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Coronation Trade Insights

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Institute of Chartered Shipbrokers

Nigeria in focus

The latest report from the National Bureau of Statistics (NBS) in its series on foreign trade in goods shows the total value of trade increased by 11.8% q/q to N11.7trn in Q4 ‘21. For FY ’21, total foreign trade increased by 57.6%, to N39.7trn from N25.2trn in 2020. Compared with 2020, the total export value rose by 51% to N18.9trn, from N12.5trn and the import value rose by 64.1% to N20.8trn from N12.7trn. The net result was a deficit of N1.9trn, which followed a deficit of N178bn the previous year.

Total trade in 2021 was higher primarily due to subsiding pandemic restrictions that had affected export activity in 2020 and increases in commodity prices (i.e. crude oil). The total trade as a percentage of nominal GDP stood at 22.6% in 2021, compared with 16.4% in 2020.

For Nigeria, the NBS notes that most imports in Q4 and FY ’21 originated from Asia (China in particular). In 2021, the value of imported agricultural goods, manufactured products as well as oil-related products rose by 57%, 2.5% and 43.3% respectively when compared to FY ‘20.

Regarding export destination, India remained the top exporting partner for Nigeria in 2021. The five top exports partners were India, (16.4%) Spain (11.8%), France (6.3%), the Netherlands (6.0%) and Canada (4.5%). These five countries accounted for 45% of the total exports in 2021.

Unsurprisingly, crude oil accounted for the largest share (76.2%) of total exports in 2021. The value of crude oil exports increased by 52.6% when compared to 2020. Bonny Light averaged USD71.1/b in 2021. We note that raw and fermented cocoa beans, sesamum seeds, ginger, cigarettes, natural rubber and aluminium featured as
non-oil export products in 2021.

Nigeria exported goods valued at N1.2trn to fellow members of the Economic Community of West African States (ECOWAS), compared with N841bn in 2020. This represented 51.4% of total exports within Africa. Meanwhile, imports from ECOWAS accounted for 15% of the value of total imports.

The leading port of operation during the year under review was the Apapa Port. Goods worth N17.1trn exited the country through this port. The next leading port of operation was Port Harcourt, through which goods worth N1trn were shipped to partner countries. Tin Can Island was also very active and goods worth N405bn exited Nigeria through this port.

The CBN announced the RT200 FX program, which is a set of policies, plans and programs for non-oil exports that will enable the country to attain the goal of USD200bn in FX repatriation from non-oil exports over the next 3-5 years. The program would rest on five key anchors; (I) non-oil exports proceed repatriation rebate scheme (II) Non-oil commodities expansion facility (III) Dedicated non-oil export terminal (IV) Value-adding exports facility (V) Biannual non-oil exports summit.

The CBN has released the operating guidelines for the non-oil export proceeds repatriation rebate scheme. Under this scheme, non-oil export proceeds sold to Authorised Dealers and Banks (ADBs) for third party use through investors and Exporters (I&E) window, will get a rebate of N65 for every USD and N35 for every US Dollar repatriated and sold into the I&E window for own use on eligible transactions only. The payment of the incentive will be made on quarterly basis.

The recent introduction of the pan-African payment and settlement system (PAPSS) is another welcome development, as over 80% of African cross-border transactions originating from banks within the continent are currently cleared and settled offshore.

Therefore, creating inefficiencies, and increasing the cost of African cross-border payments. PAPPS will facilitate payments as well as formalise some of the informal cross-border trade in Africa.

Through a simple, low-cost and risk-controlled payment clearing and settlement system, PAPPS would provide an alternative to the current high-cost and lengthy correspondent banking system, as well as an enabling infrastructure to spur the growth of intraAfrican trade and commerce, with the active participation of central banks, financial institutions, regional economic communities, the private sector, and other stakeholders.

Global/Regional in focus

Extraordinary measures such as lockdowns, quarantines and travel restrictions aimed at curtailing the spread of COVID-19 had a dramatic effect on global trade in 2020. According to data from the World Trade Organisation (WTO), merchandise trade declined by -7.3% or USD2.7trn to USD35.2trn in 2020, compared with USD37.9trn in 2019.

According to WTO, merchandise trade increased by 24.4% y/y (USD2.1trn) to USD11.2trn in Q3 ’21. However, the recovery in 2021 was affected by supply shortages, on the back of bottlenecks in global freight transport, spiralling shipping costs, logistic disruptions, semiconductor shortages, and rising energy prices. The Russia-Ukraine crisis has hampered progress with global trade activity and has led to hikes in prices of some core commodities such as wheat. Turning to Africa, in 2020, merchandise trade declined by 15.9% to USD895.3bn, compared with USD1.1trn in 2019.

