Shrink in Nigeria’s Merchandize Trade Surplus Portends Weaker Growth Prospect…


    Recently published merchandize trade report by National Bureau of Statistics (NBS), showed that Nigeria’s foreign sector was dented from relatively weak year-on-year (y-o-y) merchandise trade activity in Q1 2019. Total exports fell y-o-y by 4% to N4.54 trillion as crude oil exports tanked y-o-y by 6% to N3.38 trillion. However, total imports grew y-o-y by 26% to N3.70 trillion, chiefly on the back of a 99% spike in imported capital goods, parts and accesssories to N1.03 trillion, a 175% increase in imported transport equipment and parts to N0.49 trillion as well as a 24% increase in food and beverages imports to N0.39 trillion.

    Consequently, merchandise trade surplus declined by 53% to N0.83 trillion; total merchandise trade grew by 8% to N8.24 trillion. In terms of geographical performance, Europe remained Nigeria’s biggest export market, having imported goods worth N1.83 trillion (or 40% of total exports) from Nigeria despite a 22.43% y-o-y decline.

    Next was Asia which grew its purchases y-o-y by 8.09% N1.32 trillion (or 29% of total exports) and then Africa which accounted for 21% of total exports having grown y-o-y by 93.95% to N0.94 trillion. On the other hand, Nigeria’s largest imports came from Asia at N1.63% (or 44% of total imports) following a 56.01% y-o-y increase.

    Next were imports from Europe which fell y-o-y by 38.55% N0.92 trillion (or 25% of total) and Africa which spiked by 535.38% to N0.64 trillion (or 17% of total imports). Ultimately, Nigeria-European merchandize trade yielded the biggest surplus of N0.92 trillion having increased y-o-y by 4.90%.

    This was followed by a trade surplus of N0.29 trillion with Africa despite a 23.30% decline. On the flip side, Nigeria recorded a trade deficit of N0.31 trillion with Asia (from a trade surplus of N0.18 trillion) mainly due to a 78.81% increase in trade deficit with China to N0.83 trillion.

    In a related development, global crude oil prices continued to trend lower in June 2019 for the second week running – Opec’s reference basket price averaged USD61.81 per barrel compared to an average of USD69.97 a barrel recorded in May 2019 while Nigeria’s Bonny Light averaged USD63.17 a barrel so far in June compared to USD71.65 a barrel averaged in May.

    This is against the backdrop of rising U.S. crude oil output – domestic crude oil production averaged 12.3 million barrels per day (mbpd) in June compared to an average of 12.2 mbpd in May – coupled with slowing global economic activity (J.P.Morgan Global Composite Output Index fell to 51.2 in May (from 52.1 in April).

    Meanwhile, Nigeria’s oil-dependent extertal sector outlook appears weakened as the June edition of Opec’s Monthly Oil Market Report which showed that Nigeria’s crude oil production decreased month-on-month by 5.04% to 1.73 mbpd in May 2019 also suggests a slowing crude oil market with possible negative implications for Nigeria’s oil exports. Specifically, the report foresees slower rise in global oil demand in 2019, by 1.14 mbpd, lower than last month’s rate of 1.2 mbpd.

    Opec’s downward revision was mainly predicated on sluggish oil demand data in the OECD region during in Q1 2019; partly resulting from the negative impact of rising global trade tensions, especially between the United States and China, on international trade flows. In another vein, non-Opec oil supply in 2019 is expected to further grow y-o-y at a rate of 2.14 mbpd following a significant increase of 2.91 mbpd in 2018.

    We note that the short term prospects for the Nigerian economy could be challenged by both endogenous factors such as suboptimal daily crude oil production and exogenous shocks such as oil price volatility amid geopolitical tensions and relatively weak appetite for Nigerian crude oil cargoes.

    We also note that the increasing trade deficits of most non-oil export industries (particularly consumer staple, consumer discretionary and industrial supplies, except for Raw hides and skins, leather, furskins etc. saddlery) further dims hope of import substition in the short to medium term, and, combined with sustained subsidies, portends sluggish near term economic performance.

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