Another Trade Deficit in Q4 2020

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Friday, March 19, 2021, / 08:50 AM / by FBNQuest Research / Header Image Credit: Anadolu Agency


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The latest report from the NBS in its series on foreign trade in goods shows the total value of trade as NGN9.1trn in Q4 '20, representing an increase of 8% on the preceding quarter. The value of trade in Q4 was the highest recorded in 2020. Compared with Q3, the total export value increased by 7% to NGN3.2trn, and the import value rose by 9% to NGN5.9trn. The value of imports almost doubled that of exports. The net result was a deficit of NGN2.7trn, which followed a deficit of NGN2.4trn the previous quarter. This makes five consecutive trade deficits. The data were drawn primarily from the Nigeria Customs Service.

 

On an annual basis, total trade was valued at NGN32.3trn in 2020, which was 10% lower than 2019. The value of total imports in 2020 stood at NGN19.8trn while total exports were valued at NGN12.5trn. The annual deficit was therefore NGN7.3trn.

 

Total trade in 2020 declined primarily due to lower exports. The implementation of lockdowns and restrictions had an adverse effect on export activity last year. The total trade value as a percentage of GDP stood at 21% in 2020.

 

Despite the recovery in trade activities across the globe, we expect the weakness in the trade account to persist due to Nigeria's compliance with OPEC's quota cuts. At the same time, there is little evidence of lessening dependence on imports.

 

From Bureau's commentary we note that the value of imported agricultural and manufactured goods rose by 6% q/q and 11% q/q respectively. These increases can be linked to fx rate adjustments as well as increased demand following the relaxation of lockdowns.

 

As usual, crude oil accounted for the largest share (79%) of total exports in Q4. The value of crude oil exports rose by 4% q/q, but declined by -31% y/y. The crude oil price (Bonny Light) averaged USD45/b in Q4.

 

In the quarter under review, Nigeria exported goods valued at NGN23bn to fellow members of the Economic Community of West African States (ECOWAS), compared with NGN13bn the previous quarter. This represented 12% of total exports within Africa. Meanwhile, imports from ECOWAS accounted for 0.4% of the value of total imports.

 

The UN Economic Commission for Africa estimates that tariff reductions under the African Continental Free Trade Area (AfCFTA) agreements will boost intra-African trade by over 51% by 2022 (or by as much as 100% if non-tariff barriers are reduced). The area is also expected to contribute significantly towards the development of regional value chains.

 

The Federal Executive Council has ratified Nigeria's membership of the AfCFTA.

 

Merchandise trade values (NGN trn)

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Sources: National Bureau of Statistics (NBS); FBNQuest Capital Research


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