Trade deficit occurs when the total value of goods and services imported by a country exceeds the total value of goods and services it exports.
This does not necessarily mean it is bad for a country to have a trade deficit with another country, as long as it maintains trade balance or surplus with other countries. This is because countries often have comparative advantages in the production of certain goods and services. Therefore, importing such goods from countries that produce them more efficiently may not necessarily be a bad idea.
Let us look at Nigeria’s trade position with the world’s two largest economies.
CHINA
According to BusinessDay, imports from China to Nigeria hit a record high of $24.9 billion in 2025, up from $18.9 billion in 2024.
These imports range from machinery, electronics, and industrial inputs to consumer goods.
Nigeria’s exports to China include crude oil and petroleum products, liquefied natural gas (LNG), sesame seeds, cocoa beans, and cashew nuts.
Nigeria recorded an $18 billion trade deficit with China in 2023.
THE UNITED STATES
According to the Office of the United States Trade Representative, trade in goods between Nigeria and the United States was estimated at $11.80 billion in 2025. Imports from the U.S. were $6.8 billion, while exports from Nigeria to the U.S. were $5 billion.
This shows a trade deficit for Nigeria in 2025, unlike the surplus recorded in 2024, when Nigeria exported goods worth $5.75 billion and imported goods worth $4.3 billion.
Goods exchanged between the two countries include vehicles and automobile parts, medical equipment, crude oil and petroleum products, liquefied natural gas (LNG), fertilizers (especially urea), and cocoa and cocoa products.
From the data above, Nigeria recorded trade deficits with the world’s two biggest economies in 2025.
WHAT CAN WE DO TO CLOSE THE TRADE DEFICIT GAP OR ACHIEVE A SURPLUS?
- Invest in infrastructure that will support the production of goods currently being imported.
- Establish mutually beneficial partnerships with other countries for technological transfer.
- Invest in human capital development to improve productivity.
- Provide government support for small, medium, and large businesses to encourage growth and expansion.
FINAL THOUGHT
Trade deficits are not always negative, especially when imports support industrial growth and economic development. However, long-term dependence on imports without corresponding growth in local production and exports can weaken a country’s currency, industrial capacity, and external reserves.
For Nigeria to improve its trade position, there must be consistent investment in infrastructure, industrialization, technology, and productivity.
MACRO DIALOGUE
Do you think Nigeria should focus more on reducing imports or increasing exports to improve its trade balance?
Akinsulere’s Economic Notes
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