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Correcting Imbalance in Nigeria’s Trade Relations

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NEPC

The continuous trade deficit recorded by the country and the need to safeguard the economy, prevent dumping and enlarge the Nigerian market to other regions of the world has made it imperative for a review of the country’s trade policy writes IFEANYI ONUBA

Last month, the National Bureau of Statistics released the merchandise trade statistics for the third quarter of 2016 with the country recording a trade deficit of N104.14bn with its trading partners.

The report stated that while the country’s total value of merchandise trade in the third quarter of 2016 rose by N661.5bn or 16.3 per cent to N4.72tn, the country’s trade structure was still dominated by crude oil exports.

It said despite the plans by the government to reduce the import bill through its diversification efforts, the amount spent on importation of goods rose by N140, 7bn or 6.2 per cent to N2.41tn.

Nigeria’s import trade by direction showed that the country imported goods mostly from China, with an import value of N478.7bn or 19.8 per cent of total imports.

This was followed by Belgium at N331.3bn or 13.7 per cent, Netherlands with N299.7bn or 12.4 per cent, the United States with N165.5bn or 6.9 per cent and India with N121.3bn or five per cent of total imports.”

In terms of export, the report added that this rose by N520.8bn or 29.1 per cent to N2.3tn in the third quarter with mineral products accounting for a huge chunk of this amount.

India, according to the report, remains Nigeria’s major trade partner in the quarter in review accounting for 25.4 per cent of total exports while the United States and France contributed 17.9 per cent and 10.7 per cent respectively.

While the Federal Government through its zero oil plan said it had identified 22 priority countries as markets for Nigerian products with 11 strategic products to replace oil, analysts said such move would not achieve the desired impact with the current trade policy of the government.

They blamed the negative trade balance recorded in the third quarter of 2016 on the country’s inability to formulate an effective strategy to boost exports.

Those who spoke to our correspondent on the issue were the President, National Association of Nigerian Traders, Barrister Ken Ukaoha, the President, Abuja Chamber of Commerce and Industry, Mr Tony Ejinkeonye and the Head, Banking and Finance Department, Nasarawa State University, Uche Uwaleke.

Ukaoha told our correspondent in a telephone interview that a lot of factors contributed to the decline in trade with the lack of an effective trade strategy as one of them.

He said, “We have for so long remained import dependent. We have also continued to cultivate a mono product economy which is oil and our earnings from oil are presently disappointing.

“Apart from the fact that the price of oil is depreciating, you also find out that the quantity of our export is going so terribly low as a result of vandalism.

“In terms of other non-oil exports, the country has still not got its act together. This is because diversification which should have pioneered our export has not been effective. As we speak today, we don’t have a trade policy in place and we don’t have an export strategy in place.

“We are talking about import substitution but all the strategies needed there are not in place. Also, the delay in the passage of the budget last year made all the private sector operators who are major players in exports to relax, waiting for the budget passage in order to know the next line of action.”

On what could be done to reverse the trend, Ukaoha said the National Economic Management Team should as a matter of urgency come up with a trade policy to reverse the trend.

He said, “The Federal Government needs to work overnight to make sure we have a trade policy document that shows us where we are headed to in terms of import substitution and any other trade policy that we can adopt on trade as a country.

“We must come to terms with our reality of our regional endeavours in terms of regional integration and regional trade by seeing ECOWAS regions as the first point in our regional trade.”

Uwaleke, an associate professor of finance, said the negative trade balance recorded at the end of third quarter of 2016 and the fact that a significant proportion of the exports were mineral products underscore the need to diversify the export base of the economy.

He said. “I have always said that devaluation of the naira will not make any significant impact on our trade balance given the inelastic nature of imports and the country’s shallow export base.

“The NBS report also shows that the bulk of Nigeria’s imports is from China. By implication, a lot of pressure will be taken off the dollar if the Nigeria-China agreement on Yuan transactions is well implemented.

“The naira will also firm up as a direct consequence of settling imports from China in Yuan instead of the dollar.”

Reacting to the negative trade balance recorded by the country, Ejinkeonye called on the government to look inwards on how to resuscitate export activities across the non-oil value chain given the crumbling state of the oil sector.

He said, “As the Nigerian economy remains in despair, it has become worrisome to us in the private sector and indeed entire Nigerians on how we can survive economic hardship.

“The negative trade balance is a clear indication and a wake-up call for the government to swing into action and look inwards on how to resuscitate export activities across the non-oil value chain given the crumbling state of the oil sector.

“It is against this backdrop that we are calling on the Federal Government to consider revisiting the Export Expansion Grant scheme which was originally initiated to motivate exporters and also encourage export based activities in a bid to diversify our economy from the mono-export market.

“It is now evident, given the merchandise trade statistics, that the suspension of EEG would continue to affect the non-oil sector growth which has been recording poor performance in the last four year.”

Speaking on the development, the Trade Advisor to the Minister of Industry, Trade and Investment and Chief Trade Negotiator for Nigeria, Amb Chiedu Osakwe, said the Federal Government would soon commence a comprehensive review of the country’s trade policy in order to correct the trade imbalance with its trading partners.

He said this review would enable the government avoid dumping of substandard products into the economy by some foreign trade partners.

The review which would be done this year would be the first to be carried out since 2002 when the current policy was formulated.

He said the review of the trade policy would be done in such a way that that it would discourage dumping and promote the diversification efforts of the government.

Osakwe said, “We want to restructure our trade policy and reset the economy with it and we will be using trade negotiations to create consistent safeguards to protect the economy.

“So we will be working on our domestic trade laws that will safeguard the economy, prevent dumping and enlarge the Nigerian market.”

