Nigeria’s expanding merchandise trade and the steady build-up of its trade surplus since 2019 point to a structural improvement in the external sector, and are driven largely by foreign exchange market reforms, broader trade liberalisation and currency adjustments, Cowry Research has said.
The research firm said the development is reshaping incentives across the economy, strengthening export competitiveness and encouraging deeper backward integration in domestic industries.
In the latest assessment of trade dynamics, Cowry Research noted that the persistent growth in total trade reflects a gradual adjustment to policy reforms aimed at restoring market efficiency.
It stated that by allowing the exchange rate to reflect underlying demand and supply conditions, the reforms have improved price discovery and reduced distortions that previously discouraged exports.
The firm explained that currency adjustments, while initially inflationary, have made Nigerian goods more competitive in regional and global markets.
According to the company, exporters across agriculture, manufacturing and energy-related value chains are benefiting from improved margins, while import substitution has become more attractive for local producers facing higher costs for foreign inputs.
This shift, Cowry Research said, is accelerating backward integration as firms invest in local sourcing, processing and intermediate production to manage FX exposure and improve cost efficiency.
Beyond competitiveness, the research firm highlighted the broader macroeconomic implications of a widening trade surplus.
Stronger export earnings relative to imports are expected to feed directly into Nigeria’s current account balance, helping to narrow structural deficits and strengthen the country’s external buffers. Over time, this improvement could ease pressure on foreign exchange reserves and reduce Nigeria’s vulnerability to external shocks.
Cowry Research also pointed out that a healthier current account position provides fundamental support for the domestic currency. While acknowledging that exchange rate movements are influenced by portfolio flows, capital repatriation and global risk sentiment, the firm said a sustained trade surplus improves the underlying supply of foreign exchange and reinforces confidence in the naira over the medium to long term.
The firm added that the gains recorded so far underscore the importance of policy consistency. It warned that any reversal of FX reforms or a return to administrative controls could undermine export momentum and weaken trade performance.
To consolidate on the progress made so far, Cowry Research stressed the need for continued trade liberalisation, improved port and logistics infrastructure, and targeted support for export-oriented industries.
Looking ahead, the research firm said Nigeria’s ability to sustain rising trade volumes and a growing surplus will depend on deepening industrial capacity, improving productivity and maintaining a transparent FX regime.
If these conditions are met, the research firm believes the external sector could become a more reliable anchor for macroeconomic stability, supporting growth, strengthening the naira and improving Nigeria’s overall economic resilience.
