Nigeria Records Trade Deficit in Q4, Slowing Trade Surplus by 58.41% in FY 2019

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Recently released foreign trade statistics report showed that merchandise goods worth N36.15 trillion were traded in FY 2019, 14.05% higher than N31.69 trillion recorded in FY 2018. Of the total goods traded, the value of exports increased marginally y-o-y by 3.56% to N19.19 trillion in FY 2019 while the value of imports rose sharply y-oy by 28.82% to N16.96 trillion in FY 2018, resulting in a 58.41% y-o-y decline in trade surplus to N2.23 trillion in FY 2019.

Nigeria Records Trade Deficit in Q4, Slowing Trade Surplus by 58.41% in FY 2019 - Brand Spur

According to the report, crude oil exports which contracted y-o-y by 3.08% to N14.69 trillion, constituted 76.54% of total export value in FY 2019. Non-crude oil exports, on the other hand, increased y-o-y by 33.37% to N4.50 trillion in FY 2019, constituting 23.46% of the total export value.

Further breakdown of the non-crude oil exports showed that manufactured goods registered a sharp rise of 221.25% to N2,074.44 billion from N645.74 billion in FY 2019.

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On the import side, capital goods (plants and machinery for the production of other goods) constituted 26.78% of the total imports in FY 2019 (up from 19.82% in FY 2018) while fuels & lubricants, Vehicles & aircraft, and entertainment appliances (optical, photographic, cinematographic) constituted 16.03% (down from 30.16%), 13.87% (down from 15.88%) and 7.13% (up from 1.53%) respectively in the same period under review.

Europe and Asia dominated Nigeria’s export destinations; although export value to Europe declined marginally by 5.78% to N5.08 trillion from N5.39 trillion, exports to Asia surged by 45.37% to N8.42 trillion in FY 2019, from N5.79 trillion in FY 2018.

On a quarterly basis, total trade rose by 25.90% to N10.12 trillion in Q4 2019, from N8.04 trillion in Q4 2018 (and rose q-o-q by 10.15% from Q3 2019). Of the total goods traded, the value of exports increased y-o-y by 7.08% (but declined q-o-q by 9.79%) to N4.77 trillion while the value of imports rose astronomically y-o-y by 49.34% (and surged q-o-q by 37.20%) to N5.35 trillion, resulting in the trade deficit of N579.06 billion in Q4 2019.

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Meanwhile, crude oil prices plummeted by 26.97% to USD36.49 per barrel on Thursday, March 12, 2020, from USD46.33 per barrel on Friday, March 6, 2020, amid trade spat between Russia and Saudi Arabia that has resulted in an oversupply, leaving the more efficient producers better positioned to withstand the supply shock.

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The crude oil price shock was made worse as COVID-19 continued to soften demand, especially in China. Given the recent economic realities, share prices plunged in almost all Exchanges in the world in an unexpected manner.

Not insulated, share prices in the Nigerian Stock Exchange crashed to new lows; even stocks which obviously have good fundamentals like Zenith Bank Plc and Guaranty Trust Bank Plc lost significant value amid investor fears that the expected plunge in foreign earnings by the Federal Government would lead to devaluation of Naira against USD and, in turn, affect the banks’ earnings going forward.

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Nigeria’s external reserves fell by 0.22% to USD36.18 billion on Monday, March 9, 2020, from USD36.26 billion on Monday, March 2, 2020.

Given the COVID-19 pandemic and oversupply of crude oil, both of which have negatively impacted on the demand for commodities, especially crude oil, we expect the trade deficit of N579.06 billion printed in Q4 2019 to extend into 2020.

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Notwithstanding, the sharp rise in manufactured goods exports may be further strengthened by the rising trend of imported plant and machinery which we feel should catalyse economic growth; as value-added to manufactured goods for exports should drive employment growth. Hence, we expect FG to focus on delivering critical infrastructure, especially power supply as this is expected to increase the production efficiency of manufacturers in the country’s quest for industrialisation.

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Nigeria Records Trade Deficit in Q4, Slowing Trade Surplus by 58.41% in FY 2019 - Brand SpurNigeria Records Trade Deficit in Q4, Slowing Trade Surplus by 58.41% in FY 2019 - Brand Spur

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Nigeria Records Trade Deficit in Q4, Slowing Trade Surplus by 58.41% in FY 2019 - Brand SpurNigeria Records Trade Deficit in Q4, Slowing Trade Surplus by 58.41% in FY 2019 - Brand Spur

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