Nigeria Economy | |
Nigeria Economy | |
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Monday, June 22,
2020 / 05:20 AM / by Proshare Content/ Header Image
Credit: EcoGraphics
Nigeria's economy like other open economies of the world
engages in international trade. A major source of its revenue comes from its
trading relations with other nations. In Q4 2019, the value of its total trade
was N10.1trn, or 10.2% higher than the
value recorded in Q3 2019 and 25.9% higher than in Q4 2018. On an annual basis,
the value of total trade in 2019 was recorded at N36.15bn, representing a
14.05% increase over 2018.
To understand the dynamics as
well as the channel of transmission of the impact of the COVID-19 on the
nations trade balance, it is important to breakdown the trade components.
Imports
Nigeria's total imports stood
at N5,349.63bn in Q4 2019 representing an increase of 37.2% over the value
recorded in Q3 2019 and 49.34% over the corresponding quarter of 2018. In 2019,
total imports grew by 28.8% compared to 2018.
Chart 38: Value of
Imports By Section (N'bn) Q4 2019
Source: NBS, Proshare
Research
Imported manufactured goods
recorded the highest increase in imported goods of 40.74% in Q4 2019 from Q3
2019 and 77.50% more than in Q4 2019. This was due to the importation of other
electrodiagnostic apparatus during the quarter. For 2019, the value of imported
manufactured goods imports was 60% higher than in 2018.
While the value of imported
Agricultural goods decreased by 2.8% in Q4 2019, compared to Q3 but rose 6.6%
compared to the corresponding quarter in 2018. The value of agricultural imports
in 2019 was 12.7% higher than in 2018.
The Nigerian economy is
heavily reliant on imported manufactured goods. A disruption to the global
supply chain as a result of the coronavirus (or any other health pandemic for
that matter) would negatively affect strategic imports and hobble domestic
production. On the brighter side, the virus opened the eyes of the Nigerian
government to the urgent need to follow through on a policy of backward supply
chain integration to reduce the impact of international contagion on the local
economy.
Chart 39: Nigeria's
Key Import Partners (%) 2017-2019
Source: NBS,
Proshare Research
Nigeria's two key import partners in 2019 were Asia
and Europe both accounting for 49.6% and 29.95% respectively of Nigeria's
imports. Any disruption to their economies resulting from the coronavirus would
adversely affect the Nigerian economy as the effect would likely be transmitted
through foreign exchange translation costs and supply disruptions. Some
European nations such as Italy, Spain, the UK, Germany and France were
initially on lockdown leading to import disruptions and replacement cost
pricing of products. The disruption in product and service flows were
incorporated into end-product pricing, which raised production costs and put
pressure on the local producer price index (PPI) (see Chart 39).
Exports
Nigeria's total export value
was 9.79% lower in value in Q4 2019 relative to Q3 2019 but 7.06% higher
relative to Q4 2018. In 2019, the value of total exports was 3.56% higher than
in 2018.
Agricultural goods exports
grew in value by 61.89% in Q4 2019, compared to Q3 2019 but decreased by 30.23%
when compared with Q4 2018. In 2019, the value of agricultural goods exports
fell by 10.74% relative to 2018.
Manufactured goods exports in
Q4 2019 were 48.9% less in value than that recorded in Q3 2019 and 573.19%
higher than Q4 2018. In 2019, the value of manufactured goods export was over
200% higher than in 2018.
Crude oil exports in Q4 2019
were 3.16% lower than the value in Q3 2019 and 0.88% lower than Q4 2018. For
2019, the value of oil exports was lower than in 2018 by 3.08%.
Chart 40: Share of
Total Exports (%) 2016-2019
Source: NBS,
Proshare Research
Nigeria's top four export products in 2019 were crude oil, other oil products, manufacturing and agricultural products. In 2019, Nigeria recorded a decline in its share of crude oil exports to total exports to 76.54% from 81.78% in 2018. There was also a decline in the share of agriculture exports to total exports to 1.41% in 2019 from 1.63% in 2018. Manufacturing exports to total exports recorded an increase to 10.81% in 2019 from 3.48% in 2018. The latest statistics reveal that the Nigerian economy is still largely dependent on oil exports. The fall in oil demand as a result of the spread of coronavirus would adversely affect Nigeria's revenues in 2020 and perhaps Q1 2021 (see Chart 40).
Chart 41: Nigeria's
Key Export Partners (%) 2017-2019
Source: NBS,
Proshare Research
Nigeria's key export partners in 2019 were Europe and Asia accounting for
39.71% and 28.71% respectively of Nigeria's export. A disruption in Nigeria's
key export partner's economy resulting from coronavirus adversely affected
Nigeria's revenue generation capacity (see Chart 41).
Nigeria's
Trade Balance - A Case of Pain Overriding Gain
Nigeria's trade balance declined from N5.37trn in 2018 to N2.23trn in
2019. The drop in the country's trade balance was caused by an increase in its
imports relative to exports in 2019. Nigeria's export increased by +3.56% while its imports increased by +28.78%. A continuous spread of the coronavirus across
various countries and within the Nigerian economy will disrupt global supply
chains, productivity and hence revenue generation which will have adverse
effects on Nigeria's trade balance (see Chart 42).
Chart 42: Nigeria's
Import, Export and Trade Balance (N'trn) 2017-2019
Source: NBS, Proshare Research
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