He also said that the Federal Government would not be stampeded into signing and ratifying the Economic Partnership Agreement between the European Union and the ECOWAS region

He explained that while Cote d Voire and Ghana had signed onto the agreement, the Federal Government was not in a hurry to do same as the agreement in its current form does not support the diversification efforts of government.

He said the review of the trade policy would enable the government expand market opportunities for Nigerian companies as well as look into the ECOWAS Common External Tariff and the EPA that have been seen to be controversial.

Osakwe said the ministry was also updating Nigeria’s trade policy priorities by working to correct imbalances in the country’s trade relationships and reversing negotiating failures.

Manufacturers and industrialists have taken a strong position that the negotiation that resulted in the CET did not take into account the sensitivities of the Nigerian industrial and manufacturing sector

Stakeholders have taken the position that the Nigerian economy would be damaged if the CET is implemented in 2020 and that the situation would be compounded if Nigeria signs the EPA with the European Union.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Economy

Nigeria Sovereign Investment Authority Generates N160.06 Billion in 2020

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Naira Exchange Rates - Investors King

The Nigeria Sovereign Investment Authority (NSIA) generated revenue of N160.06 billion in 2020, according to the latest audited financial reports announced by the Managing Director of NSIA Mr. Uche Orji.

The NSIA income came from devaluation gain of N51 billion, and core income of N109 billion compared to N33.07 billion in 2019.

But Orji lamented: “Covid-19 adversely affected logistics around infrastructure projects, especially the toll road projects and the presidential fertiliser initiative.

Despite the pandemic, the Authority achieved 33 percent growth in Net Assets to N772.75 billion compared to the previous year’s performance of N579.54 billion.

Orji said the NSIA “received additional contribution of $250 million; and provided first stabilisation support to the Federal Government of $150 million withdrawn from Stabilisation Fund last year.”

The same year, the NSIA received $311 million from funds recovered from the late General Abacha from the United States Department of Justice and Island of Jersey for deployment towards the Presidential Infrastructure Development Fund (PIDF) projects of Abuja-Kaduna-Kano Highway, Lagos Ibadan Expressway and Second Niger Bridge.

In response to COVID-19, Orji said: “NSIA partnered the global Citizen, a not-for profit group, to form the Nigeria Solidarity Support Fund. Separately NSIA acquired and distributed oxygen concentrators to the 21-teaching hospital as part of corporate social responsibility; in addition to staffing support to the Presidential taskforce on COVID-19.”

In 2020, the NSIA “invested additional capital into NG Clearing, the first derivative clearing house in Nigeria to maintain NSIA’s shareholding at 16.5 per cent following the company’s rights issue of 2020″ Orji said.

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Economy

EFCC Recovers $153m, 80 Assets from Diezani, Says Bawa EFCC Chairman

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Diezani Allison-Madueke - Investors King

The Chairman of the Economic and Financial Crimes Commission (EFCC), Abdulrasheed Bawa has said the commission recovered $153 million and 80 properties from the former Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke.

Bawa said: “There are several cases surrounding that. As you may have read, I was part of that investigation, and we have done quite a lot. In one of the cases, we recovered $153 million; we have secured the final forfeiture of over 80 properties in Nigeria valued at about $80 million.

“We have done quite a bit on that. The other cases as it relates to the $115 million INEC bribery as the media has sensationalised it, is also ongoing across the federation.”

We are looking forward to the time when we will, maybe, have her in the country, and of course, review things and see what will happen going forward. The case has certainly not been abandoned.

Speaking on the trial of former Abia State Governor Orji Uzor Kalu, he said his trial will start soon in Lagos.

Bawa added: “The position is very clear. The EFCC succeeded in 12 years to get him convicted at the Federal High Court. Of course, he went to the Supreme Court, and because the judge that convicted him has been elevated, the ruling was made and the EFCC as a respecter of the rule of law, we have taken it as it is. The Supreme Court has ordered that we should go back to the Federal High Court in Lagos.

“Now, we are at the Federal High Court in Abuja, and we have applied to the court for the case to be transferred to Lagos as ordered by the Supreme Court to enable us start all over again.

“It, however, draws a precedence, and those are the issues; law as the lawyers will say, is a living thing; we had the ACJA in 2015, we have had this problem of elevation of judges from High Court to Court of Appeal, and we pushed that they should be given the opportunity to finish their cases, because some of these cases have taken a very long time.

“We thought we had succeeded in getting this in ACJA, The law was, however, not seen as such. Now, we may have to solve the problem from the constitution, and then, we will be home and dry.”

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Economy

Nigeria Consumes 93m Litres of Petrol Daily in April 2021

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Petrol - Investors King

Nigeria’s daily petrol consumption rose to a record-high of 93 million litres in April 2021, according to the latest data from the Nigerian National Petroleum Corporation (NNPC).

The amount represents 77 percent of the 120.80 million litres consumed daily in West Africa despite having just 52 percent of the region’s population.

In previous months, Nigeria consumed 61 million litres on average, therefore, the NNPC stated that the 93 million litres per day consumption is unsustainable.

The sudden surged in petrol consumption was a result of smuggling, according to experts.

There is no doubt that Nigeria’s present petrol consumption is embarrassing, due to smuggling which is currently a thriving business,” Mike Osatuyi, national operations controller, Independent Petroleum Marketers Association of Nigeria.

On the allegation that marketers illegally export petrol, Osatuyi asked why the five security agencies across the borders are unable to stop it.

Smuggling of petrol across the borders is becoming more intense as Nigeria inches closer to full deregulation, one stakeholder said. Despite over 95 million Nigerians in poverty, the country inadvertently pays for cheap petrol across West Africa.

It means Nigeria is financing the economies of neighbouring countries,” Osatuyi said. “Nigeria should not be consuming more than 50 million litres per day.

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