Nigeria’s trade deficit narrowed in the third quarter as the value of exports from Africa’s most populous nation surged after a devaluation of the naira.
The trade deficit narrowed by 78.4 percent to N104.1 billion in the three months through September compared with N484.2 billion in the previous three month period, according to a report released Thursday, December 1.
“The rise in exports this quarter reduced the deficit trade balance,” the NBS said.
Exports saw a quarterly rise by 29 percent to N2.30 trillion, from N1.87 trillion in the second quarter. However, it contracted by 0.01 percent compared to N2.33 trillion a year ago.
In dollar terms, exports probably declined, the increase is in naira terms and is reflective of the devaluation in June, according to Ayodele Akinwunmi, head of research at FSDH Merchant bank.
June’s devaluation led the naira to shed more than a third of its value to N305/$ at the official market from N197/$ pre-devaluation.
The structure of Nigeria’s export trade is still dominated by crude oil exports, with the contribution of crude oil to the value of total domestic export trade amounting to ₦1,944.0 billion or 84.2%, according to the NBS. The country’s leading export markets include India, the U.S., France and Spain, while its import markets include China, Belgium, Netherlands and the US.
Muda Yusuf, the director-general of the Lagos Chamber of Commerce and Industry (LCCI) thinks this undermines efforts to diversify the country’s economy from oil whose afflictions in terms of pricing and production have pushed Nigeria to the brink of its first full year contraction in 25 years.
“It means nothing has changed despite talks to diversify our export earnings from oil, said Yusuf.
The economic recession in Nigeria deepened in the third quarter as oil output fell due to militant attacks in its crude-producing Niger Delta and global prices remained low, choking the economy of much needed dollars to fund imports.
Oil production averaged 1.63 million barrels per day between July to September, down from 1.69 million in the second quarter. The government’s budget calculations are based on 2.2 million barrels of oil production per day.
Despite these afflictions, oil remains the country’s best bet in further compressing the trade deficit in subsequent quarters, according to Akinwunmi.
“Much would lie on the peace talks between government and militants, that the country may export more,” said Akinwunmi.
Dolapo Oni, head of energy research at Ecobank said that the positive outlook for oil prices following the OPEC’s Vienna meeting could translate to higher oil revenue and a shrinking trade deficit.
OPEC, on Wednesday, agreed to cut its production by 1.2 million barrels to douse the overhang in the oil market and boost prices, oil prices have rallied to $54 per barrel as at midday on Thursday, following OPEC’s decision.
On the flip side, to boost non-oil exports, Akinwunmi says investing in infrastructure and helping local manufacturers be more competitive in terms of pricing would come in handy.
The NBS report also showed that imports rose 43 percent year-on-year to ₦2.41 trillion from N1.68 trillion recorded in the same period of 2015, while quarterly comparison shows an increase by 6.2 percent from N1.5 trillion.
“Import value may have risen due to the naira devaluation, but I am sure in terms of volume, there has been a decline,” LCCI’s Yusuf said. “This is because the naira depreciation has made imports more expensive and it has shaved imports, while the 41 items banned from accessing dollars in the official market, coupled with the FX shortages has contributed to a decline.”
The Central Bank of Nigeria removed a peg of 197-199 per dollar on June 20 in a move to end a foreign-currency scarcity that curbed imports and crippled production for more than a year. The move caused the naira to lose more than a third of its value.
The naira exchanged for N316/$ at the official window, as at 2:00pm in Lagos, while it exchanged for N480/$ at the parallel market.
“Other commodities which contributed noticeably to the value of import trade in 2016 were Boilers, machinery and appliances; at ₦475.6 billion (19.7%), Products of the chemical and allied industries at ₦220.0 billion (9.1%), Plastic, rubber and articles thereof at ₦153.9 billion (6.4%) and Prepared foodstuffs, beverages, spirits, vinegar & tobacco at ₦148.2 billion (6.1%),” the statistics agency added.
Animal and vegetable oils, fats and waxes, contributed the least, accounting for 1.5%, 0.6%, and 0.3% respectively.
“The structure of Nigeria’s import trade according to SITC was dominated by the imports of “Mineral fuel, lubricant etc,”, “Machinery and transport equipment”, and “Chemicals and related products”, which accounted for 30.3%, 25.1%, and 14.4% respectively in 2016.
Crude inedible materials, except for fuel, Beverages and tobacco were the least imported, according to the NBS.
