Return to Trade Surplus in 2022
By Coronation Merchant Bank Economic Research
The latest report from the National Bureau of Statistics (NBS) in its series on foreign trade in goods shows the total value of trade declined by -4.5% q/q to N11.7trn in Q4 ’22. This is the third consecutive q/q decline recorded. On a y/y basis, it rose marginally by 0.1%.
The total export value increased by 7.2% q/q to N6.4trn compared with N5.9trn recorded in Q3’22 while the import value declined by -15.5% q/q to N5.4trn from N6.3trn. The net result was a surplus of N996.8bn vs a deficit of -N409.4trn recorded in Q3 ‘22. Total trade as a percentage of nominal GDP (2022) stood at 5.9% in Q4 ’22 compared with 6.2% recorded in Q3 ’22.
For FY2022, the total value of trade was N52.4trn compared to N39.7trn recorded in FY2021. Total export value for FY2022 increased by 41.7% y/y to N26.8trn. Meanwhile, import value also increased by 22.7% y/y to N25.6trn in 2022 from N20.8trn recorded in 2021. The net result was a surplus of N1.2trn compared with a deficit of -N1.9trn recorded in FY2021. Total trade as a percentage of nominal GDP (2022) stood at 26.3% in 2022 vs 22.9% recorded in 2021, (using 2021 nominal GDP).
According to the NBS, most imports in Q4 ’22 originated from China (N1.4trn). This was followed by Belgium (N585.6bn), India (N368.9bn), Netherlands (N365.3bn), and the United States (N319.2bn). These five countries collectively accounted for 55.8% of the total imports in Q4 ’22. The value of imported manufactured products and oil-related products declined by -14.3% q/q and -18.2% q/q respectively.
Imported agricultural goods also declined by -13.3% q/q.
Imports from the Economic Community of West African States (ECOWAS) stood at N55.4bn in Q4 ‘22, accounting for 30.7% of total imports within the region. Regarding export destinations, Spain (N617.2bn) was the top exporting partner for Nigeria in Q4 ’22, followed by the Netherlands (N517.6bn), India (N490.4bn), France (N489.8bn) and Indonesia (N473.3bn). These five countries collectively accounted for 41.6% of the total exports in Q4 ’22.
Crude oil accounted for the largest share (77.8%) of total exports in Q4 ’22 and increased by 5.4% q/q to N4.9trn in Q4 ’22 compared with a decline of -21.2%q/q recorded in the previous quarter. The q/q increase in the value of total crude exported can be partly attributed to improved oil production due to the FGN’s recent efforts towards tackling crude oil theft and vandalism.
Based on data from the NBS, average crude oil production (condensates inclusive) in Q4 was 1.34mbpd compared with 1.20mbpd in the previous quarter and 1.50mbpd in Q4 ‘21. This is lower than the OPEC production quota for Nigeria pegged at 1.8mbpd and the FGN’s production benchmark of 1.7mbpd.
As for non-oil exports, superior quality cocoa beans, sesamum seeds, cashew nuts in shell, superior quality cocoa, other frozen shrimps and prawns, shelled cashew nuts, crude palm kernel oil, natural coca butter, ginger and soya beans featured as the top export commodities in Q4 ’22.
Nigeria exported goods worth N553.7bn to fellow members of the ECOWAS in Q4 ‘22, compared with N507.9bn in Q3 ’22. This represented 58.7% of total exports within Africa.
The most active port during the period was the Apapa Port. Goods worth N5.8trn exited the country through this port and accounted for 91% of total exports. Other ports widely used include Port Harcourt (N341.9bn) and Tin can Island (N159.3bn).
Global/Regional in focus
According to data from the World Trade Organization (WTO), merchandise trade increased by 13.4% y/y or USD1.5trn to USD12.8trn in Q3 ’22 compared with USD11.2trn recorded in the corresponding period of 2021. Meanwhile, on a q/q basis, total merchandise trade declined marginally by -0.9% reflecting disruptions in supply chains due to the impact from the ongoing Russian-Ukraine crisis and a slowdown in economic
activities on the back of global recession concerns triggered by rising inflation and monetary policy tightening in both advanced and emerging economies.
We understand that Russia has agreed to extend the Black Sea Grain deal for an additional 60 days (2 months) after uncertainties regarding the continuity of the initiative mounted as the original expiration date of 18 March ’23 drew near. According to data from the United Nations, c.24.1 million tonnes of grains (corn, wheat, barley, sunflower oil among others) have been exported through 1600 vessels to both advanced and emerging economies, highlighting the vital role that the Black Sea Initiative has played in promoting global food security.
