Freshly released foreign trade statistics report showed that merchandise goods worth N8.30 trillion were traded in Q1 2020, 17.94% lower than N10.12 trillion recorded in Q4 2019 (but 0.80% higher than N8.24 trillion printed in Q1 2019).
Of the total goods traded, value of exports decreased quarter-on-quarter (q-o-q) by 14.42% (and fell year-on-year, y-o-y, by 9.98%) to N4.08 trillion in Q1 2020, while the value of imports plunged q-o-q by 21.08% (but rose y-oy by 13.99%) to N4.22 trillion in Q1 2020, resulting in a trade deficit of N0.14 trillion in Q1 2020 (from an N0.83 trillion trade surplus in Q1 2019).
According to the report, crude oil exports which contracted q-o-q by 18.86% (and fell y-o-y by 12.80%) to N2.94 trillion, constituted 72.12% of total export value in Q1 2020. Also, non-crude oil exports decreased q-o-q by 0.27% (and moderated y-o-y by 1.75%) to N1.14 trillion in Q1 2020, constituting 27.88% of the total export value.
Further breakdown of the non-crude oil exports showed that manufactured goods registered a decline of 12.72% to N444.46 billion from N509.23 billion and N462.33 billion in Q4 2019 and Q1 2019 respectively.
On the import side, capital goods (machinery for the production of other goods and transport equipment) constituted 41.36% of the total imports in Q1 2020, down from 50.64% in Q4 2019 (but up from 40.66% in Q1 2019) while fuels & lubricants, Chemicals & related products, and Manufactured goods constituted 22.99% (up from 15.85% in Q4 2019 and 9.35% in Q1 2019), 9.44% (down from 10.73% in Q4 2019 and 10.89% in Q1 2019) and 7.29% (up from 6.20% in Q4 2019, but down from 22.73% in Q1 2019) respectively.
Europe and Asia continued to dominate Nigeria’s export destinations; although export value to Europe declined sharply by 20.28% to N1.57 trillion in Q1 2020 from N1.97 trillion in Q4 2019 (and from N1.83 trillion in Q1 2019), and exports to Asia moderated by 9.89% to N1.28 trillion in Q1 2020 from N1.42 trillion in Q4 2019 (and from N1.32 trillion in Q1 2019).
Of the total exports to Europe and Asia, Spain and India recorded the highest trades: exports to Spain and India were N0.42 trillion and N0.64 trillion respectively.
Meanwhile, value of exports to African countries increased to N0.99 trillion in Q1 2020, from N0.95 trillion in Q4 2019 (and from N0.94 trillion in Q1 2019) chiefly on exports of crude oil and manufactured goods.
In a related development, the United States crude oil input to refineries rose further week-on-week by 1.28% to 13.48 mb/d as at June 5, 2020 (but 26.55% lower than 17.06 MB/d as at June 7, 2019) while refinery capacity utilization continued to rise higher to 73.1% from 71.8% in the preceding week (but remained less than 93.2% as at June 7, 2019).
However, U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) rose w-o-w by 1.07% to 538.07 million barrels (but rose by 10.83% from 485.47 million barrels as at June 7, 2019).
On a weekly basis, WTI crude moderated by 5.20% to USD36.13 a barrel; however, Brent crude rose by 6.22% to USD38.45 a barrel while Bonny Light crude rose further by 3.92% to USD39.77 a barrel as at Thursday, June 11, 2020.
The foreign trade deficit printed in Q1 2020, on the back of the decline in crude oil exports, was in line with our expectations. We noted in our Cowry Weekly Report dated Friday, March 13, 2020, that COVID-19 pandemic and oversupply of crude oil, both of which have negatively impacted on the demand for commodities, especially crude oil, would negatively impact foreign trade balance in Q1 2020.
In Q2 2020, we expect the value of exports to decline sharply given the lockdown in the country, especially in April and May 2020, and as FG pledges compliance with OPEC+ output cut by July. Hence, we note the high possibility of Nigeria recording trade deficit this quarter.
Cowry Asset Research