However, there were notable improvements in African trade activity last year, as global economies reopened fully and there was progress with vaccine uptake (African vaccination rate currently stands at 20%). Based on data from the International Trade Center, in 2020, countries within Africa (combined) imported agricultural products worth USD4bn from Russia. Wheat accounted for c.90% of these imports. Egypt was the largest importer, followed by Sudan, Nigeria, Tanzania, Algeria, Kenya, and South Africa.

Furthermore, in the same year, wheat accounted for c.48% of total imported agricultural products from Ukraine, valued at c.USD2.9bn. The ongoing Russia-Ukraine crisis has resulted in further supply-chain disruptions. The sanctions imposed by the US and its allies on Russia could have an adverse effect on trade activities between countries within Africa and Russia.

The United Nations Conference on Trade and Development disclosed that, in 2019, intra-African trade accounted for less than 15% of total exports among African countries. This suggests that there are potential benefits from increased regional trade.

However, if informal cross-border trade is considered, this percentage increases. We note that 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.

Africa currently engages in the global value chain mainly via the supply of primary goods. The intra-trade level in Africa is low when compared with other regions, like Asia and Europe. The African Continental Free Trade Area (AfCFTA) is expected to boost the intra-regional economy and provide new dynamics to Africa’s participation in the global value chain. According to World Bank’s analysis, the AfCFTA will boost intracontinental exports by over 81% and exports with non-African countries by 19% by 2035.

Regarding sectors, manufacturing exports are anticipated to make the most gains: a 110% increase for intra-African trade and 46% for non-African trade. For Nigeria, the local manufacturing sector needs to be strengthened in order to benefit from the potential boost.

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

Economy

Fuel Scarcity: Car Owners Abandon Vehicles as Nigerian Masses Stage Protest

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Petrol - Investors King

As the fuel scarcity bites harder across the country, vehicle owners have been abandoning their vehicles and opting for public transportation.

Investors King reports that some other Nigerians, especially civil servants have resigned to fate by trekking to work while others who could afford skyrocketing transport fares were moving around in public vehicles.

Findings across some states revealed that a litre of Premium Motor Spirit, popularly known as petrol, was being sold between N280 and N350.

This came as downstream petrol marketers have blamed the Nigerian National Petroleum Commission (NNPC) for only selling the petroleum products for private depots owners and ignoring retailers whose numerical strength outweighs that of the major marketers.

The scarcity is worsened because most filling stations were not operating while the few that are selling the product are struck with long queues, fighting and bribery.

At various Government Secretariats and other offices checked by Investors King, it was observed that the parking spaces were not filled with vehicles as it was usually done.

A civil servant who did not want his name mentioned lamented the fuel scarcity and hike in fuel price saying, “I have no choice than to keep my vehicle at home. My office doesn’t want to listen to excuse of wasting time at filing stations in search of fuel. So, I have to opt for public vehicle so that I won’t be sacked.”

Meanwhile, some aggrieved Nigerians have staged protests over fuel scarcity and the expensive prices of fuel and called on the Federal Government of Nigeria to find a lasting solution to the challenge.

The protesters blocked the Lagos Benin Expressway at Oluku Junction in expression of their displeasure, saying that hike in fuel is contributing negatively to skyrocketing prices of food items.

Many commuters and other road users were stranded during the demonstration as the busy road was totally blocked for hours.

“We can’t continue to experience this pain. We are tired. Government should find lasting solution to this issue. We are here just to let the world know that we are not happy and this fuel scarcity is really affecting us negatively. Enough is enough,” one of the protesters said.

There was no vehicular movement when the protesters, mostly youths, stormed the road.

Meanwhile, commercial motorists have been warned against steps they take in a bid to minimize the fuel consumption of their vehicles which could lead to loss of lives and property.

Speaking, the Executive Secretary, Office Of Transportation, Engr. Bilal Adiat said because petrol is scarce and expensive, hence commercial motorists are now improvising ways of reducing the fuel consumption of their vehicles so as to maximize profit.

Bilal said most of the steps taken by the commercial drivers are against the mechanical set-up of the vehicles which could lead to fire disaster and loss of lives and properties, urging for both motorists and Nigerians at large to be wary of the dangers inherent in keep fuel in gallons.

