IntroductionNigeria and timber, and its top import products are

IntroductionNigeria is one of the most important countries in Sub-Saharan Africa, being the region’s largest economy with a GDP of $405 billion in 2016, most populous nation with approximately 190 million people in 2017, and is one of the largest countries by size. Additionally, Nigeria has experienced remarkable economic growth over the past two decades, with average annual GDP growth being 16.5% since 1997. This has been mostly driven by the sale of petroleum, which was first discovered in the country in 1956 and of which Nigeria has some of the largest continental and global reserves. This growth has allowed Nigeria to invest in development initiatives such as infrastructure, education, and health, and encourage economic diversification. In recent years, however, falling oil prices have resulted in a severe economic contraction, with GDP decreasing by an annual average of 15.6% since 2014. Furthermore, political instability has eroded investors’ confidence in the country, causing FDI to fall in Nigeria, even as it has risen throughout the region.Much of Nigeria’s economic activity is driven by international trade, with its largest export partners being India, Spain, South Africa, Brazil, and the Netherlands, and its largest import partners being China, the United States, The Netherlands, India, and Belgium-Luxembourg. Its top export products are crude and processed petroleum oil, natural gas, cocoa beans, and timber, and its top import products are processed petroleum oil, wheat, medicaments, and telegraphy machinery. This reliance on trade is represented by the country’s openness index, which has been 62% on average since 2010, and its balance of trade, which has been $45.5 billion on average since 2010. However, the economic contraction mentioned above have reduced Nigeria’s exports dramatically, meaning that in 2015 the country’s openness measure and balance of trade fell 32.17% and 82.55%, respectively – the largest declines of the past decade.II.        Trade Pattern with the United StatesNigeria and the United States are major trade partners, exchanging approximately $5 billion of goods and services in 2015. But, this relationship is one of unequal importance. In 2015, the United States was Nigeria’s ninth largest export partner and second largest import partner, receiving $1.73 billion or 3.7% of Nigerian exports and providing $3.24 billion or 8.2% of Nigerian imports. However, in the same year Nigeria was only the United States’ 59th largest export partner and 49th largest import partner, receiving 0.13% of American exports and providing 0.2% of American imports.The balance of trade between Nigeria and the United States has largely been in Nigeria’s favor over the past decade, but the reduction in exports has resulted in the country maintaining a trade deficit in recent years.         The pattern of trade between the two countries resembles their respective world export patterns, with the United States exporting a diverse variety of products, with no one category being too dominant, and Nigeria exporting a limited range of products, with a few goods being dominant. The top products that the United States exports to Nigeria are wheat and meslin (13%), medium sized cars (7.3%), processed petroleum oil (6.8%), large sized cars (3.4%), PVC in primary forms (2.8%), floating platforms for drilling or production (2.5%), vehicle parts (2.4%), turbojets (2.2%), metal hardware accessories for pipes and boilers (1.8%), and ethyl alcohol (1.6%). The top products that Nigeria exports to the United States are crude petroleum oil (87%), processed petroleum oil (9.3%), mineral and chemical fertilizers (0.16%), wigs and other hair products (0.13%), cocoa beans (0.11%), petroleum gases (0.1%), wristwatches (0.09%), animal feed ingredients (0.09%), cashew nuts (0.07%), and frozen shrimp and prawns (0.07%).         One intriguing attribute of this trade pattern is that Nigeria imports petroleum oil even though it has massive reserves. The distinction is that the petroleum that Nigeria exports is largely crude, while those that it imports is mostly processed. This is because while the extraction and production of crude petroleum is dependent on reserves and thus a nation’s geography and natural resources, the production of refined petroleum requires massive capital infrastructure and skilled labor and thus may be done more effectively or cheaply somewhere were these resources have already been cultivated, such as in the United States.III.      