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 * Monday, March 11, 2024


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 * Nigeria’s trade surplus shrinks 99.7% as imports hit 16-yr high


NIGERIA’S TRADE SURPLUS SHRINKS 99.7% AS IMPORTS HIT 16-YR HIGH

Bunmi Bailey

March 11, 2024

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Nigeria’s trade surplus shrank by 99.7 percent last year as imports surged to
the highest in at least 16 years, a BusinessDay analysis of the latest foreign
trade data shows.

A report by the National Bureau of Statistics (NBS) shows that Africa’s most
populous nation recorded a positive trade balance of N2.9 billion in 2023 for
the second straight year, down from N1.21 trillion in the previous year.

However the country recorded a trade deficit of N1.4 trillion in the fourth
quarter for the first time since Q1 last year.

A trade surplus, also known as a positive balance of trade, occurs when a
country’s exports exceed its imports, while a deficit is the opposite.

A breakdown of the NBS report shows that total trade was N71.9 trillion in 2023,
of which imports were valued at N35.9 trillion and exports stood at N36 billion.




Further analysis revealed that on a year-on-year basis, imports rose by 40.2
percent and exports by 33.9 percent.

The import growth for last year is higher than the 23.1 percent increase
recorded in 2022, while the export growth is lower than the 41.7 percent
increase in 2022.

“The value of total imports stood at N14.1 trillion in Q4; this represents an
increase of 56.0 percent compared with the value recorded in Q3 (N9.04 trillion)
and by 163.1 percent compared to the value recorded in Q4 2022 (N5.36
trillion),” the NBS report said.

It said the increase in import was largely due to the import of ‘tanks and other
armoured fighting vehicles, motorised, whet’ worth N5.06 trillion.

“The significant rise in imports caused a decline in trade surplus. But it is a
one-time thing. I expect the surplus to reverse in Q1,” Ayorinde Akinloye, a
Lagos-based investor relations analyst, said.



He added that in terms of impact on the economy, the decline in surplus meant
that low net foreign exchange came into the country which affected the external
reserves and the FX rate.

Israel Odubola, a Lagos-based research economist, said exports rose slightly in
Q4, partly due to a marginal increase in crude oil prices in the quarter.

“It should be worrying that the trade deficit in Q4 is the highest quarterly
deficit since Q1 2021.The slim trade surplus we had seems like a narrow escape.
Overall, our external position is still relatively weak,” he added.

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Last June, the Central Bank of Nigeria merged all segments of the FX market into
the Investors and Exporters window, and reintroduced the willing buyer, willing
seller model.

The naira has continued to depreciate against the dollar and other major foreign
currencies since then.




The official exchange rate fell from N463.38/$ to N1,627.4/$ as of March 8,
2024. At the parallel market, the naira depreciated to above 1,600/$ from 762/$.

The high cost of sourcing FX was one of the major factors that pushed Nigeria’s
inflation rate to a record high of 29.90 percent in January from 28.92 percent
in the previous month, according to the NBS.

“The naira devaluation is a major factor that contributed to the deficit.
Imports have become more expensive now. So, even if there is a reduction in
volume, the naira value has almost doubled,” Muda Yusuf, chief executive officer
of Centre for the Promotion of Private Enterprise, said.

He added that from the classic economist’s point of view, once a currency is
devalued, exports are expected to increase but unfortunately for Nigeria, the
structure of its economy does not respond to that kind of incentive because of
its insufficient productive capacity.

“Most of our production is related to imports in a large way. So, we have not,
to a large extent, taken advantage of the devaluation of the currency, although
there have been some advantages.”



The Manufacturers Association of Nigeria said in a report last year that
manufacturing activities continued to suffer due to the persisting scarcity of
FX and further depreciation of the naira.

The association added that the lingering FX scarcity and continuous depreciation
of the naira have left manufacturers bleeding and limited their capacity
utilisation since the importation of non-locally produced critical input has
become a nightmare.

The tough business environment is also pushing multinationals to exit Africa’s
biggest economy as Procter & Gamble, GlaxoSmithKline Consumer Nigeria, Equinor,
Sanofi and Bolt Food have announced plans to leave the country this year.

The trade report also highlighted that the Netherlands, India, Spain, Canada and
France were Nigeria’s top export destinations in Q4 with N1.91 trillion, N1.10
trillion, N1.03 trillion, N907.6 billion and N799.8 billion respectively

“Altogether, exports to the top five countries amounted to 45.3 percent of the
total value of exports. The largest exported product was ‘petroleum oils and
oils obtained from bituminous minerals, crude’ valued at N10. 3 trillion
representing 81.2 percent, this was followed by ‘natural gas,’ with N1.01
trillion accounting for 8.0 percent, and ‘Urea, whether or not in aqueous
solution’ with N251.9 billion or 1.98 percent of total exports,” the report
said.



In terms of imports, the top five trading partners were Singapore with goods
valued at N5.09 trillion, followed by China with N2.06 trillion. Belgium had
N1.14 trillion, India had N908.6 billion and the United States with N512.9
billion.

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It is the only Nigerian newspaper with a bureau in Accra, Ghana. It has both
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