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Nigeria in Focus

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The latest report from the National Bureau of Statistics (NBS) in its series on foreign trade in goods shows the total value of trade as N13.28trn in Q3 ‘21, representing an increase of 10% on the preceding quarter and a y/y increase of 59%. Compared with Q2 ‘21, the total export value rose by just 1% to N5.13trn, and the import value rose by 17% to N8.15trn.

The net result was a deficit of N3.02trn, which followed a deficit of N1.87trn the previous quarter. This makes eight consecutive trade deficits. The data were drawn primarily from the Nigeria Customs Service.

• Total trade in 2020 declined primarily due to lower exports. The implementation of lockdowns and restrictions had an adverse effect on export activity last year. The total trade value as a percentage of GDP stood at 21% in 2020. In Q3 ’21, total trade as a percentage of GDP stood at 8.7%.

• For Nigeria, the NBS notes that the majority of imports in Q3 ’21 originated from East Asia (China, especially). The value of imported agricultural goods. Manufactured products as well as oil-related products rose by 21% q/q, 14% q/q and 35% q/q respectively.

• Regarding export destination, India remained the top exporting partner for Nigeria in Q3 ‘21. The five top exports partners were India, (14.8%) Spain (12.2%), Italy (8.7%), France (7.1%), and the Netherlands (4.7%). These five
countries accounted for 47.5% of the total exports in Q3 ’21.

• As usual, crude oil accounted for the largest share (78%) of total exports in Q3. However, the value of crude oil exports declined by 1.3% q/q but rose by 66% y/y. The crude oil price (Bonny Light) averaged USD73.8/b in Q3.

• We note that raw cocoa beans, sesame seeds, cigarettes, natural rubber and aluminium featured as non-oil export products in Q3 ’21.

• Nigeria exported goods valued at N347bn to fellow members of the Economic Community of West African States (ECOWAS), compared with N363bn the previous quarter. This represented 52% of total exports within Africa.
Meanwhile, imports from ECOWAS accounted for 11% of the value of total imports.

• The leading port of operation during the quarter under review was the Apapa Port. Goods worth N4.7trn exited the country through this port. The next leading port of operation was Port Harcourt, through which goods worth N308bn were shipped to partner countries. Tin can Island was also very active and goods worth N104bn exited Nigeria through this port.

• The African Continental Free Trade Area (AfCFTA) agreement is expected to contribute significantly towards the development of regional value chains. To maximise the benefits of the agreement, Nigeria’s manufacturing sector needs to be strengthened. Furthermore, local manufacturers need to significantly improve their service delivery and product standards if they are to be competitive in a burgeoning intra-continental marketplace.

• The UN Economic Commission for Africa estimates that tariff reductions under the AfCFTA agreement will boost intra-African trade by over 51% by 2022 (or by as much as 100% if non-tariff barriers are reduced). The Federal Executive Council has ratified Nigeria’s membership of the AfCFTA.

Global/Regional in focus

The COVID-19 pandemic generated an unprecedented global shock, with a devastating effect on global trade largely due to the lockdown measures that were put in place across countries as a strategy to mitigate the pandemic’s spread. The impact on international trade was evident in the decline in commodity prices in the first quarter of 2020 (e.g. crude oil, copper, among others) as well as reduced manufacturing output and disrupted operations across global value chains. Based on data from the World Trade Organisation (WTO), the initial COVID-19 shock led to a -13.3% or USD569.9bn decline in global merchandise trade from USD4.3trn in Q1 ’20 to USD3.7trn in Q2 ’20.

However, due to increase in vaccination as well as reopening of economies, merchandise trade recovered to USD5.6trn in Q3 ’21 compared with USD4.9trn recorded in the corresponding period in 2020. This is also 16.4% above the average recorded over the past eight quarters (USD4.8trn).

Turning to the African landscape, the pandemic also adversely impacted the continent’s trade, particularly in 2020. For instance, in Q2 ’20 when the pandemic was at its peak, and the associated lockdown measures affected a large share of the global population, merchandise trade declined by 15.1% in Q2 ’20 to USD89.7bn compared with USD105.6bn recorded in the preceding quarter. However, there have been notable improvements in African trade in 2021 with global economies reopening and increase in vaccine uptake (African vaccination rate currently stands at 8.6%).

