Nigeria still at the mercy of “hot money managers” as Foreign Trade Surplus, Capital Importation Shrinks in H1 2019…

A clerk at a money exchange bureau counts Naira, Nigerian currency, in Maiduguri, Nigeria, on Wednesday, May 1, 2019. Photographer: Jean Chung/Bloomberg

Freshly published merchandize trade report by National Bureau of Statistics (NBS) showed that Nigeria’s foreign sector merchandise trade value rose year-on-year (y-o-y) by 15.43% to N16.84 trillion in H1 2019.

However, merchandise trade surplus declined by 63.14% to N1.42 trillion in H1 2019 given the total exports which fell y-o-y by 0.99% to N9.13 trillion, as value of crude oil exports fell y-o-y by 0.50% to N7.31 trillion, and total imports which surged y-o-y by 43.63% to N7.71 trillion.

Specifically, import value rose chiefly on the back of a 117.29% spike in imported boilers, machinery and appliances to N2.11 trillion.

In terms of geographical performance, Europe remained Nigeria’s biggest export market, having imported goods worth N3.94 trillion (or 43.13% of total exports) from Nigeria despite a 5.97% y-o-y decline.

Next was Asia which grew its purchases y-o-y by 2.57% N2.59 trillion (or 28.42% of total exports) and then Africa which accounted for 15.83% of total exports having grown y-o-y by 31.24% to N1.45 trillion.

On the other hand, Nigeria’s largest imports still came from Asia at N3.41 (or 44.26% of total imports) following a 65.53% y-o-y increase. Next were imports from Europe which fell y-o-y by 6.40% N2.34 trillion (or 30.30% of total) and Africa which spiked by 313.55% to N0.89 trillion (or 11.49% of total imports).

Ultimately, Nigeria-European merchandize trade yielded the biggest surplus of N1.60 trillion despite a 5.88% y-o-y decrease. This was followed by a trade surplus of N0.56 trillion with Africa despite a 37.08% decline.

On the flip side, Nigeria recorded a trade deficit of N0.82 trillion with Asia (from a trade surplus of N0.47 trillion) as Nigeria’s import from China remained relatively large.

Elsewhere, Nigeria’s capital importation data, released in the course of the week by NBS, showed that imported capital fell by 31.41%, quarter-on-quarter, to USD5.82 billion in Q2 2019 (but rose on a yearly basis by 5.56%).

A breakdown of the Q2 2019 capital imports showed that Foreign Portfolio Investment (FPI) which accounted for 73.76% of the total inflow fell q-o-q by 39.93% to USD4.29 billion (but rose by 4.21% y-o-y).

Similarly, Foreign Direct Investments (FDIs) which constituted just 3.83% registered a q-o-q decrease of 8.41% to USD0.22 billion (and 14.72% y-o-y). However, Other investments (mainly comprised of Foreign Loans and other claims) which constituted 22.41% rose q-o-q by 19% to USD1.30 billion (and 15.16% y-o-y).

A more detailed analysis showed that capital inflows from Equities FPIs plunged by 24.28% q-o-q (and 52.61% y-o-y) to USD0.49 billion in Q2 2019; also, inflows by Bonds FPIs nosedived by 44.09% q-o-q (and 20.96% y-o-y) to USD0.32 billion in Q2 2019.

Investment inflows by FPIs in Money market instruments fell by 41.26% q-o-q (but rose by 30.28% y-o-y) to USD3.48 billion.

Meanwhile, Foreign Loans rose by 18.43% q-o-q (but declined by 20.57% y-o-y) to USD0.89 billion in Q2 2019.

A breakdown of capital imports by sector showed that investments in banking accounted for 32.52% or USD1.89 billion but fell by 32.52% q-o-q (although rose by 541.60% y-o-y).

Other sectors which received relatively large inflows include: financing and shares which accounted for 28.39% and 19.24% of the total capital imports respectively.

Furthermore, largest inflow in Q2 2019 worth USD3.13 billion was from United Kingdom (lower than USD4.52 billion in Q2 2018).

Following were inflows from the United States and South Africa worth USD1.15 billion (fell from USD1.53 billion) and USD0.31 billion (plunged from USD0.76 billion) respectively.

We expect FG to tweak its policies to drive private participation as the meagre FDIs inflow and the shrinking foreign trade surplus suggest that Nigerian economy is stifled due to dearth of market-driven policies.

Also, Nigeria is still at the mercy of “hot money managers” for currency and interest rate stability as portfolio investments still constitute the major foreign capital inflow.

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Godwin Okafor is a Financial Journalist, Internet Social Entrepreneur and Founder of Naija247news Media Limited. He has over 16 years experience in financial journalism. His experience cuts across traditional and digital media. He started his journalism career at Business Day, Nigeria and founded Naija247news Media in 2010. Godwin holds a Bachelors degree in Industrial Relations and Personnel Management from the Lagos State University, Ojo, Lagos. He is an alumni of Lagos Business School and a Fellow of the University of Pennsylvania (Wharton Seminar for Business Journalists). Over the years, he has won a number of journalism awards. Godwin is the chairman of Emmerich Resources Limited, the publisher of Naija247news.

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