Nigeria’s economic crossroads: trade reforms, rising growth, and the $1 trillion question

During my time as a university student at Obafemi Awolowo University, I lived in Awo Hall, one of the halls of residence on campus. In my six-member room, space was a premium. I stayed in a corner—larger than the double bunkers—and let one of my roommates from a bunker use my space to run a small printing business.

I allowed it because he gave me free access to print whenever I needed—a small but invaluable exchange. That access became a lifeline when I was low on cash and had no way to fund my transport to a radio station—where I hosted a weekly DJ show an hour away from campus.

One idea changed that: I wrote letters to small businesses—hair salons, cyber cafes—offering them shout-outs on my show in exchange for a small fee. More than half responded, and suddenly, I had more than enough funds to recover from my cash crunch.

That experience showed me how low barriers and access to service can unlock opportunities and fund a chain of value creation. A simple exchange—printing for space—led to a cascade of benefits:

• Businesses deepened their brand capital through radio shout-outs

• Students felt connected to their local shops

• I funded transport and kept my show running

That cycle mirrors West Africa’s trade dynamic—where countries, like students in shared spaces, have value to offer and exchange. Some have more space, some operate from bunkers, but when trade flows freely, opportunities expand, economies thrive, and everyone benefits.

This week’s deep dive explores that very idea—how Nigeria’s trade policies impact growth, access, and competitiveness, and whether the country can unlock its full potential.

This one comes right on schedule. Let’s dive in.

Nigeria’s import bans and high tariffs—long intended to protect local industries—are now under scrutiny as the World Bank calls for sweeping reforms to lower prices, boost revenue, and ease poverty.

Economic activity picked up in 2024, driven by selected services and a recovery in oil production. According to the World Bank’s latest Nigeria Development Update (NDU), output growth rose in Q4 2024 to 4.6 percent year-on-year (YoY), up from 3.2 percent in Q4 2023, bringing full-year 2024 growth to 3.4 percent, up from 2.9 percent in 2023—the highest growth rate since 2014(excluding the 2021-2022 COVID-19 rebound)

The services sector played a major role in this expansion, accelerating to 5.4% growth in Q4 2024, up from 4.0% in Q4 2023. Financial and ICT services continued to drive the sector—with finance growing by 30.9% in 2024, supported by high interest rates and exchange revaluation gains. Meanwhile, ICT continued to thrive on the robust demand for voice and data services.

While these trends signal positive momentum, the World Bank warns that Nigeria must grow about five times faster to reach its $1 trillion target by 2030.

"Since the last edition of the Nigeria Development Update (NDU) in October 2024, economic developments in Nigeria have been broadly positive, helped by the government staying the course in maintaining an appropriate macroeconomic policy mix," the World Bank noted in its May 2025 NDU.

“Now, the challenge is to consolidate macroeconomic stability and ignite inclusive growth through deeper, wider structural reforms.”

Revenue vs. protectionism: the trade-offs

Currently, Nigeria bans the import of 25 categories of goods, including poultry, processed foods, pharmaceuticals, and used vehicles. These restrictions were initially designed to shield local industries and encourage domestic production, but instead, they have distorted market prices, driven smuggling, and weakened customs enforcement—costing the government billions in lost revenue.

Nigeria’s reliance on trade restrictions is not new. In 2016, the federal government placed import embargo on beef, recharge card vouchers, and 23 other products in an attempt to control the import market and incentivize local production.

This policy approach escalated further in August 2019, when the government blocked imports of key consumer goods—ranging from live poultry and refined vegetable oils to medications and used cars—from neighbouring countries Benin, Niger, and Cameroon.

While the intent was to protect local industries, these broad restrictions fueled parallel markets, encouraged smuggling, and raised concerns about supply shortages and price volatility.

The average tariff rate in Nigeria is now twice that of sub-Saharan Africa, and bans have driven up prices by 5.8 percent on average, disproportionately hurting lower-income households who spend more on essentials like food and medicine.

The World Bank estimates that lifting trade restrictions could reduce poverty by up to 2.6 percentage points, providing direct relief for millions facing high living costs.

Despite recent improvements—Nigeria Customs Service collected 1.75 trillion naira in Q1 2025, up nearly 30% year-on-year—analysts warn that progress could stall without comprehensive trade policy reforms. The World Bank projects that aligning tariffs with the ECOWAS Common External Tariff (CET) could increase customs revenue by as much as 66%.