Intra-African trade is currently low as it accounts for less than 15% of total African exports, suggesting higher potential benefits from greater regional trade. However, when informal cross-border trade is taken into account, Africa records higher intraregional trade, particularly in agriculture. In some African countries, informal cross-border trade accounts for c.90% of official trade flow and contributes c.40% to total trade within regional economic communities.

The African Continental Free Trade Area (AfCFTA) agreement has the potential to alleviate the effects of COVID-19 in Africa and intra-African trade. The agreement has several benefits including the potential to boost economies and bolster trade diversity, encourage industrialisation, eliminate tariffs and non-tariff barriers as well as contribute to sustainable growth, among others.

At the last CIBN Banking and Finance conference held in September ‘21, a special session on AfCFTA was taken by Dr. Hippolyte Fofack, Chief Economist and Director of Research and International Cooperation Department at the African Export-Import Bank. He noted the numerous benefits of the AfCFTA agreement ranging from the deepening and acceleration of industrialisation to mutually reinforcing the relationship between regional integration and intra-African trade.

The question, therefore, is “what are the top sectors with high potential within AfCFTA markets?”. From our vantage point, top merchandise trade sectors include vehicles and transport equipment, agro-food products, energy, metals and machinery, as well as chemical products. As for the services sectors, we highlight; ICT, infrastructure and logistics, finance, banking and insurance, education as well as health.

The successful implementation of the AfCFTA to boost both extra- and intra-African trade hinges upon successfully tackling supply-side constraints, closing the trade financing gaps, excessive reliance on foreign currencies, among others. Industry sources suggest that Africa’s current untapped export potential amounts to USD21.9bn, equivalent to 43% of intra-African exports. The AfCFTA agreement can potentially add USD9.2bn worth of exports through partial tariff liberalisation over the next five years. Additionally, the agreement could boost employment and earning capacities among marginalised groups (i.e. women and youth).

Economy

Nigerians Pay N210 Billion For Electricity in Three Months

Nigerian electricity consumers pay N210 billion to power distributors in three months

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Nigerian electricity consumers pay N210 billion to power distributors in three months.

Nigeria Electricity Regulatory Commission (NERC) disclosed that Nigerians used N210 billion to buy electricity from distribution companies (Disco) between October and December of 2021. 

According to the 2021 fourth quarter (Q4) report of the commission which was released yesterday, electricity distribution companies otherwise known as “Discos” released a bill of N303.11 billion to consumers in Q4 2021 while a sum of N210.17 billion was retrieved. This means that N92.94 billion were left uncollected within the period under review.

NERC further stated that total billing by Disco increased by N30.12 billion if Q4 2021 is compared with Q3 2021. This represents an increase of 11.03 percent. Similarly, revenue collected in Q4 2021 increased by N16.64 billion when compared with Q3 2021. 

Although there was a slight increase of N16.64 billion in the revenue collected in Q4 2021, the increase in revenue did not however match up with the increase in electricity billing which was N30.12 billion, leaving a difference of N13.48 billion. 

Meanwhile, Nigeria Electricity Regulatory Commission (NERC) conceded that there is a huge metering gap for end-user customers. The commission acknowledged that metering deficiency is a perennial challenge that has critically hampered revenue generation in the industry.

The commission, therefore, disclosed a decrease in the number of meters installed in Q4 2021. 

“A total of 81,084 meters were installed in 2021/Q4 as compared to the 288,154 meters installed in 2021/Q3. The reduction in the number of meter installations in 2021/Q4 was largely driven by the winding down of the NMMP phase zero (0). The Commission’s records indicate that, of the 10,514,582 registered energy customers as at December 2021, only 4,773,217 (45.40%) have been metered compared to 42.93% metering as at September 2021” the report stated.

On electricity generation capacity, NERC noted that the average generation capacity for Q4 2022 was 5,465.72MW, with 4,294.02MWh/h generated per hour while the total power generated in Q4 2021 from 25 generating plants across the country was 9,480.21GWh.

 

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Economy

Severe Flood Ravage Farmlands in Nigeria, Experts Raise Concerns of Looming Food Shortage

The persistent rain being recorded in Nigeria lately has resulted in severe flooding that has ravaged farmlands as experts warn about food shortage in the coming months.