Turning to China, merchandise exports to other countries increased by 6.6%q/q to USD970.6bn in Q3 ’22 compared with USD910.4bn recorded in Q2 ’22. We note that the Chinese authorities have phased out the zero-covid policy and reopened the economy. As evidenced by the growth recorded in China’s PMI (52.6 as at February ’23 vs 50.1 recorded in January ’23), the reopening is expected to spur economic activities and minimize production disruptions in the manufacturing sector.
Nigeria’s Economy Grows at Slower Pace in Q1 2023 as Cash Crunch Weighs on Productivity
The Nigerian economy grew at a 2.31% pace in real terms in the first quarter (Q1) 2023, according to the latest report from the National Bureau of Statistics (NBS). This represents a 0.8% year-on-year decline when compared to the 3.11% recorded in the first quarter of 2022.
The bureau attributed the decline to the impact of cash crunch experienced across the nation during the quarter under review.
However, growth was driven mainly by the Services sector, which recorded a growth of 4.35% and contributed 57.29% to the aggregate Gross Domestic Product (GDP).
The agriculture sector contracted by -0.90%, below the 3.16% growth recorded in the first quarter of 2022. Although the growth of the industry sector improved to 0.31% relative to – 6.81% recorded in the first quarter of 2022, agriculture, and the industry sectors contributed less to the aggregate GDP in the quarter under review compared to the first quarter of 2022.
In the first quarter, aggregate GDP stood at N51,242,151.21 million in nominal terms, higher when compared to the first quarter of 2022 which recorded aggregate GDP of N45,317,823.33 million, indicating a year-on-year nominal growth of 13.07%.
The Nigerian Oil Sector
Nigeria was pumping crude oil at 1.51 million barrels per day (mbpd) in the first quarter, higher than the 1.49mbpd recorded in the first quarter of 2022 and 0.17mbpd higher than 1.34mbpd pumped in the fourth quarter of 2022.
The sector contracted by 4.21% (year-on-year) in Q1 2023, indicating an increase of 21.83% points relative to the -26.04% recorded in the corresponding quarter of 2022 while growth in the sector rose by 9.18% points when compared to –13.38% filled in the final quarter of 2022. On a quarterly basis, the oil sector recorded a growth rate of 20.68% in Q1 2023.
The sector contributed 6.21% to the total real GDP in the quarter under review, down from 6.63% and 4.34% recorded in the first quarter of 2022 and up from the preceding quarter respectively.
The Nigerian Non-Oil Sector
According to the report, the non-oil sector expanded by 2.77% in real terms in Q1 2023. Representing a decline of 3.30% from the same quarter of 2022 and 1.67% points lower than the final quarter of 2022.
The non-oil sector was driven in the first quarter of 2023 mainly by Information and Communication (Telecommunication); Financial and Insurance (Financial Institutions); Trade; Manufacturing (Food, Beverage & Tobacco); Construction; and Transportation & Storage (Road Transport), accounting for positive GDP growth.
In real terms, the non-oil sector contributed 93.79% to the nation’s GDP in the first quarter of 2023, higher than the share recorded in the first quarter of 2022 which was 93.37% and lower than the fourth quarter of 2022 recorded as
German Economy Plunges Into Recession as Household Spending Succumbed to Inflationary Pressure
Europe’s largest economy, Germany has plunged into recession as inflationary pressure eroded consumer spending and household income.
The economy contracted by 0.3% in the first quarter of the year following a 0.5% decline recorded in the final quarter of 2022. An economy is said to be in recession if it contracted for two successive quarters.
German economic GDP data showed “surprisingly negative signals,” said Finance Minister Christian Lindner on Thursday. Comparing Germany with other developed economies, the minister said the economy was losing potential for growth.
“I don’t want Germany to play in a league in which we have to relegate ourselves to the last positions,” he said, referring to the forecasts of the International Monetary Fund, which predicted a recession in 2023 only in Germany and Britain among European countries.
However, Robert Habeck, Germany’s economy minister, had attributed the slowdown in growth to the previous exposure to Russia’s energy supply and the decision to cut supply following the breakout of war in Ukraine.
“We’re fighting our way out of this crisis,” Habeck said at an event in Berlin on Thursday.
