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Nigeria Recorded N104Billion Negative Trade Balance in Q3

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Trade - Investors King
  • Nigeria Recorded N104Billion Negative Trade Balance in Q3

The National Bureau of Statistics (NBS) has disclosed that Nigeria recorded a negative trade balance of N104 billion in third quarter of this year.

NBS, which newly released the data in its ‘3rd Quarter 2016 External Trade News: Trade Intensity Index/Re-Exports Analysis’, put the total value of Nigeria’s external trade in the third quarter at N 4.721.9 trillion. It pointed out that the figures consisted of exports worth N2.309 trillion and imports worth N2.413 trillion, indicating a slight negative trade balance of N104 billion.

Giving a breakdown, it noted that, “As in previous quarters, the sector, which contributed the most to total trade was crude oil, which was all for exports,” stating that, “In total this sector accounted for N1,944 billion, or 41.2per cent of the total trade in the third quarter of 2016.”

“The manufacturing sector had the second largest share of total trade, accounting for N1,218.3 billion or 25.8per cent of the total, but in contrast to Crude Oil, was dominated by imports. Other Oil products was also a prominent sector, and accounted for N1,029.4 billion, or 21.8per cent of the total. The remaining sectors were a relatively small proportion of total trade. Raw Materials accounted for 6.37per cent of the total, Agriculture accounted for 4.43per cent, Solid minerals accounted for 0.43per cent, and trade in Energy goods was negligible at N0.1 billion,” it added.

On the export intensity index with major trading partners, the statistical agency explained that, the index “compares the share of exports to each country in Nigeria’s total exports, with the share of world exports going to that country, and therefore gives a measure of the importance of that country to Nigeria as an export destination.”

Accordingly, it noted that, “A higher number denotes a stronger relationship, and an index of one indicates that exports to that country are what would be expected given global trade patterns. In quarter three, Nigeria had a particularly strong export relationship with India, with export intensities of 5.6, 8.3 and 3.9 July, August and September respectively.

“Spain was also a key export market with intensities of 3.6, 4.4 and 1.9 during the same months. Despite more exports going to the US than Spain, this was due to the importance of the US as a global market, and the country nevertheless had lower intensities, of 1.2, 0.7 and 0.9 . France and the Netherlands were the other two largest export destinations, and recorded intensities of 0.8, 3.6 and 0.6 for France, and 1.1, 1.8 and 0.9 for the Netherlands.

As for the import intensity index with major trading partners, the NBS noted that, “This index mirrors the export intensity index, and measures the importance of Nigeria as an export destination for other countries. “

According to the agency, “Nigeria’s major trading partners in terms of import were China, Belgium, Netherlands, United States and India. During the quarter, the import intensity of Nigeria with China was 1.09, for July 1.08 for August and 0.65 for September.

These figures, it explained, were around one, and therefore indicated that China’s exports to Nigeria reflected the global share of imports accounted for by Nigeria.

“By contrast, Belgium – the next leading consumer of Nigeria’s products – showed high import intensities with Nigeria, of 4.35, 3.54 and 2.19 for the months July to September, denoting a stronger relationship. The Country’s import intensities were also high with India (2.57, 2.49 and 1.28) and the Netherlands (4.38, 2.57 and 1.04) during the same months.

“However, the import intensity of Nigeria with United States and Spain were lower, with indices less than one other than for Spain in August. This is possibly a result of the mix of products imported from these countries, which may have been affected more by the CBN import regulations,” it added.

Besides, in terms of the major import partners, NBS stated that, “As in previous quarters, the country that Nigeria imported the most goods from in the third quarter of 2016 was China. In total, China accounted for N478.7 billion, or 19.8 per cent of total imports.”

Nevertheless, it added, “this is a lower share of total imports than the country accounted for in the previous quarter.”

“Belgium and the Netherlands were the next most important import partners, and accounted for N331.1 billion (13.7 per cent) and N299.7 billion (12.4 per cent) respectively. They were followed by USA, India and France, which recorded N165.5 billion (6.86 per cent), N121.3 billion (5.03 per cent) and N91.3 (3.78 per cent) respectively,” it pointed out.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Fed’s Decision to Hold Rates Stalls Oil Market, Brent Crude Slips to $82.17

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Crude Oil - Investors King

Oil prices faced a setback on Thursday as the U.S. Federal Reserve’s decision to maintain interest rates dampened investor sentiment.

