Triggered by drop in crude oil, Nigeria’s economic woes has deteriorated further, as the nation recorded her first quarterly trade deficit in seven years in the first quarter of this year. Specifically, Nigeria swung to a deficit of N184.1 billion ($925 million) from a revised surplus of N364.6 billion in the previous quarter, the National Bureau of Statistics (NBS) said yesterday.
Exports declined by more than a third to N1.45 trillion as the value of shipments of crude oil, which usually accounts for over 90 per cent of Nigeria’s foreign earnings, fell by almost half from the preceding quarter.
The report said that the total value of Nigeria’s merchandise trade at the end of first quarter of 2016 stood at N2,723.9 billion. It said that from the preceding quarter value of N3,517.4 billion, this was N793.5 billion or 22.6 per cent less.
The drop, the agency explained in the “Foreign Trade Statistics for the First Quarter of 2016”, was occasioned by sharp decline both in volume of export and import with export declining to N671.1 billion or 34.6 per cent, while import recorded equal measure of fall by N122.4 billion or 7.8 per cent, bringing Nigeria’s export trade balance to N184.1 billion, representing N548.7 billion less than preceding quarter. The crude oil component of total trade decreased by N716.7 billion or 46.6 per cent, against the level recorded in Q4 2015, NBS said.
“This development arose due to a sharp decline in both imports and exports. Exports saw a decline of N671.1 billion or 34.6 per cent, while imports declined by N122.4 billion or 7.8 per cent.
“The steep decline in exports brought the country’s trade balance down to N184.1 billion, or N548.7 billion less than in the preceding quarter. “The crude oil component of total trade decreased by N716.7 billion or 46.6 per cent against the level recorded in fourth quarter of 2015,” the report said.
Nigeria’s economy is under pressure after the price of oil, which contributes two-thirds of government’s revenue, fell by more than half since mid-2014, and production dropped to a 27-year low of 1.4 million barrels a day following the re-emergence of an insurgency in the key oil-producing Niger Delta.
The economy shrunk by 0.4 per cent in the first quarter, the first contraction in more than a decade, and Central Bank of Nigeria (CBN) Governor Godwin Emefiele said on May 24 a recession is imminent. “Exports are obviously suffering, and it’s mainly because of oil,” Alan Cameron, an economist at Exotix Partners LLP in London told Bloomberg by phone yesterday.
“The militants have caused production to drop, but we don’t know how severe the effect will be since we don’t know how long the decline in production will last.” The NBS said the structure of Nigeria’s import trade was dominated by the imports of “machinery and transport equipment”, “mineral fuel”, and “chemicals and related products”, which accounted for 34.7 per cent, 17.4 per cent, and 14.7 per cent respectively in 2016.
These commodities contributed the most to the value of import trade in Q1, 2016, whereas commodities such as “crude inedible materials”, “oils, fats & waxes”, and “beverages & tobacco”, contributed the least, accounting for 1.5 per cent, 0.8 per cent, and 0.6 per cent respectively.
Import trade by section, was dominated by the imports of “boilers, machinery and appliances”, which accounted for N378.4 billion or 26.0 per cent of the total value of import trade in Q1, 2016.
Other commodities, which contributed noticeably to the value of import trade in the period under review were “mineral products” at N263.0 billion (18.1 per cent), and “products of the chemical and allied industries” at N137.0 billion (9.4 per cent), “vehicles, aircraft and parts thereof; vessels etc.” at N127.8 billion (8.8 per cent) and “base metals and articles of base metals” at N105.1 billion (7.2 per cent).
At the end of the quarter, the import trade classified by broad economic category revealed that “Industrial supplies not elsewhere classified” ranked first with N404.4 billion or 27.8 per cent.
This was followed by “capital goods and parts” with the value of N370.1 billion or 25.5 per cent, and “fuels and lubricants” with N244.2 billion or 16.8 per cent. Nigeria’s import trade by direction showed the country imported goods mostly from China, with an import value of N345.5 billion or 23.8 per cent of total imports.
This was followed by the United States at N127.1 billion or 8.7 per cent, India with N89.4 billion or 6.1 per cent, Netherlands with N73.8 billion or 5.1 per cent and United Kingdom with N61.4 billion or 4.2 per cent of total imports. Imports by economic region revealed that the country consumed goods largely from Asia with import value of N611.2 billion or 42.0 per cent.
The country also imported goods valued at N538.2 billion or 37.0 per cent from Europe, and N201.9 billion or 13.9 per cent from America, the report noted.
The value of the export trade, totalled N1,269.9 billion in Q1, 2016 showing a decrease of N671.1 billion or 34.6 per cent, over the value recorded in the preceding quarter, the report added. NBS noted that on year-on-year analysis, the country’s exports dropped by N1,395.2 billion or 52.3 per cent against the export value recorded in the corresponding quarter of 2015.
Nigeria has held its currency at N197-N199 per dollar since March 2015, even as other oil exporters from Russia to Colombia and Malaysia let theirs drop amid the slump in crude prices. Foreign reserves dwindled as the CBN defended the peg.
Emefiele said last week policy makers were considering greater flexibility in the foreignexchange market. The International Monetary Fund (IMF) forecasts Nigeria’s economic growth could slow to 2.3 per cent this year, from a 16-year low of 2.8 per cent in 2015.