Trade Pattern AnalysisTechnology Gap Theory can be applied based on the type of products exchanged between these two countries and in order to demonstrate the application of this theorem, there are some assumptions that need to be made. Based on the Heckscher-Ohlin Model, there are two countries with homogeneous factor of production and two goods; we are considering cars and crude oil, goods that are traded between Nigeria and United States. There is no complete specialisation between these countries if we analayse the production patterns. Nigeria produces mainly petroleum, but agricultural production can be relevant in the analysis as they also export ginger, sesame seeds and cashew nuts – sector that has a export value of $15 million. The goods exported from America on the other hand are various; machines have an export value of $426 million, transportation have a value $357 million and chemical products $120 million. These numbers provide basis for our assumption of no complete specialisation. However it is also important to note the significant difference between the sizes of the two economies and the level of development. According to the Technology Gap Theory, these countries do not have the same technology and there is a delay in the transmission of the technology from one nation to another, where the US gets an advantage of actually developing the technologies. This is especially visible in the car manufacturing industry, in fact Nigeria is clearly importing cars because it does not have the required technology to produce them. The chart of the imitation lag presents a situation in which the consumer of Nigeria want medium size cars, but they are forced to import them, because Nigerian firms are not able to produce the same quality and level of output like the American manufacturers. Further application of alternative trade theories can be shown through the gravity model, where the larger, the more equal in size and the closer the two countries are, the larger the volume of trade between them is expected to be. The United States would be expected to trade more with its neighbors Canada and Mexico ($283 billion with Canada and $297 billion with Mexico) and big economies like China and Germany, rather than incorporate big trade agreements with developing nations such as Nigeria, where trade only makes up as little $4.38 billion. Nevertheless, developing countries like Nigeria have been playing an increasingly significant role in the commodities sector, particularly with an increased support of the wealthy countries that targets under-developed or developing countries. Moreover, we can analyse the Nigerian and the United States trade pattern through the endogenous growth theory, which implies a positive relationship between international trade and long-run economic growth and development. The United States is the largest foreign investor in Nigeria, specifically concentrated on petroleum and wholesale trade sectors. The two countries actually have a bilateral trade and investment framework agreement (TIFA), where the strong financial support from the US has allowed for the flow of knowledge to research and development across the Nigerian economy. Furthermore, the theory implies that international trade between the countries will be promoting larger economies of scale in production, lead to a more efficient use of domestic resources across sectors, encourage greater specialization and more efficiency and rapid introduction of new products and services. We can see that throughout the last four years Nigerian currency has actually appreciated 62 percent due an increased interest in the country’s economy by big partners such as the US and China. (See attachment B) International trade has benefited Nigeria and a growing interest from other developed countries has allowed for the economic growth economy-wide. Another trade theory which can be applied to the pattern of trade between the United States and Nigeria is preference similarity hypothesis, where tastes of consumers are conditioned by the income level.  This implies that the per capita income level of a country will yield a particular pattern of tastes, the theory is very similar to a product differentiation theory, which says that the higher the income of consumers, the more variety they seek in the products they buy. Despite the fact that Nigeria is the largest economy in the African continent, more than half of its population lives below the poverty line. It is also an extractive economy that is not largely service-oriented, although there has been some progress to diversify the economic portfolio of the country. Nigeria’s GDP per capita for the last year has only been $5,900, which places it in the lower middle income country by IMF. Since domestic production is solely focused on extracting petroleum, gas and other natural resources, domestic manufacturing and production are under-developed, causing heavy reliance on imports from highly-developed countries. United States exports to Nigeria given its low income per capita includes large industry products such as vehicles, refined petroleum products, vehicles, aircrafts and other transportation means. IV.       