Sharp Decline in Merchandise Trade in Q2 2020

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Friday, September 04, 2020 / 09:22 AM / By FBNQuest Research / Header Image Credit: Investing.com

 

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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 N6.2trn in Q2 2020, representing a sharp decline of 27% on the preceding quarter. Compared with Q1, the total export value decreased by 46% q/q to N2.22trn, and the import value declined by 11% q/q to N4.02trn. The net result was a deficit of N1.8trn, which followed a deficit of N420bn the previous quarter. This makes three consecutive trade deficits. The data were drawn primarily from the Nigeria Customs Service.

                                                                                               

The sharp decline seen in the total value of trade mirrors the disruptions caused by Covid-19, given the varying degrees of restrictions with respect to international trade, travel and tourism. Trade activity across countries is yet to fully pick up.

 

Although the value of total imports declined, from the bureau's commentary we note that the value of imported raw materials, agricultural goods and manufactured goods rose by 86% q/q, 59% q/q and 5% q/q respectively. These increases can be partly linked to the CBN's fx rate adjustments (i.e. depreciation).

 

As usual, crude oil accounted for the largest share (70%) of total exports in Q2. That said, the value of crude oil exports declined by -47% q/q and -59% y/y. It was the lowest crude oil export value recorded since Q1 2017. The crude price crashed in April below US$15/b: global demand for oil products slumped in the quarter, when all industrialized economies other than China were in lockdown. Exporters such as Nigeria had difficulty in securing buyers for their cargoes.

 

Merchandise trade values (N'trn)

 

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

 

In the quarter under review, Nigeria exported goods valued at N31bn to fellow members of the Economic Community of West African States, significantly lower than the value of N146bn recorded the previous quarter. This represented 18% of total exports within Africa.

 

The pandemic has brought into sharp focus Nigeria's weak productive base. Only a small fraction of goods (mainly agricultural products) undergo initial stages of industrial transformation before being exported, severely diminishing their value added. Policymakers need to design structural reforms to revive Nigeria's productive base and increase its industrial self-reliance.

 

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