1) Global value chains (GVCs) describe the range of activities involved in designing, producing, marketing and distributing a good or service from conception to the end consumer. 2) Nigeria's economy is highly dependent on exporting commodities like oil and agricultural products, but it needs to transition to more sophisticated participation in GVCs through basic manufacturing and processing. 3) For Nigeria to effectively integrate into GVCs, policies need to focus on improving infrastructure, strengthening intellectual property protections, easing access to financing, and reforming customs and border procedures.

1. How GVCs are changing the international trade and what policies
Nigeria can support to broaden participation in GVCs-Cynthia
Igodo
Today, companies divide their operations across different countries, from the design
of the product and manufacturing of components to assembly and marketing,
creating international production chains.
This results in products “Made in the World”.
For example, Benz-Daimler AG, the producer of the Mercedes Benz has its
headquarters in Stuttgart, Germany and relies on over 100 suppliers of Benz parts
across the globe such as Thyssenkrupp (German), Eagle Ottawa, (USA) Inteva
Products (USA), Carcoustics (Netherlands), Nemak (Mexico), Johnson Electric
(Hong Kong) and ZF Lenksysteme (German), etc.
Global Value Chain (GVC) describes the full range of activities by firms in different
countries such as design, production, marketing, distribution, and support to bring
a product/good or service from conception to the final consumer
All countries participate in GVCs but their participation differ. Some countries, like
Nigeria export raw materials for further processing while others import inputs for
assembly and export. Still others produce complex goods and services.
For firms in developing countries, a 1% increase in GVC participation is estimated
to boost per capita income growth by more than 1%, about twice as much as
standard trade.
The biggest growth spurt typically comes when countries transition out of exporting
commodities and into basic manufacturing, such as garments designed in Europe,
but which are cut, sewn and trimmed in China, Bangladesh, Cambodia, and Vietnam.
Nigeria has become integrated in GVCs through export of oil and other natural
resources. But Nigeria needs to transition to progressively more sophisticated forms
of participation.
Nigeria
The Federal Republic of Nigeria is located in West Africa bordering Niger in the
north, Chad in the northeast, Cameroon in the east, and Benin in the west. Its
southern coast is on the Gulf of Guinea in the Atlantic Ocean.
Nigeria is the most populous country in Africa and the seventh most populous
country in the world, with an estimated 206 million inhabitants as of late
2019. Nigeria has the third-largest youth population in the world,
after India and China, with more than 90 million of its population under the age of

2. eighteen (World Bank Data). Nigeria has the largest economy in Africa and is the
world's 24th largest economy (IMF 2020 estimates), worth more than $500 billion
and $1 trillion in terms of nominal GDP and purchasing power parity, respectively.
Nigeria is highly endowed with commodities. The country is rich in several
agricultural products (cocoa, groundnut, palm produce, cotton, tomatoes, cassava,
rice, maize, etc.), fisheries, livestock, precious stones (gold, gemstones, etc.), crude
oil and natural gas. Most of these commodities hold high potential for GVC
processes that remains largely untapped.
Unlike countries like Lesotho, Seychelles, Tanzania and Zimbabwe that ranked
amongst the top 30 countries, Nigeria ranges among the lowest on the continent
both on backward and forward GVC integration. In 2011, for instance, the
UNCTAD-EORA GVC database shows that while Seychelles, Tanzania and
Lesotho recorded a total GVC participation rate of 0.74, 0.67 and 0.66, respectively,
Nigeria scored 0.45. These countries demonstrated strength in backward integration
compared to forward, implying that they use more imported inputs in their overall
exports. Conversely, Nigeria’s strength is in forward integration, suggesting that its
exports are dominated by raw inputs. (Eric Ogunleye 2014)
It is noteworthy that a few firms in Nigeria are already making efforts to break into
GVC.

4. Potentials for GVC in Nigeria
Nigeria is rich in agricultural commodities, such as cocoa, shea nut, palm produce,
cassava, cashew, soybeans, millet, maize, tomatoes, leather/meat, cotton/textile,
sesame, rubber, soybean, yam, rice, tomatoes, fruits etc.
The large abundance of these products provides an opportunity for their processing
for domestic consumption and exports.
Beyond agriculture, the large factor endowment of the country in oil, gas and other
natural resources that include solid minerals provide additional opportunities for
GVCs.