Existing State of Commercial PoliciesAverage wage rates for middle class in Nigeria range between $480 and $645, whereas in the US it is around $3,396 per month, indicating that productivity of labor is significantly higher in the United States. This can help us see that Nigeria would be focusing on the utilisation of more labor, compared to the US, as productivity is significantly lower. Since, The United States is the largest foreign investor in Nigeria, FDI has been focused on the petroleum and wholesale trade sectors. Furthermore, Nigeria is eligible for preferential trade benefits under the African Growth and Opportunity Act (AGOA), which gives an opportunity for Nigeria to import cocoa, rubber, returns, antiques, and food waste to the United States as part of an attempt to help the developing economy (export.gov). Nigerian government strongly promotes Nigeria as a rewarding destination for foreign direct investment, which flows into all major sectors of the economy, with United States, Canada, France, and China being the main sources.  In the recent years, China has added a large contribution to the development of infrastructure and capital projects in the country. Moreover, United States actually has a Commercial Service branch operating the the Consulate in Lagos, which actively supports initiatives such as doing business in Africa by the American companies, which helps businesses extend into the new and emerging market (export.gov). Nevertheless, despite its openness to international trade, Nigeria still retains sound regulatory environment for international oil companies doing operations in Nigeria. The oil industry has been a subject of protectionist legislations, where only Nigerian independent operators will be given first consideration in the award of oil projects in Nigeria, furthermore multinational companies working through Nigerian subsidiaries must demonstrate that a minimum of 50 percent of the equipment used is owned by Nigerian subsidiaries (export.gov). Thus we can see barriers towards complete openness and success of Nigerian economy, where political interference, failure to legislate on key issues, and an inconsistent approach to regulating the price of gas collectively deterred the necessary investment to capture and deliver gas to domestic markets (export.gov). Furthermore, there are many other challenges that consumer importers and producers face in Nigeria, such as protectionist practices like import restrictions on agricultural products and a lack of intellectual property rights. V.        Latest news https://www.ft.com/content/46dc411b-d13a-3b95-9517-17ef737ab544 – Opec hammering out deal on Nigeria, Libya output https://www.bloomberg.com/news/articles/2017-11-20/nigerian-economic-growth-quickens-to-1-4-in-third-quarter – Nigerian Economic Growth Quickens as Oil Output Increases Bloomberg experts D. Doya and E. Onu have stated that an increased oil production of 2.3 million barrels per day in Nigeria is contributing towards quickening economic growth, which would increase government spending budget on building new roads, rail and ports to $23.9 billion. This promised budget for 2018, shows how reliant Nigeria is on oil to drive economic growth. However, these positive news can potentially be disregarded, because OPEC is in the process of coming out with a deal to actually cut Nigeria’s production to 1.8 million barrels, which at current oil price of $58.58 will result in a loss $29,290,000 of oil revenue per day for the planned Nigerian budget (Shepard, Raval 2017). This production exemption is intended to lower oil production in order to drive up the oil prices, which in the long run can actually benefit Nigerian oil-dependent economy. However in the short run, it can really harm their high expectations on the potential revenues. Hence, it once again shows that Nigeria must not just depend on the oil because of the latest volatility in the oil markets, and rather should focus on trying to diversify their economy. VI.       Conclusion After having analyzed the trade policies between Nigeria and United States, we approve the conduct of the trade policies between these two countries. Only 0.2% of the products in United States come from Nigeria, while for the African country America  is one of the main foreigners trade countries; this show the strong effect that America has on Nigeria. The economy is characterized by a  still under-developed third sector compared with the primary sector, which is the main economic driver of Nigeria.The fact that United States mainly imports oil limits the economic growth of the other sectors so there is not a diversification of the economy. The main interest in Nigeria regarding trade is for oil not just for United States but also for the other main trade partners.Even if Nigeria is increasing  in the secondary sector becoming a manufacturing center for the African consumer product sector, there is not a real third sector related with services. Although trade faces some difficulties due to  by corruption and some gaps in trade policies,Nigeria is a country with a lot of economic potentialities for business in the service industry or the manufacturing one. United States should support these two features of the African country by providing some financial incentives and by supporting and sponsoring some business to work there and to invest in Nigeria.