December 15, 2017/Cowry Asset
In the just concluded week, National Bureau of Statistics reported greater merchandise trade volume as well as relatively higher merchandise trade surplus for the Nigerian economy in the third quarter of 2017. In Naira terms, Nigeria’s total merchandize trade grew year-on-year by 23.86% (and quarter-on-quarter by 3.94%) to N5.92 trillion.
Also, balance of trade improved yo-y from a deficit of N135.96 billion in Q3 2016 (and q-o-q by 141.79%) to a surplus of N1.22 trillion. These followed a 53.85% y-o-y (and 15.19% q-o-q) increase in exports to N3.57 trillion, accompanied by a 4.47% y-o-y (and 9.51% q-o-q) decrease in imports to N2.35 trillion. In U.S. Dollars, merchandize imports also declined y-o-y by 7.67% (and q-o-q by 9.76%) to USD7.20 billion while merchandize exports increased y-o-y by 48.69% (and q-o-q by 1.5%) to USD10.95 billion, resulting in a trade surplus of USD3.75 billion (from a trade deficit of USD0.43 billion in Q3 2016).
In the nine months to September 2017, given the y-o-y depreciation in interbank foreign exchange rates by 58.31%, 56.93% and 3.47% to averages of N314.92/USD, N325.42/USD and N326.31/USD in Q1 2017, Q2 2017 and Q3 2017 respectively, imports declined y-o-y by 18.95% to USD22.43 billion while exports rose by 29.35% to USD30.03 billion, resulting in a trade surplus of USD7.59 billion (as against a trade deficit of USD4.46 billion in the corresponding period of 2016). Crude oil exports accounted for 80.30% of the total value of exports in the first 9 months to September 2017 (lower than 82.39% in the corresponding period of 2016).
The improvement recorded in the foreign sector partly resulted from the effect of foreign exchange policies of the Central Bank of Nigeria on external trade volumes. Specifically, value of imports were negatively impacted by the banning of 41 items from the eligible import list of the apex bank (which led manufacturers to substitute imports) coupled relatively higher exchange rates since June 2016 occasioned by introduction of a more flexible exchange rate regime.
On the other hand, value of exports improved mainly due to improved global crude oil prices, in addition to improved crude oil production, while contribution of non-mineral exports improved to 4.27% from 3.42% in the 9 months to September 2017.
In a related development, the outlook for Nigeria’s crude oil exports remained promising amid increased domestic crude oil production and relatively higher global crude oil prices in a gradually stabilizing market – Nigeria’s Bonny light grade appreciated week-on-week by 0.80% to USD62.95 a barrel as at Wednesday December 13, 2017.
Nigeria’s crude oil production increased month-on-month by 5.67% to 1.79 million barrels per day (mbpd) according to Opec’s Monthly Oil Market Report (December 2017 edition). The increase in Nigeria’s crude oil output was amid a 0.87% (0.84 mbpd) m-o-m increase in global oil supply to an average of 97.44 mb/d in November 2017 of which non-Opec supply (including Opec NGLs) rose m-o-m by 1.53% to 64.9 mpbd (accounting for 65.59%) while Opec’s crude oil production fell m-o-m by 0.41% (or 0.133 mbpd) to 32.45 mbpd (accounting for 33.44%).
According to Opec, although there was an oil market deficit of 1.14 mbpd in Q3 2017 – as global oil demand stood at 97.72 mbpd while global oil supply stood at 96.58 mbpd –, the market is expected to see a balance by late 2018 as it anticipates that a sustenance of efforts by Opec and non-Opec producers to support oil market stability should lead to a further reduction in excess global inventories. For 2017, Opec forecasts its output for 2017 to stand at 32.8 mbpd which together with nonOpec’s projection of 64.13 mbpd should meet 2017 projected global crude global crude oil demand of 96.94 mbpd.
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