 

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Economy

Despite Nationwide Blackout, FG Reveals Discos Failed to Utilise 1,070.36MW

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power project

As major parts of Nigeria continue to complain of blackout, the Federal Government has revealed that Electricity utility firms otherwise known as the DisCos had a total of 1,070.36 megawatts unused between December 24 and December 30, 2022.

For most Nigerians, prolonged power outage they experience could be attributed to lack of sufficient megawatts within the reach of the power utility companies.

Discos had lamented low power supply from generating companies (GenCos), which they attributed the blackout to.

While blaming GenCos for the incessant drop in electricity supply, DisCos through a statement from Ikeja Electric said it has been shedding load owing to low power allocation.

The General Manager of the Corporate Communication Department, EKEDC, Godwin Idemudia, while apologising to customers, especially those affected by the power outage, lamented a sharp decrease from the electricity it gets from the grid, saying it was not enough to meet the demand of its customers.

Hence, the continued lamentation of electricity consumers who are at the receiving end of the excuses proffered.

But, contrary to the argument and excuse adduced by EKEDC, latest power utilisation data obtained from the Transmission Company of Nigeria, an agency of the Federal Government, revealed that the Discos did not utilise the over 1,070MW of electricity between December 24 and December 30, 2022.

Nigeria has 11 Discos including Abuja, Benin, Eko, Enugu, Ibadan, Ikeja, Jos, Kaduna, Kano, Port Harcourt and Yola.

Figures from TCN showed that there are electricity that utility firms were not releasing to electricity consumers.

On December 24, 2022, the figures showed that a total of 118.04MW of electricity was unused by Enugu, Ibadan and Port Harcourt Discos, while the eight other power distributors took and distributed excess load on that day.

Also, on December 25, nine power distributors obtained excess load allocation, but two others including Enugu and Ibadan, could not distribute a total of 93.73MW of electricity.

However, the next day, being December 26, the quantum of unutilised energy increased, as seven Discos, including Abuja, Benin, Enugu, Ibadan, Jos, Kano and Port Harcourt, failed to distribute a total of 198.82MW of electricity.

While four companies took excess load allocation, according to TCN’s data, six of the power firms were said to be unable to distribute 180.99MW of electricity on December 27, as the remaining five took excess load allocation.

The data further revealed that the six Discos that could not distribute the 180.99MW of electricity include Abuja, Enugu, Ibadan, Jos, Kano and Port Harcourt.

The transmission company further stated that five distribution companies comprising of Benin, Enugu, Ibadan, Jos and Port Harcourt, could not distribute 89.09MW of power on December 28.

TCN stated that five Discos accepted excess load allocation that was more than their maximum load nomination for that particular day.

 

 

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Economy

Nigeria’s Economy to Grow at a Subdued Pace in 2023 – CBN

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Godwin Emefiele - Investors King

The Central Bank of Nigeria (CBN) has said Nigeria’s economy would grow at a subdued rate in 2023 following a series of weak economic fundamentals.

The apex bank stated in the communique no 146 of the monetary policy committee signed by Godwin Emefiele, the Governor of the central bank, and obtained by Investors King.

According to the committee, global economic uncertainties heightened by Russia’s invasion of Ukraine, Covid-19 cases in China, rising interest rates and the surge in commodities prices are expected to spill over given Nigeria’s economic structure as a commodity-dependent nation.

Also, Nigeria’s rising inflation rate ahead of general elections is one of the factors that will weigh on growth in 2023 while the high unemployment rate, foreign exchange scarcity, and waning consumer buying power amid slowing new job creation are estimated to compound Nigeria’s woes.

On Tuesday, the monetary policy committee raised borrowing costs by 100 basis points to 17.5% from 16.5% despite the nation’s slowing growth. Nigeria’s economy grew at 3.54% in the second quarter of 2022 before slowing to 2.25% in the third quarter of 2022.

While there were reports that Electricity distribution companies (DisCos) have silently increased tariffs by as much as 19% since December 1, 2022 even with the fuel scarcity.

The Socio-Economic Rights and Accountability Project (SERP) on Monday filed a lawsuit against President Buhari over “the failure to reverse the unlawful, unjust, and unreasonable increase in electricity tariff, and to probe the spending of public funds as ‘investments and bailouts’ to DisCos and GenCos since 2005.”

Similarly, there are plans to remove fuel subsidy by the second half of 2023 in order to rein in expenditures and boost revenue.

All this at a time when the unemployment rate and earnings are at a record low, Naira to the dollar exchange rate at N750/$1 on the parallel market and manufacturing activities slowdown due to forex challenges would hurt growth in 2023.

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