The Federal Reserve’s announcement on Wednesday indicated a reluctance to initiate an interest rate cut, pushing expectations for policy easing possibly as late as December. This unexpected stance rattled markets already grappling with inflationary pressures and economic uncertainty.

Brent crude, the international benchmark for Nigerian crude oil, saw a drop of 43 cents, or 0.5% to $82.17 a barrel, reflecting cautious investor response to the Fed’s cautious approach.

Similarly, West Texas Intermediate (WTI) crude oil also slipped by 46 cents, or 0.6% to settle at $78.04 per barrel.

Tamas Varga, an analyst at PVM Oil, commented on the Fed’s decision, stating, “In the Fed’s view, this is the price that needs to be paid to achieve a soft landing and avoid recession beyond doubt.”

The central bank’s move to hold rates steady is seen as a measure to balance economic growth and inflation containment.

The Energy Information Administration’s latest data release further exacerbated market concerns, revealing a significant increase in U.S. crude stockpiles, primarily driven by higher imports.

Fuel inventories also exceeded expectations, compounding worries about oversupply in the oil market.

Adding to the downward pressure on oil prices, the International Energy Agency (IEA) issued a bearish report highlighting concerns over potential excess supply in the near future.

The combination of these factors weighed heavily on investor sentiment, contributing to the decline in oil prices observed throughout the trading session.

Meanwhile, geopolitical tensions in the Middle East continued to influence market dynamics, with reports of Iran-allied Houthi militants claiming responsibility for recent attacks on international shipping near Yemen’s Red Sea port of Hodeidah.

These incidents underscored ongoing concerns about potential disruptions to oil supply routes in the region.

As markets digest the Fed’s cautious stance and monitor developments in global economic indicators and geopolitical tensions, oil prices are expected to remain volatile in the near term.

Analysts suggest that future price movements will hinge significantly on economic data releases, policy decisions by major central banks, and developments in geopolitical hotspots affecting oil supply routes.

 

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Crude Oil

Nigerian Oil Loses Ground to Cheaper US and Russian Crude

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Crude oil

Nigeria’s once-thriving oil industry is facing a significant challenge as traditional buyers increasingly turn to more affordable alternatives from the United States and Russia.

This shift has led to France emerging as the leading buyer of Nigerian crude, marking a significant change in the global oil market dynamics.

Top Nigerian crude grades like Bonny Light, Forcados, and Brass have long been favored by refineries in Europe and Asia due to their low sulfur content.

However, the country’s primary customers, including India and China, are now opting for cheaper US and Russian oil.

This trend poses a substantial risk to Nigeria, which relies on oil exports for more than half of its foreign exchange earnings.

Data from BusinessDay reveals a stark decline in India’s purchase of Nigerian crude. In the first quarter of 2024, India bought N1.3 trillion worth of Nigerian oil, a significant drop from the average of N2 trillion purchased between 2018 and 2021.

“Buyers are increasingly turning to cheaper alternatives, raising concerns for the country’s revenue stream,” said Aisha Mohammed, a senior energy analyst at the Lagos-based Centre for Development Studies.

The latest tanker-tracking data monitored by Bloomberg indicates that India is buying more American crude oil as Russian energy flows dwindle amid sanctions.

India’s state-owned oil refiners and leading private companies have increased their imports of US crude, reaching nearly seven million barrels of April-loading US oil. This shift is the largest monthly inflow since last May.

Russian crude flows to India surged following the invasion of Ukraine, making Russia the biggest supplier to the South Asian nation.

However, tighter US sanctions have stranded Russian cargoes, narrowing discounts, and prompting India to ramp up purchases from Saudi Arabia.

“Given the issues faced with importing Sokol in Russia, it’s no surprise that Indian refineries are turning toward US WTI Midland as their light-sweet alternative,” explained Dylan Sim, an analyst at industry consultant FGE.