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Harvey

The persistent rain being recorded in Nigeria lately has resulted in severe flooding that has ravaged farmlands as experts warn about food shortage in the coming months.

Due to torrential rainfall in recent weeks, with no sign of slowing down, almost all 36 states of the federation have experienced one form of flooding or the other.

The Nigeria Hydrological Services Agency (NIHSA) had recently warned that flooding will persist till the last quarter of 2022, which will take a great toll on farming.

In the North-Eastern part of the country, more than 150,000 hectares of land have been destroyed. Farmers in the region have expressed concerns over the large-scale destruction of produce, stating that the damage caused by the rainfall could be estimated at N30 billion.

They have therefore called for urgent interventions to mitigate the effects of the flooding, so as to reduce hunger and enhance food security.

Kenechukwu Onuorah, an expert at Global Rights, an international human rights capacity-building non-governmental organization, stated that one major consequence of persistent flooding is the huge impact it will have on agricultural output.

According to him, persistent flooding will make basic foodstuff scarce and expensive if nothing is done urgently to mitigate it.

His words, “The persistent rain may be good because it creates swampy lands that are good for the plants but flooding is a disaster.

“It comes with erosion, especially in the South, and washes away the plants. It destroyed the crops and even livestock will have nothing to feed on.

“There is so much we could do that we are not doing. We must ensure appropriate urban planning and drainage systems.

“Government at all levels must work to set Nigeria on the path towards greener renewable energy in order to reverse the effects of climate change. Unfortunately, the government is not working in that direction yet”.

Also speaking on the issue, The  Nigeria Hydrological Services Agency (NIHSA), an agency that provides services required for the assessment of Nigeria’s surface and groundwater resources, disclosed that flooding would persist, noting that the River Niger and Benue system had started building up.

The agency said, “As we are aware, Nigeria is located within the River Niger Basin, which is occupied by nine countries, namely: Benin, Burkina Faso, Cameroun, Chad, Cote D’Ivoire, Guinea, Mali, Niger, and Nigeria. Our country is at the lowest portion of the Basin.

“This means that once the upper catchment of the Basin gets flooded, Nigeria should be prepared to experience flooding”.

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Economy

Nigerian Lawmakers Express Concerns As Crude Oil Theft Increases Nation’s Debt

Lawmakers in Nigeria have expressed concerns over the incessant crude oil theft witnessed in the country as Nigeria’s debt reaches an all-time high of N42.84trn.

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Oil prices - Investors King

Lawmakers in Nigeria have expressed concerns over the incessant crude oil theft witnessed in the country as Nigeria’s debt reaches an all-time high of N42.84trn.

The Speaker, of the House of Representatives, Hon. Femi Gbajabiamila, while delivering his welcome remarks after the house resumed from a recess, stated that the continuous oil theft witnessed in the country has so far sabotaged Nigeria’s economy as there is a massive decline in the volume of crude oil exports.

He further stated that this act carried out by unscrupulous people is nothing but treason against the country, for which they must be severely dealt with.

He described those who carry out such dastardly acts as not being different from terrorists and insurgents.

In his words: “Due to theft and various acts of economic sabotage, we are experiencing a massive decline in the volume of crude oil exports.

“Our crude oil export of 972,394 BPD for August is the lowest we have recorded in the last two decades. 

“At a time when we are already experiencing severe financial constraints, there are mechanisms in place to prevent these sorts of bad actors, and the government spends significant amounts of money each year to protect oil and gas resources in the country. 

“Evidently, these existing arrangements do not suffice. As such, there is an urgent need to review them and make the necessary improvements. 

“It is also of particular importance that the perpetrators of these crimes against the state are identified, prosecuted, and subjected to the stiffest penalties the law allows. 

“Those who seek to impoverish our country in this manner have declared war against the Nigerian people. The government’s response must be sufficient to convince them of the error of their ways and deter others who might be tempted to join in their treason.   

“I met with the Finance Minister and the DG Budget and made it clear to them that enough of crude oil theft. Nigerians don’t want to hear that again. What do you intend to do about it? That’s the important question.” 

According to the managing director of the Nigerian National Petroleum Corp. (NNPC) Mele Kyari, he had disclosed that thieves from all levels in the country steal 200,000 barrels of crude oil per day.

It should be recalled that in 2021, Investors King reported that Nigeria lost $3.5 billion to crude oil theft.

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