“Under the weight of immense inflation, the German consumer has fallen to his knees, dragging the entire economy down with him,” said Andreas Scheuerle, an analyst at DekaBank.
Data revealed by Investors King showed German household consumption declined by 1.2% quarter on quarter after price, seasonal and calendar adjustments. While government spending also contracted substantially by 4.9% in the quarter.
“The warm winter weather, a rebound in industrial activity, helped by the Chinese reopening, and an easing of supply chain frictions were not enough to get the economy out of the recessionary danger zone,” ING global head of macro Carsten Brzeski said.
By contrast, investment was up in the first three months of the year, following a weak second half of 2022. Investment in machinery and equipment increased by 3.2% compared with the previous quarter, while investment in construction went up 3.9% on quarter.
There were also positive contributions from trade. Exports rose 0.4%, while imports fell 0.9%.
“The massive rise in energy prices took its toll in the winter half-year,” Commerzbank chief economist Joerg Kraemer said.
A recession could not be avoided and now the question is whether there will be any recovery in the second half of the year.
“Looking beyond the first quarter, the optimism at the start of the year seems to have given way to more of a sense of reality,” Brzeski said.
Power Crisis Looms: South Africa Braces for Record-Breaking Winter Blackouts
As winter descends upon South Africa, the nation finds itself on the precipice of an unprecedented power crisis. Eskom Holdings SOC Ltd., the state electricity company, is struggling to meet the surging demand, and the country is bracing for an alarming wave of record-breaking blackouts.
With 3,000 megawatts less capacity than the previous year, Eskom’s acting CEO, Calib Cassim, delivered a sobering message to reporters: South Africa is heading into a “difficult winter.” In a worst-case scenario, the utility may be forced to implement loadshedding on a massive scale, cutting a staggering 8,000 megawatts from the electricity grid. This would translate into 16 hours of outages during a 32-hour cycle, pushing the nation’s resilience to the brink.
Already burdened by power rationing, South Africa has experienced its most severe bout of outages in recent memory. Eskom’s inability to keep up with demand, largely due to aging and poorly maintained power plants, has dealt a blow to the nation’s economic growth rate. The central bank estimates that the power crisis will shave off a substantial 2 percentage points from South Africa’s already struggling economy this year.
The consequences of the ongoing blackouts extend beyond the economic sphere, as investor sentiment takes a hit. The South African rand, the national currency, has witnessed a sharp decline of 12% this year, marking it as the worst-performing major currency among those monitored by Bloomberg. This stark decline sets South Africa apart from its emerging-market peers, who have managed to make strides against the US dollar.
Analysts are sounding the alarm, with headlines dominated by the intensification of loadshedding and its grim implications for the country. Although South Africa has implemented several measures to stabilize the power supply, progress has been limited. President Cyril Ramaphosa’s plans to expand the procurement of renewable energy have been hindered by a lack of grid capacity, hampering efforts to transition to cleaner and more sustainable sources.
In a bid to address the crisis, Ramaphosa appointed Kgosientsho Ramokgopa as the electricity minister. However, the absence of clearly defined powers has impeded his ability to effectively resolve the dire situation, leaving South Africa in a precarious position.
Eskom’s recent efforts to improve its performance have been plagued by setbacks. Maintenance at the Koeberg nuclear facility has fallen behind schedule, and repairs are required at the Kusile coal-fired plant. The energy availability factor, a crucial metric that measures usable generation capacity, has plummeted to 52%, well below the targeted 60%, according to Cassim.
Adding to Eskom’s woes, former CEO Andre de Ruyter’s memoir has exposed dysfunctionality within the company’s plants, instances of improper conduct by officials, and persistent political interference. These revelations have further eroded trust and cast a shadow of uncertainty over Eskom’s ability to navigate the power crisis.
Crime and sabotage have compounded the challenges faced by Eskom. Incidents are under investigation, diverting attention and resources away from essential plant operations. Eskom emphasizes the need to concentrate on running the facilities efficiently and calls on the public to reduce electricity consumption, especially during peak periods.
South Africa finds itself at a critical juncture as it confronts an imminent power crisis of unprecedented magnitude. The outcome of this challenge will determine the nation’s economic stability, investor confidence, and its ability to secure a sustainable energy future. As winter approaches, the need for swift and effective solutions has never been more urgent. Failure to address this crisis could plunge South Africa into darkness, both literally and metaphorically.
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