With the naira now more competitive after recent devaluations, domestic producers are better positioned to compete with imports and expand into export markets. However, as the World Bank notes, access to imported intermediate goods and services remains crucial for businesses looking to scale production and maintain efficiency.

Macroeconomic stability and rising business confidence

Nigeria’s business activity surged heading into 2025, driven by improved macroeconomic activity. According to Stanbic’s purchasing managers index (PMI), business conditions rebounded sharply— rising from 46.9 in October 2024 (signaling contraction) to 54.3 in March 2025 (signaling expansion). 

Similarly, CBN’s PMI points to a resurgence in manufacturing activity, though higher input costs remain a challenge. These improvements underline short-term gains, but the World Bank cautions that long-term, sustained, and broad-based growth will require a significant increase in private investment.

"This requires maintaining recent advances on macroeconomic stability,” according to the World Bank, "as well as deepening reforms to address structural constraints, including high trade barriers, weak competition forces, poor access to reliable electricity supply, insecurity, and low human capital levels."

Without these critical reforms, the World Bank notes that Nigeria’s economic acceleration could be temporary.

Bridging the gap: private-sector led growth

While finance and ICT are growing rapidly, the World Bank notes these sectors do not generate mass employment, as many Nigerians lack the necessary skills and opportunities to participate in them.

The World Bank highlights a private-sector-led, public-sector-facilitated strategy as a path to boosting inclusive growth, with key reforms including:

• Addressing major infrastructure gaps, particularly in electricity and transportation

• Fostering healthy competition, enhancing market openness, and improving business conditions

• Expanding access to finance for firms to scale operations and enhance productivity

• Improving policies across key industries to unleash untapped economic potential

Market competition and foreign investment

The World Bank points out that a lot of markets in Nigeria aren't very competitive and are dominated by a few players, which means there's less motivation for businesses to invest, expand, and create jobs.

By having a more robust and independent competition authority, like the Federal Competition and Consumer Protection Commission (FCCPC), the markets could encourage healthier competition. This, according the World Bank, would pave the way for more innovation and investment opportunities.

Additionally, reducing trade barriers for foreign firms, including the requirement to incorporate a domestic business, could foster competition while raising foreign exchange inflows and foreign direct investment (FDI), which the World Bank says remains low compared to peer economies.

The World Bank also sees Nigeria’s competitive exchange rate as a critical opportunity for domestic firms to export, provided they can access imported intermediate products to expand production and integrate into global supply chains.

Trade facilitation: key reforms to unlock growth

Beyond lifting import bans and reducing tariffs, additional trade facilitation measures could further strengthen Nigeria’s economy, including:

• Removing mandatory pre-shipment inspections of exports to streamline logistics

• Implementing the National Single Window (NSW) and risk-based border management for faster processing

• Enhancing Nigeria’s National Quality Infrastructure (NQI) System to ensure standardized exports

Monetary policy context: CBN holds rates as inflation cools

The Central Bank of Nigeria’s Monetary Policy Committee (MPC) has responded to recent macroeconomic improvements by holding the Monetary Policy Rate steady at 27.5% for the second consecutive meeting in 2025.

This pause follows six consecutive hikes in 2024 and comes amid a notable cooling of inflation: headline inflation dropped to 23.71% in April from 24.23% in March, while food inflation eased to 21.26%. Month-on-month inflation also declined sharply, signaling that recent tightening measures may be taking effect.

CBN Governor Olayemi Cardoso said the committee’s unanimous decision to hold rates would “enable members to better understand near-term developments in the economy.”

Some market analysts suggest that if inflation continues to moderate, the CBN could consider rate cuts in the second half of 2025, potentially lowering borrowing costs for businesses navigating Nigeria’s evolving trading landscape.

Looking ahead: balancing policy and growth

With inflation easing, GDP growth at its highest in over a decade, and customs revenues rising, Nigeria’s policymakers must decide whether to embrace a new era of trade openness or reinforce protectionist policies.

The World Bank concludes that removing trade barriers offers Nigeria a strategic opportunity to drive growth, enhance revenue, and support vulnerable households.

As business confidence rises and macroeconomic stability strengthens, can Nigeria accelerate reforms to achieve long-term economic transformation?

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