THUR, MARCH 12 2020-theG&BJournal- The Nigerian Economic Summit Group (NESG) has made a strong case for the reopening of the land borders following the sharp drop in Nigeria’s trade surplus triggered by the unimpressive performance of the Non-oil export in Q4 2019.
‘’While Nigeria’s trade figures improved significantly in the first three quarters of 2019, the land border closure, which kicked off temporarily in August 2019 and became full closure in October, plunged Nigeria’s external trade account into deficit in Q4’2019,’’ NESG said in their March Foreign Trade Alert report seen by TheG&BJournal.
Non-oil export, which performed impressively in the first three quarters of the year declined by 43.9% in 2019Q4.
‘’Not only has the closure led to a trade deficit, it has also triggered a rise in inflation from 11% in August 2019 to 12.1% in January 2020,’’ NESG said.
In the report, NESG equally x-rayed the prospect of lower oil demand and falling crude oil prices, which it says raise some concern.
NESG noted that on a quarterly basis, Nigeria’s land border closure had negative impact on overall trade in the fourth quarter of 2019. In the last quarter of 2019, crude oil exports declined by 3.2%; non-crude oil exports fell by 25.9%, while non-oil exports plunged by 43.9%. With this, overall import in the quarter was N5.35 trillion while export stood at N4.77 trillion. This implies that Nigeria’s trade balance slipped into a deficit of N579 billion ($1.6 billion) for the first time since the third quarter of 2016.
Nigeria’s external trade value (import + export) rose by 14.2% to N36.2 trillion in FY’2019 from N31.7 trillion in 2018. Similarly, the value of external trade advanced to an 18-month high of N10.1 trillion in Q4’2019 from N9.2 trillion in Q3’2019. It also represents a 26.3% increase compared to its level in the corresponding quarter of 2018 (N8 trillion). While the ratio of export to import continued its declining trend since 2017, trade surplus narrowed further to N2.2 trillion in FY’2019 from N5.4 trillion in 2018. This is as a result of faster growth in imports relative to exports.
Meanwhile, trade balance for Q4’2019 moved into a deficit of N579 billion from the recorded surpluses of N1.4 trillion and N879.3 billion in Q3’2019 and Q4’2018, respectively.
Total value of goods exported grew by 3.8% to N19.2 trillion in FY’2019 from N18.5 trillion in 2018. Growth in exports was triggered by an increase of 33.4% of non-crude oil export in 2019 from 31.3%. On a quarterly basis, total export earnings increased for the first three quarters of 2019 but fell to N4.8 trillion in the fourth quarter, driven by a decline in both oil and non-oil exports.
‘’This suggests that closure of the country’s land borders negatively impacted trade in Q4’2019. In FY’2019, Crude oil and other oil products export continued to dominate exports earnings, albeit at a lower share of 87% of total earnings,’’ NEG said.
The contribution of non-oil exports improved to 13% of total exports in 2019 from 6.4% of total exports in 2018.
Moreover, the non-oil exports – which excludes petrochemicals and oil-related items – spiked 108.3% to N2.5 trillion in 2019 from N1.2 trillion in 2018.
‘’This could be attributed to higher export of manufactured goods, whose share of total non-oil exports jumped to 82% (N2.1 trillion) in 2019 from 54% (N645.7 billion) in 2018. Meanwhile, other non-oil export commodities – agricultural products, raw materials, solid minerals and energy products – suffered a decline in 2019.’’
According to NESG, ‘’the outbreak of Corona virus (COVID-19) in China and its faster spread to other countries could cripple the demand for Nigeria’s crude oil by major trading partners, such as, India. For instance, the global rating agency – Moody’s – has recently revised India’s growth forecast for 2020 downwards to 5.3% from 5.4% due to the pervasiveness of the virus. Lower export demand for Nigeria’s crude oil coupled with persistent decline in oil prices would shrink the fiscal space and further constrain the country’s trade balance,’’ NESG said, adding that Nigeria’s increasing dependence on the importation of industrial products would put more pressure on the external reserve position.
‘’The growing demand for imported industrial products in Nigeria is an indication of weak domestic production base, especially given that the manufacturing sector accounted for 9% of GDP in 2019,’’ NESG said.
‘’ The country’s external reserves have fallen below $40 billion since November 2019. Persistent decline in external reserves in light of higher demand for forex could weaken the domestic currency, thereby hurting the operations of import-dependent manufacturing sector players.’’
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