According to the National Bureau of Statistics (NBS), Nigeria’s trade balance improved by 20.95% to N2.18trn ($7.14bn) in the first quarter of 2018, as the country recorded increases in both exports and imports.
Thank you for reading this post, don't forget to subscribe!Imports into the country rose to N2.52trn ($8.2bn) in Q1, 19.22% higher than the previous quarter. This was primarily driven by a rise in other oil imports, which jumped 122.7% q-o-q to N846.31bn ($2.77bn). The effect of this increase was dampened by the decline recorded in other categories such as agricultural goods and solid minerals which dipped 5.87% and 17.27% respectively. Major suppliers of imports are China (21.1%), Netherlands (12.1%) and Belgium (10.6%).
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Nigeria’s total exports rose by 20.02% to N4.69trn ($15.37bn) in Q1 2018. All of our export categories, except raw materials recorded ample growth during the quarter. Agricultural exports rose 63.8% to N73.24bn ($240m) with Cocoa- raw or fermented (40%), Sesame seeds (36%), and Cashew nuts (6.8%) as the top agricultural exports. Crude oil exports rose 10% to N3.58trn ($11.73bn), accounting for 76% of total export earnings (compared to 83% in Q4 2017). This can be attributed to the 9.48% increase in aver-age oil prices in Q1 and 1.5% rise in domestic oil production.
The major markets for our exports include Netherlands (20.5%), India (18.2%) and Spain (8.3%).
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Implications
Higher trade surplus is positive for exchange rate, terms of trade and current account balance. Increased in-flow is also the reason for the 19.2% accretion in the external re-serves recorded in Q1, giving the Central Bank more room to support the currency. Additionally, export revenue from oil ac-counts for two-thirds of the government’s revenue. Thus, this up-ward trend is positive for fiscal spending. It also means Nigeria would have less need for borrowing and debt financing.
However, a trade surplus does not necessarily indicate economic strength. In fact, some of the strongest economies have the highest trade deficits. In March, the US recorded a trade deficit of $49bn, while the UK’s widened by 162% to £3.09bn ($4.15bn)
Outlook
In Nigeria’s case, the primary reason for the improvement in the balance of trade was higher oil prices and production. Thus, it follows that any shock to price or production would have a significant im-pact on fiscal revenue, and for-eign exchange. Oil prices are expected to stay strong in the short-term supported by geo-political tensions and supply concerns. This will keep ex-ports firm in Q2-Q3. Nigeria’s exports for the full year are projected at $61.3bn, a 33.84% increase from 2017 levels.
On the flip side, higher oil prices would mean increased landing costs of refined petroleum products. This will push up Nigeria’s import bill. Additionally, the increased availability of forex will continue to support import demand. The effect of these will, however, be partially dampened by the expected decline in the global prices of agricultural imports, such as sugar. Imports are expected to total $45.2bn in 2018, 38.22% higher than 2017.
