NIGERIA: Informal Trade With Neighboring Countries


Several studies have shown that informal cross border trade (ICBT) across custom frontiers is thriving globally, especially in Africa. In several African countries including Nigeria, ICBT constitutes a significant proportion of the informal sector activities and remains a source of employment with enormous impact on food security. Buying and selling of merchandise across the custom frontiers are entrenched in the day to day economic activities of the border dwellers and helps in addressing the issue of supply/demand imbalances of the commodities being traded. Often, the bulk of these transactions are a set of economic activities embarked upon by peasants and herders to mitigate surpluses and shortages of staple foods, thereby alleviating price fluctuations and contributing to food security and poverty reduction.

Over the years, policy makers and analysts in Nigeria have remained increasingly concern over the lack of adequate information on the nature and magnitude of cross-border trade between Nigeria and her immediate neighbours. As a result, balance of payments statistics (BOP) compilers had to rely on staff estimates for coverage adjustment of formal trade numbers in a bid to account for these transactions. These developments led to the growing need for the country to undertake a study of ICBT activities across the various borders/frontiers of the country. Such a study would address issues around the magnitude, pattern and composition of cross border informal trade.

A number of studies on ICBT have been undertaken in sub-Saharan Africa countries like Uganda, Malawi and Mozambique. However, there are no records of any similar study being carried out in West Africa. In line with the commitment of the Statistics Department, Central Bank of Nigeria (CBN) to providing reliable statistics (including a credible BOP), a study was commissioned by the CBN in 2013/2014 to monitor and document the ICBT between Nigeria and her neighbours across the country’s international land/sea borders.

The importance of such a study is further underscored by the need to capture more transactions between residents and non-residents as highlighted by the growing size of the “net errors and emissions (NEO)” in the country’s BOP statistics over the years. Between 2010 and 2013, the ratio of the NEO to GDP averaged 2.9 percent. It is also important to note that ICBT accounts for about 4.0 percent of Nigeria’s total trade as well as 7.0 and 3.0 percent of imports and exports, respectively. Majorly, it accounts for about 10.0 percent of total non-oil (products other the petroleum products) imports. Following the completion of the study in 2014 and the subsequent estimation and recording of informal trade transactions in the goods account of Nigeria’s BOP as well as other improvement in data, the ratio of the NEO/GDP decreased to 1.4 per cent of GDP.

Scope, Methodology, Compilation Practices, and Data Sources

The coverage adjustment made for ICBT in the goods account of Nigeria’s BOP statistics cover unrecorded trade transactions undertaken across Nigerian borders which are not captured in official custom statistics. It covers low value but frequent imports and exports of merchandise across various borders/adjoining routes in the country. As highlighted earlier, these transactions form the day to day activities of the border dwellers.

The borders in Africa have people on either side with relatively similar backgrounds and culture. There also exist special markets (a physical location) where specific goods are traded on specific “market days”, which could be on either side of the border. For this reason, petty traders move goods to sell in these markets and buy other needed goods from the market on a regular basis. These transactions are not covered in the formal customs numbers.

Given the importance of external trade statistics to policy, it was also important that the gap created by the absence of records on ICBT be filled. The study undertaken by the CBN in 2013/14 was aimed at providing a means of estimating these and other transactions across Nigerian borders that are not captured in official custom records. The specific objectives of the study were to:

a) identify the category of commodities being traded informally across the selected border posts;

b) determine the direction of unrecorded cross-border trade in Nigeria;

c) estimate the values of unrecorded cross-border trade flows; and

d) generate unrecorded cross-border trade estimates for BOP compilation.

The procedures outlined in Ackello-Ogutu (1995) used for estimating ICBT in Eastern and Southern Africa were adopted in the study. The procedures involved:

  • Careful selection of border posts to be monitored based on reconnaissance visits;
  • Selection and training of enumerators;
  • Selection of monitoring periods;
  • Deployment of survey instruments;
  • Border monitoring for a 12 month period;
  • Data entry;
  • Data cleaning and
  • Data analysis.

The procedure for estimation of informal cross border merchandise trade transactions for Nigeria is based on this study. The survey was conducted over a twelve-month period (June 2013 - May 2014). It involved the actual recording of all goods going out/coming into Nigeria from the neighboring countries for one week in each month. The weeks in which the surveys were conducted was randomly selected (to account for seasonality) and effectively communicated to the enumerators. During the survey weeks, enumerators were stationed to take stock of unrecorded movement of goods using a predesigned questionnaire. The data on the products were coded in line with the Harmonized Commodity Coding and Description System (HS) – see appendix 1. The data collection forms for imports and exports are shown as appendix 2 and 3, respectively.

