept

of interdependence, since this article involves two parties that are depending on each other for

mutual economic growth.

Some other key factors which are essential for evaluating the implications for each country

include the understanding of Tariffs and how they affect imports and exports. Tariffs are the

taxes that are imposed by a country on goods that are imported to the country. The reason for this

is for the concept of trade protectionism and to promote the growth of domestic producers.

However, in this article, we see the relationship between two countries that differ in their

development. For this reason, The UK has decided to withdraw tariffs for 90% of goods coming

from Nigeria, which shows a positive outcome for their interdependent relationship.
The above graph visually shows the effect that the release of Tariffs will have on the removal of

tariffs by the UK government. Plotting quantity on the x-axis and price on the y-axis, we can see

the domestic supply and demand curves labelled D and S. The symbol P represents the domestic

price that producers are selling the good or service at Q quantity within the UK.

Before the new tariff policies mentioned in the article, the UK was exporting goods and services

at Pw + tariff prices. This would mean that the domestic producers of the UK would only manage to

produce up to Q4 quantity as their capacity to supply ends there. However, the new quantity

demanded increases to Q3 quantity. This rise in demand was supplied by Nigerian exports to the

UK.

However, with the introduction of “duty-free trade” for 90% of non-oil Nigerian goods in the

UK, we see a change in price to become the world price at P w. The implications of this duty-free

trade, would mean that the domestic producers would be able to sell goods at Q1 quantity, but

the quantity demanded would rise to Q2, and therefore, from Q1 to Q2 quantities, the Nigerian

producers would export goods to the UK. This would eliminate the deadweight loss denoted by

the areas of a and b in the graph. They would also in turn, lose government revenue from the

tariffs denoted by the areas c and d in the graph.

This mutual agreement between the countries aims to raise the non-oil sectors of Nigeria which

will ultimately grow Nigeria’s non-oil and gas sector, while providing UK with goods at a much

cheaper rate. This shows the interdependent nature that comes with global trade policies such as

duty-free trade. While this builds a good relationship with the countries, it also has several

economic advantages and disadvantages.

On one hand, this policy will lower the price of goods and services to a large extent to domestic

consumers in the UK. Moreover, if efficiency and standard of production is comparatively better
in Nigeria than the UK, the quality of goods consumed will be better. In addition to this, it

provides more choice to UK citizens with regards to what goods they consume as this policy

provides a better variety of goods and services. This policy could also give incentive to the

domestic producers in the UK to produce efficiently at the lowest possible price to compete with

the foreign producers. Unemployment in Nigeria would be significantly lowered as new

employment will be generated to meet the high demand of goods. Overall, the Nigerian economy

with regards to its non-oil sector, would grow due to not being burdened by the tariff prices

especially with regards to goods that Nigeria has a comparative advantage over. On the other

hand, this would show some disadvantages. Newer infant industries of the UK would not be able

to compete with the prices of the Nigerian imports as they are not able to achieve economies of

scale. This policy will remove many UK citizens out of their jobs and cause unemployment,

forcing them to either change their careers or sell at low prices, cutting their profits. The UK will

also lose an important source of government revenue from Tariff prices and the balance of

payments could be disrupted.

In terms of the stakeholders, the consumers in the UK would receive goods and services for

cheaper prices as well as have more choice when it comes to buying goods and services. The

government’s revenue would decrease substantially. The domestic producers will have to sell at

a low price in order to compete with the foreign producers – this could lead to shutdown of

several businesses. Foreign producers will be better off as they don’t pay tariff costs and duty-

free trade enables them to maximize their profits.