Trade Complementarity and Substitutivity between China and Nigeria in Exports: Evidence from the Data in 1996-2022

Abstract

This study examined the China and Nigeria’s export relations with a view to determining the mutuality of the trade benefits to both countries. Using data for the period 1996 to 2022 from World Integrated Trade Solution (WITS) database, the paper estimated four distinct measures of trade relations (the revealed comparative advantage index, the trade integration index, the complementarity index and the export similarity index) and then analyzed the effect of trade complementarity and substitutivity on exports of Nigeria and China respectively. Based on the findings, China’s top export destination in sub-Saharan Africa is Nigeria, and one of Nigeria’s top export destinations globally is China. Furthermore, the comparative advantage index showed that China has a comparative advantage in manufactured goods, capital goods, consumer goods, intermediate goods, and mechanical and electrical goods, whereas Nigeria has a comparative advantage in fuels and basic materials. Meanwhile, Nigeria’s trade integration index showed that Nigeria’s trade connections to China are weak, while China’s trade integration index showed that its ties to Nigeria are strong. This implies that China depends less on Nigeria’s exports and that Nigeria is more dependent on China’s exports. In addition, Nigeria’s and China’s export structures differed significantly, but it was determined that these trade links are advantageous to both parties and increased their respective export trade. However, the two countries’ trade rivalry will jeopardize their mutual benefits from trade in addition to sharply lowering the volume of their respective exports.