COUNTER-TRADE AND THE NIGERIAN ECONOMY
Counter-trade, a modern variant of the age-old system of trade by
barter, has emerged as a new feature of Nigeria’s economic
relationships. Nigeria has concluded a number of counter-trade
agreements running into billions of dollars with some of her foreign
trading partners. One such agreement, for example, involves the exchange
of N500 million worth of Nigerian crude oil for the import of raw
materials, spare parts and manufactured goods from Brazil.
For a nation which is suffering from a drastic reduction in its
foreign exchange earnings and trade arrears with Western export credit
agencies, counter-trade had the attraction of providing goods for the
domestic market without draining the scarce foreign exchange. The low
credit rating which the country has in the international capital market
and the unwillingness of the government to adhere strictly to the
international Monetary Fund’s supervised adjustment programme also
favour counter-trade in the system.
However, there are grounds for insisting that counter-trade should be
used with caution. Counter-trade is a form of gambling. As with every
other form of trade by barter, one partner is inevitably going to be
better off than the other in the end. This will be determined by what
monetary value is assigned to the goods exchanged, and how constant this
remains within the duration of the transaction.
For example, if the agreement is based upon the current price of oil, a
subsequent price decrease will make Nigeria exchange more barrels of
oil for the same value of goods, while an increase in price will yield
the opposite effect. This means that if the nation is not careful, she
might end up giving away millions of barrels of oil in counter-trade
deals.
It is only logical to presume that in counter-trade negotiations,
Nigeria will be in a weak bargaining position. It is no secret that the
country is in dire economic straits and that this is the reason for the
recent decision to adopt the counter-trade option. For a long time,
Nigeria’s trade policy was against counter-trade, not because it ran
counter to OPEC rules and regulations but because the deal would entail a
reduction in the price of crude oil. Nigeria has been driven to the
counter-trade option by economic necessity. But a desperate negotiator
is never a good negotiator.
Moreover, there is, at the moment, a glut in the international oil
market. This means that Nigeria’s trading partners are not concerned
about access to world oil supplies but she will certainly be concerned
about access to essential commodities, raw materials and spare parts.
These partners may not buy Nigerian oil but Nigeria will desperately
need to procure their goods. This is a framework for unequal exchange.
Nigeria’s negotiating disadvantage also derives from the
mono-cultural basis of her economy. The only commodity she has for
barter is oil. The price of this commodity is fixed by OPEC; but OPEC
has now lost effective control of the international price of oil. In
effect, the price of the only commodity which Nigeria has now lost
effective control of the goods of her counter-trade partners are largely
determined by those countries themselves. This gives them an in-built
incentive to inflate the prices of their products.
