Trade Balance Surge on Rising Exports
Nigeria’s trade value rose for the sixth consecutive quarter to N5.92 trillion. This represents a 3.94% QoQ and 23.86% YoY growth. Total exports value grew by 15.19% QoQ and 53.85% YoY to N3.57 trillion while total imports value declined 9.41% QoQ and 4.47% YoY to N2.35 trillion. Bolstered by a sustained growth in exports as well as declining imports, Q3’17 balance of trade remained favourable, climbing significantly by 141.8% QoQ to N1.2 trillion. On a year-to-date basis, total trade value stood at N16.9 trillion, just 2.5% shy of the total trade value for the year 2016 (N17.4 trillion). Exports made up 57.2% of year-to-date trade value, with a significant trade surplus of N2.5 trillion (compared to full year 2016 N290 billion trade deficit).
Refocusing imports to boost domestic sector
Trade imports declined 9.5% QoQ and 4.5% YoY to N2.4 trillion. Importation of crude Inedible materials slumped significantly by 82.6% QoQ to N38.1 billion while importation of food and live animals also decreased by 20.2% QoQ from N434.5 billion in the preceding quarter. Quite noticeably though, there was an increase in machinery and transport equipment imports by 20.6% QoQ and 7.1% YoY to N648.8 billion. This possibly hints to increased effort by the government to develop the local manufacturing sector.
Oil Exports still trade mainstay
Crude oil exports, being the dominant trade commodity, grew 22.5% QoQ to N2.9 trillion. This, largely supported by the rise in oil production volume (2017 Ytd average 1.9mbpd; 2016 average 1.8mbpd) as well as global oil price recovery (2017 Ytd average $54.47/barrel; 2016 average $44.86/barrel), was more than double the figure in the corresponding quarter in 2016 (Q3’16: N1.9 trillion). As a percentage of total exports, crude oil rose 500bps QoQ to 83.2% signifying that it remains the key revenue generator, despite ongoing efforts to diversify the economy. Overall, total oil-related exports grew by 17.4% QoQ and 53.4% YoY respectively to N3.5 trillion.
In contrast, non-oil exports declined by 23.3% QoQ but grew by 68.5% YoY to record at N126.5 billion with manufactured goods making up 39.6% of all non-oil exports. Agriculture exports declined for the third consecutive quarter to N21.5 billion (Q2’17 N29.7 billion; Q1’17 N30.0 billion). This represents 17.0% of total non-oil exports and 0.60% of total exports respectively. Year-to-date, however, agriculture exports amounted to N81.2 billion, 33.8% higher than the entire figure for 2016 (c. N60.7 billion) signifying increased efforts to develop the sector.
Europe pivotal to burgeoning trade
India (17.4%) and the United States of America (13.9%) were the two major export trading partners accounting for about 31.4% of total exports in Q3’17. Other top destinations include: Spain (10.0%), Netherlands (6.8%) and France (6.3%). Overall, exports to Canada had the highest quarter-on-quarter growth by 65.5% to N149.1 billion. On a regional basis, 36.2% of all exports were made to Europe, while Africa accounted for only 10.3% of exports.
While China accounted for a meagre 1.8% in trade exports in Q3’17, it was responsible for over 22.3% of all imports into Nigeria, further highlighting the wide trade deficit between the two nations which rose 25.6% QoQ to N458.9 billion (Exports: N63.9 billion; Imports: N522.8 billion). Other major import trading partners include the United States of America (8.0%), the Netherlands (7.6%), India (5.1%), and the United Kingdom (4.1%). On a regional basis, Europe accounted for about 43.5% of total imports while Africa accounted for 4.4%.
Trade surplus key to rejuvenating economy but diversification concerns remain
Improvements in trade figures strengthen Nigeria’s trade position globally especially given the gradual ascent of protectionist policies among several nations. The steady increase in trade surplus which represents a net inflow of foreign currency further strengthens the prospect of a stable Naira and makes a case for the domestic currency appreciation in the near term. On the flip side, however, an appreciating naira may render export prices uncompetitive internationally, thus hurting exports as well as domestic sector growth. As a result, strategic management of trade policies is critical in order to ensure both currency stability as well as competitive pricing for exports.
More so, with crude oil accounting for over 83.2% of exports in Q3’17, Nigeria remains exposed to a near unpredictable volatility in international oil supply-demand dynamics. Economic diversification remains a far reaching, yet attainable goal. Development of the domestic sector remains crucial to driving sustainable economic growth, as it provides the requisite platform for ensuring diversification. Government support for the domestic sector is key towards making Nigerian non-oil exports both viable and competitive internationally.