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Report:Nigeria’s Trade Balance Turns Positive in Q4 2016

Nigeria’s Trade Balcrude oilance Turns Positive in Q4 2016

The increase in the value of export together with the decrease in import pushed Nigeria trade balance into positive territory with a trade surplus of N0.67 trillion in Q4-2016. Exports increased to N2.98 trillion in Q4-2016 from N2.4 trillion in Q3-2016. However, the value of imported items in Q4-2016, fell to N2.31 trillion from N2.5 trillion in Q3-2016, representing a decline of 6.5%. The positive external trade surplus in Q4-2016 was driven by the sustained increase in oil exportation witnessed in the second half of the year. Despite the positive performance in Q4-2016, Nigeria experienced a trade deficit of N290 billion for the full year 2016 due to the negative trade balances in the first, second and third quarters occasioned by lower crude oil price and output.

Nigeria is still Dependent on Crude Oil for Foreign Exchange

In Q4-2016, crude oil accounted for 81.4% of total exports as against 84.3% and 83.1% in Q3-2016 and Q2-2016, respectively. While oil exports increased by 24% in Q4-2016, performed below potential despite of an increase of 51.6%. Obviously, total real export earnings from non-oil export in Q4-2016 was lower than for Q4-2015 if the exchange rate adjustment of 2016 is factored into value measurement. For instance, the dollar value of non-oil export in 2016 was US$1.8 billion, this was lower than US$2.1 billion recorded in 2015.

Agriculture & Food Related: Import Increased by 4.3% while Export Contracted by -34.5%

Nigeria imported ₦1.2 trillion worth of food and agriculture related commodities in 2016. This was marginally higher than ₦1.1 trillion spent in 2015. Products in this category include:

  1. Animal products;
  2. Vegetable;
  3. Animals and vegetable fats and oils and other cleavage product; and
  4. Prepared foodstuffs; beverages, spirits and vinegar; tobacco.

Unfortunately, exportation of the above listed commodities declined to ₦187.3 billion in 2016 from ₦285.9 billion in 2015. In the same vein, the contribution of agricultural products to total export fell to 15.4% in 2016 from 24.5% in 2015. We noticed that the agricultural programme of Federal Government appears to be yielding early gains (agriculture real GDP growth rate increased to 4.1% in 2016 against 3.7% in 2015). Nevertheless, there is need for more targeted interventions to scale up production of staple crops with a view to make Nigeria food independent and to bring down food import bills.

Nigeria's Trade Balance with the Rest of the World
Europe remains Nigeria's largest trading partner in 2016 by the volume of transaction (imports and exports) that took place. The interesting dimension is the rate of change in economic transactions between Nigeria and other regions. In the figure below, Nigeria’s imports from all regions contracted but for Asia and America that recorded positive growth rate of 11.4% and 23.6% respectively. Similarly, exports to all regions but for America declined.

Imperative for Export Diversification 

While it is necessary for Nigeria to enhance its bilateral/multilateral trade relationships with established partners, it is also imperative to have diplomatic strategy for increasing market access particularly to African markets. We believe trans-border transactions between Nigeria and ECOWAS countries should be improved going forward. Nigeria must, therefore, articulate its trading strategies in order to survive in the current uncertain global economy.

In conclusion, we believe sustainability should be at the base of our economic and foreign policy thrust, this is because of the potential impact of global volatility on domestic economy;

  • If oil price falls sharply, Nigeria economy may experience another round of shocks that could lead to negative trade balance. Therefore, we need to focus on diversifying exports away from crude oil to reduce vulnerability risks
  • Though Nigeria has enormous potentials in agriculture, we still spend a huge sum importing vegetables, animals, food and beverages etc. Hence, it is imperative to look inwards to increase production of these commodities. Agro-processing must take centre stage of agricultural/industrial policies and reforms

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