Recently, the National Bureau of Statistics (NBS), published the country’s foreign trade in goods performance in Q1-2020. A deep dive into the report showed that total trade declined by 17.9% q/q, but increased marginally by 0.8% y/y. Also, total imports increased 14.0%y/y to N4.2tn but fell 21.1% q/q. Elsewhere, total exports fell by 10.0% y/y and 14.4% q/q, to N4.1tn. Notably, crude oil exports continued to account for a large share of the country’s exports, making up 72.1%. The country also recorded its second consecutive quarter of trade deficit.
Analysing the report, the q/q decline in trade can be attributed to the outbreak of COVID-19 in China, Nigeria’s largest import partner, and the subsequent shut down in manufacturing and production activities. Also, the six major trading partners – India, Spain, Netherlands, South Africa, Italy, and China- were all severely impacted by the pandemic and implemented restrictive actions that grounded production and economic activities in these economies towards the end of Q1-2020. No doubt, the pandemic caused a twin shock to the Nigerian trade situation, evident by weaker demand for exports (especially crude oil), and disruption in global supply chains hampering imports.
Given the above, we expect the negative economic effects of the COVID-19 pandemic to
have a significant impact on Nigeria’s trade position for the rest of the year, particularly in Q2- 2020 (the height of lockdowns and restriction of movement across the world). This was amid the crude oil market crash, lower crude oil production given the OPEC+ supply cuts, and slower manufacturing activities globally. Also, given the country’s huge exposure to crude oil, the impact of the pandemic is expected to be more significant on exports than imports, potentially causing another trade deficit.
United Capital Research