The methodology used by Minde and Nakhum (1998) was adopted to gross up the trade numbers for the weeks in which the borders were not monitored. The adopted grossing-up technique assumed that trade volumes in the non-monitored days were reflected in the pattern of trade volumes recorded during the border monitoring days. Thus, the uprating formula used for grossing-up the trade volumes for each month of the survey was of the form:

Yi = [(Xi/7)* Ni ]    for i = 1,2,…….,12      (1)

where Y represents the total volume of trade in month i, X represents the total volume of trade in the 7 days in which the border was monitored for month i, and N is the number of days in month i.

Also, in order to adjust the trade data to accommodate the fact that movements of goods in the night were not covered by the monitors, and the fact that it was practically impossible to capture fully ICBT in the day, coverage index was solicited from the monitors. This phenomenon is not strange when conducting ICBT, as the studies conducted for Mozambique and Malawi showed that 65 percent and 60 percent of the trade volumes were captured in the countries, respectively. The coverage index for each borders were arrived at following extensive discussions with field monitors, stakeholders at the borders and the field supervisors. The index expresses the level of coverage in each border in percentage terms.

Overall, no bridging codes are required to integrate the data/estimates into the BOP statistics. The total estimated value of imports/exports from/to all the neighboring countries are recorded as coverage adjustments in merchandize trade in the BOP. Secondly, the monthly estimated levels of ICBT provided ratios in relation to the size of formal transactions across these borders which are used for the estimation of future transactions.

Current Challenges and Conclusions

In view of some of the useful findings from the maiden study in 2013/2014, it was recommended that an ICBT survey be conducted at regular intervals (minimum of every 5 years) for the purpose of generating more reliable information on the trade relationship between the countries to guide estimates/coverage adjustments to the BOP numbers as well as provide a measure of food security. Some of the findings from the study gave pointers to some of the needed policy reforms that would push the country to become more self-sufficient in the short to medium term and to become a net exporter of other products beside crude oil and natural gas in the long run.

An update to this study is planned for 2019. However, the BOP team is awaiting the CBN Management approval for a more elaborate study to capture all cross border informal transactions (not just merchandise trade). The financial requirement for the new study is enormous. However, the scope of the new study would also be limited by the security concerns and access to certain borders in the country because of the political insurgence in certain part of the country. However, the Statistics Department, CBN is fully committed to undertake this project.


1. Ackello-Ogutu, C. (1995). Methodologies for Estimating Informal Cross-Border Trade in Eastern and Southern Africa. SD Publication Series, Technical Paper No. 29, Office of Sustainable Development Bureau for Africa, USAID, 1995.

2. BOU and UBOS (2014). The Informal Cross-Border Trade Survey Report 2013, Uganda, November 2014.

3. Braun, V.J., Hartwigde Haen and Juegen Blanken (1991). Commercialization of Agriculture under Population Pressure: Effect on Production, Consumption and Nutrition in Rwanda. IFPRI Research Report No. 85. Washington, D.C.

4. Central Bank of Nigeria (2014). Measuring Informal Cross-Border Trade in Nigeria, Abuja, September 2016.

5. Macamo, J. L. (1999). Estimates of Unrecorded Cross-Border Trade between Mozambique and Her Neighbours, SD Publication Series, Technical Paper No. 88, Office of Sustainable Development Bureau for Africa, USAID, 1999.

6. Minde, I. J. and Nakwumwa, T. O. (1998). Unrecorded Cross-Border Trade between Malawi and Neighbouring Countries, SD Publication Series, Technical Paper No. 90, Office of Sustainable Development Bureau for Africa, USAID, 1998.

7. Namibia Statistics Agency (2014). Informal Cross-Border Trade, November 2014.


HS Code

01-05 Animal & Animal Products
06-15 Vegetable Products
16-24 Foodstuffs
25-27 Mineral Products
28-38 Chemicals & Allied Industries
39-40 Plastics/Rubbers
41-43 Raw Hides, Skins, Leather & Furs
44-49 Wood & Wood Products
50-63 Textiles
64-67 Footwears/Headgear
68-71 Stone/Glass
72-83 Metals
84-85 Machinery/Electrical
86-89 Transportation
90-97 Miscellaneous