As a result, France has overtaken the Netherlands to become the biggest buyer of Nigerian crude oil, purchasing products worth N2.5 trillion in the first quarter of 2024.

Spain and India occupied second and fourth positions, with imports valued at N1.72 trillion and N1.3 trillion respectively, as of March 2024.

The sluggish pace of sales for Nigeria’s May supplies highlights the market’s shifting dynamics. Findings show that about 10 cargoes of Nigerian crude for May loading were still available for purchase, indicating a reduced demand.

Rival suppliers such as Azeri Light and West Texas Intermediate have also seen price weaknesses, impacting Nigerian crude demand.

“We’ve got much weaker margins, so Nigeria’s crude demand is taking a hit,” noted James Davis, director of short-term oil market research at FGE.

Sellers seeking premiums over the Dated Brent benchmark have found the European market less receptive, according to Energy Aspects Ltd.

“May cargoes were at a premium that didn’t work that well into Europe, but lower offers have seen volumes move,” said Christopher Haines, EA global crude analyst. “Stronger forward diesel pricing is also helping.”

Some Nigerian grades are being priced more competitively, including Qua Iboe to Asia and Bonny Light to the Mediterranean or East, with the overhang slowly reducing, according to Sparta Commodities.

However, the overall reduced demand could lead to a decrease in revenue from oil exports, a major source of income for the Nigerian government.

“Reduced demand could lead to a decrease in revenue from oil exports, a major source of income for the Nigerian government,” warned Charles Ogbeide, an energy analyst with a Lagos-based investment bank.

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Commodities

Refiners Predict Petrol Prices to Fall to N300/Litre with Adequate Local Crude Supply

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Petrol - Investors King

The pump price of Premium Motor Spirit (PMS), commonly known as petrol, could drop to N300 per litre once local production ramps up significantly, according to operators of modular refineries.

This projection hinges on the provision of sufficient crude oil to domestic refiners, which they say would undercut the exorbitant costs currently imposed by foreign refineries.

Speaking under the aegis of the Crude Oil Refinery Owners Association of Nigeria (CORAN), the refiners stressed the urgency for the government to ensure a steady supply of crude oil to local processing plants.

They argue that the reliance on imported petroleum products has been economically disadvantageous for Nigeria.

Eche Idoko, Publicity Secretary of CORAN, emphasized that the current high costs could be mitigated by boosting local production.

“If we begin to produce PMS in large volumes and ensure adequate crude oil supply, the pump price could be reduced to N300 per litre. This would prevent Nigerians from paying nearly N700 per litre and stop foreign refiners from profiting excessively at our expense,” Idoko stated.

The potential price drop follows the model seen with diesel, which experienced a significant price reduction once the Dangote Petroleum Refinery began its production.

“Diesel prices dropped from N1,700-N1,800 per litre to N1,200 per litre after Dangote started producing. This is a clear indication that local production can drastically reduce costs,” Idoko explained.

In a previous statement, Africa’s richest man, Aliko Dangote, affirmed that Nigeria would cease importing petrol by June 2024 due to the Dangote Refinery’s capacity to meet local demand.

Dangote also expressed confidence in the refinery’s ability to cater to West Africa’s diesel and aviation fuel needs.

Challenges and Governmental Role

However, achieving this price reduction is contingent on several factors, including the provision of crude oil at the naira equivalent of its dollar rate.

CORAN has advocated for this approach, citing that it would bolster the naira and reduce the financial burden on refiners who currently buy crude in dollars.

The Nigerian government has shown some commitment towards this goal. Gbenga Komolafe, Chief Executive of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), confirmed that a framework has been developed to ensure consistent supply of crude oil to domestic refineries.

“We have created a template for the Domestic Crude Oil Supply Obligation to foster seamless supply to local refineries,” Komolafe stated.

Industry Reactions

Oil marketers have welcomed the potential for reduced petrol prices. Abubakar Maigandi, President of the Independent Petroleum Marketers Association of Nigeria (IPMAN), expressed optimism about the Dangote Refinery’s impact on petrol prices.

“We expect the price of locally produced PMS to be below the current NNPC rate of N565.50 per litre. Ideally, we are looking at a price around N500 per litre,” Maigandi noted.

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