The National Bureau of Statistics (NBS) has released the terms of trade report for FY-2020.
The report showed that total trade in merchandise declined by 10.4% in FY-2020. The reduction in trade comes as no surprise considering supply and demand shocks that rocked global trade in the early parts of 2020.
Overall, Nigeria’s trade balance closed at a deficit of N7.3bn, its highest deficit since the last recession in 2016.
On an annual basis, Nigeria’s total import value rose by 17.9% in FY-2020, primarily due to a 6.5% rise in the value of manufacturing goods imported (63.6% of import bill).
The value of Agricultural (8.6% of import bill) and Other oil products (15.2% of import bill) also increased by 78.5% and 15.1% y/y in 2020. We attribute the increases in the value of imports to global inflationary pressures and currency devaluation in 2020.
Regarding exports, the value of exports declined by 34.8% y/y, as demand shocks, output quotas, and lower oil prices weakened Nigeria’s export earnings from Crude and Other oil exports, which amounted to 85.5% of total exports in 2020.
On a quarterly basis, the value of exports showed some improvement in Q4-2020, rising by 6.7% q/q, driven by increases in crude prices and gradual demand recovery.
Our outlook for the Q1-2021 is promising, thanks to a sustained uptick in oil prices which should bolter export proceeds despite output cap by OPEC+.
Also, improved oil prices observed so far in Q1-2021 is anticipated to reduce the trade deficit going into 2021.
Lastly, administrative measures on importations, implemented by the CBN since the beginning of the pandemic, may moderate the pace of increases in the import bill, thus, reducing the size of the deficit going forward.