5. Cassava has global appeal that makes it a good candidate for GVC integration.
Why should we encourage GVCs in Nigeria?
GVC development can be a powerful driver of productivity, growth, job creation,
and increased living standards in Nigeria.
In Bangladesh, apparels made from imported textiles account for 89% of the
country’s exports, 14% of GDP and employs 3.6 million workers. Other sectors
such as plastics, leather goods and footwear saw increased growth as a result of
benefits from the complementarities with the ready-made garment sector.
Bangladesh entered the chain at the most basic level where sewing plants were
provided with imported inputs for local assembly. Today, the country engages in the
full range of ready-to-wear garment that includes yarn manufacturing, accessories
and textiles.
Thus, promoting GVC participation in commodities can positively impact Nigeria.
This is because GVCs would serve Nigeria as a vehicle for new forms of production,
technology transfer, logistical development, labour skills upgrade, long-term
industrial upgrade and global networking.

7. Suggested Policy Actions
To effectively integrate Nigerian firms into the GVCs, implementation of some
salient policy recommendations is necessary.
• The weak and uncertain regulatory environment has spooked foreign
investors with many withdrawing from Nigeria. Nigeria needs to improve the
business and regulatory environment to make investment in GVC attractive
to foreign firms.
• Strengthen IP protection to receive more technology flows through licensing
and royalties.
• Provide basic infrastructure such as electricity, water, transport, ports and
logistics.
Over the years, the state of infrastructure in Nigeria has ranked below average. In
2010, for instance, Nigeria ranked 100 out of 155 countries in the Global Logistics
Performance Index. The good news is that the situation has gradually improved over
the years with a peak ranking of 75 out of 160 countries in 2014. Despite this
improvement, challenges remain high in logistics and infrastructure.
• There is also need to improve access to credit and finance for local businesses,
especially SMEs.
• The Land Use Act, 1978 needs to be amended to improve access to land for
commercial agriculture and building factories. This will require a reform of
the current land titling system.
• While product standards and regulations effectively serve as non-tariff
measures, many are necessary to protect consumers from dangerous
products. These standards present problems for exporters and importers. For
exporters, it may be difficult to sell in other markets if standards are not met.

8. • Regulatory agencies such as the Standards Organisation of Nigeria (SON) and
National Agency for Food and Drug Administration and Control (NAFDAC)
should be strengthened to develop a strategy for meeting standardization and

9. certification requirements and provide targeted sector- and activity-specific
support to individuals and firms to meet these standards.
• The Nigerian Investment Promotions Commission and other relevant
government agencies should be empowered to provide pertinent market
information for prospective investors and potential GVC firms. Some of the
agencies include Nigerian Export Promotion Council, Nigeria Export
Processing Zones Authority, etc.
• Nigeria should champion border measures. Improving customs and border
procedures, such as implementing effective risk management systems,
replacing paper-based with electronic-based documentation, and improving
transparency through trade information portals and single windows.
• Nigeria’s policy should be geared towards trade liberalisation. In 2020, Nigeria
moved towards removal of fuel subsidy. However, in 2019 President Buhari
closed the border restricting import into and export from Nigeria. This
resulted in increased transport cost and expenses to SMEs and small
manufacturers.
This has affected trading relationships with neighbouring countries and other
trading partners. Vietnam and Ghana had sent representatives to interface with
Nigeria when the revenue of companies like Alomo Bitters and foreign rice
producers began to take a hit. The closure has also led to retaliation against Nigeria
by Ghanaian traders.
• The government, through the CBN also initiated the policy to stop Foreign
Exchange (Forex) for the importation of food into the country. It started with
the exclusion of 41 items. Subsequently, others were included. Now the CBN
policy has eliminated all sorts of food imports which it thinks can be easily
produced in Nigeria.
In a world of GVCs, protective measures against any country have knock-on effects
on all its trade partners in the value chain.Some of the links in the chain may be
unable to provide parts, components or services in time or under pre-specified
terms. These supply chain disruptions are particularly costly when firms cannot easily
resort to alternative suppliers.
• Non-Tariff Measures such as quantitative restrictions and nonautomatic
licensing have effects more like tariffs and serve primarily to restrict trade.
• Nigeria’s FDI policy, should be geared towards removing legal, regulatory,
and administrative impediments to attracting and retaining FDI in
intermediate goods and services. Political stability, investor protections, and a

10. business-friendly regulatory environment are especially important in
attracting FDI.
Conclusion
Given its high resource and human capital base, Nigeria has very high potential to
succeed through this strategy. However, the policy adopted by the Nigerian
government will determine whether it succeeds or fails in GVC development.