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Nigeria’s Foreign Trade Grew by 6.8% in Q3, 2019

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  • Nigeria’s Foreign Trade Grew by 6.8% in Q3, 2019

Nigeria’s total value of trade rose by 6.77 percent to N9.187 trillion in the third quarter (Q3) of the year, the National Bureau of Statistics (NBS) reported.

According to the report, the value traded grew by 1.33 percent when compared to Q3, 2018 and 6.8 percent more than what was obtained in Q2, 2019. Suggesting that border closure directed by President Muhammadu Buhari in August to curb smuggling and leakages was effective despite the current report partially reflecting its impact.

The total value exported during the quarter surged by 15.02 percent (N5.29 trillion) when compared with the preceding quarter of 2019 and 8.97 percent when compared with the corresponding quarter of 2018. While this is not unique, component of the non-oil sector exported grew by 29.13 percent or N1.54 trillion.

Similarly, the value of imported goods declined by 2.70 percent to N3.89 trillion during the quarter when compared to Q2, 2019 and 7,47 percent when compared with the same quarter of 2018. This, the NBS attributed to the drop in the values of mineral fuel and crude inedible materials imported that declined by 41.98 percent or N381.9 billion and 24.44 percent or N15.95 billion, respectively.

Africa’s largest economy recorded N1.39 trillion in trade surplus in the third quarter of the year.

In a surprising twist, Ghana emerged Nigeria’s largest export trading partner in the third quarter as 17.18 percent of total goods were exported to the country. Again, this indicated that smuggling has reduced and validated statements from the customs that duties grew following border closure.

Earlier this month, the Minister of Information and Culture, Alhaji Lai Mohammed said Nigeria Customs Service (NCS) now generates N8 billion per day.

“Smuggling of petroleum products out of Nigeria has been greatly reduced. The closure of filling stations along the border is a huge success. There are hundreds of filling stations along the borders. We counted many as we drove to the border this morning. They were set up purposely for smuggling. They don’t sell the fuel consignment they receive to the public. About 50 percent of them are owned by foreigners. Now that they are closed, we have recorded over 30 per cent reduction in domestic fuel consumption,” Mohammed said.

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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Economy

Nigeria, China Collaborate to Bridge $18 Billion Trade Gap Through Agricultural Exports

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In a concerted effort to address the $18 billion trade deficit between Nigeria and China, both nations have embarked on a collaborative endeavor aimed at bolstering agricultural exports from Nigeria to China.

This strategic partnership, heralded as a landmark initiative in bilateral trade relations, seeks to narrow the trade gap and foster more balanced economic exchanges between the two countries.

The Executive Director of the Nigerian Export Promotion Council (NEPC), Nonye Ayeni, revealed this collaboration during a joint meeting between the Council and the Department of Commerce of Hunan province, China, held in Abuja on Monday.

Addressing the trade imbalance, Ayeni said collaborative efforts will help close the gap and stimulate more equitable trade relations between the two nations.

With Nigeria importing approximately $20.4 billion worth of goods from China, while its exports to China stood at around $2 billion, representing a $18 billion in trade deficit.

This significant imbalance has prompted officials from both countries to strategize on how to rebalance trade dynamics and promote mutually beneficial economic exchanges.

The collaborative effort between Nigeria and China focuses on leveraging the vast potential of Nigeria’s agricultural sector to expand export opportunities to the Chinese market.

Ayeni highlighted Nigeria’s abundant supply of over 1,000 exportable products, emphasizing the need to identify and promote the top 20 products with high demand in global markets, particularly in China.

“We have over 1,000 products in large quantities, and we expect that the collaboration will help us improve. The NEPC is focused on a 12-18 month target, focusing on the top 20 products based on global demand in the markets in which China is a top destination,” Ayeni explained, outlining the strategic objectives of the collaboration.

The initiative not only aims to reduce the trade deficit but also seeks to capitalize on China’s growing appetite for agricultural products. Nigeria, with its diverse agricultural landscape, sees an opportunity to expand its export market and capitalize on China’s increasing demand for agricultural imports.

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IMF Urges Nigeria to End Fuel and Electricity Subsidies

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In a recent report titled “Nigeria: 2024 Article IV Consultation,” the International Monetary Fund (IMF) has advised the Nigerian government to terminate all forms of fuel and electricity subsidies, arguing that they predominantly benefit the wealthy rather than the intended vulnerable population.

The IMF’s recommendation comes amidst Nigeria’s struggle with record-high inflation and economic challenges exacerbated by the COVID-19 pandemic.

The report highlights the inefficiency and ineffectiveness of subsidies, noting that they are costly and poorly targeted.

According to the IMF, higher-income groups tend to benefit more from these subsidies, resulting in a misallocation of resources. With pump prices and electricity tariffs currently below cost-recovery levels, subsidy costs are projected to increase significantly, reaching up to three percent of the gross domestic product (GDP) in 2024.

The IMF suggests that once Nigeria’s social protection schemes are enhanced and inflation is brought under control, subsidies should be phased out.

The government’s social intervention scheme, developed with support from the World Bank, aims to provide targeted support to vulnerable households, potentially benefiting around 15 million households or 60 million Nigerians.

However, concerns persist regarding the removal of subsidies, particularly in light of the recent announcement of an increase in electricity tariffs by the Nigerian Electricity Regulatory Commission (NERC).

While the government has taken steps to reduce subsidies, including the removal of the costly petrol subsidy, there are lingering challenges in fully implementing these reforms.

Nigeria’s fiscal deficit is projected to be higher than anticipated, according to the IMF staff’s analysis.

The persistence of fuel and electricity subsidies is expected to contribute to this fiscal imbalance, along with lower oil and gas revenue projections and higher interest costs.

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IMF Warns of Challenges as Nigeria’s Economic Growth Barely Matches Population Expansion

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The International Monetary Fund (IMF) has said Nigeria’s growth prospects will barely exceed its population expansion despite recent economic reforms.

Axel Schimmelpfennig, the IMF’s mission chief to Nigeria, who explained the risks to the nation’s economic outlook during a virtual briefing, acknowledged the strides made in implementing tough economic reforms but stressed that significant challenges persist.

The IMF reaffirmed its forecast of 3.3% economic growth for Nigeria in the current year, slightly up from 2.9% in 2023.

However, Schimmelpfennig revealed that this growth rate merely surpasses population dynamics and signaled a need for accelerated progress to enhance living standards significantly.

While Nigeria has received commendation for measures such as abolishing fuel subsidies and reforming the foreign-exchange regime under President Bola Tinubu’s administration, these reforms have not come without costs.

The drastic depreciation of the naira by 65% has fueled inflation to its highest level in nearly three decades, exacerbating the cost of living for many Nigerians.

The IMF anticipates a moderation of Nigeria’s annual inflation rate to 24% by the year’s end, down from the current 33.2% recorded in March.

However, the organization cautioned that substantial challenges persist, particularly in addressing acute food insecurity affecting millions of Nigerians with up to 19 million categorized as food insecure and a poverty rate of 46% in 2023.

Moreover, the IMF emphasized the importance of maintaining a tight monetary policy stance to curb inflation, preserve exchange rate flexibility, and bolster reserves.

It raised concerns about proposed amendments to the law governing the central bank, fearing that such changes could undermine its autonomy and weaken the institutional framework.

Looking ahead, Nigeria faces several risks, including potential shocks to agriculture and global food prices, which could exacerbate food insecurity.

Also, any decline in oil production would not only impact economic growth but also strain government finances, trade, and inflationary pressures.

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