December 14, 2018/InvestmentOne report
Please click to view our Q3 2018 Foreign Trade Report-Rise in Imports Weighs on Trade Balance
· The National Bureau of Statistics released the Q3 2018 Foreign Trade report on Wednesday, showing a 49% year-on-year (y/y) rise and a 31% quarter-on-quarter (q/q) increase in total trade to N9trillion.
· Also, there was a 37% y/y and 68% q/q decline in trade balance to N681.3billion in Q3 2018; the lowest level in over a year.
· Looking at mineral fuel, we saw an uptrend both q/q and y/y –printing at 1trillion naira. We opine that the rise in import bill of mineral fuels may be due to higher energy prices compared to preceding quarters.
· According to the report, total crude oil exports unsurprisingly continued to constitute the lion share of total exports 85%, in the quarter in review. The figure came in at about N4trillion (up 10% q/q and 40% y/y).
· Further showcasing the dependence of the nation on crude oil and oil products is that mineral products accounted for about 97% of Q3 2018 exports, as has been the case in preceding years.
· The country reported a 45% y/y improvement in non-oil exports, printing at N163billion. This increase was driven by exports of manufactured goods (52% y/y) and agricultural goods (57% y/y) constituting about 77% of total non-oil exports.
· Focusing on Intra-African trade, commerce between Nigeria and other African countries in Q3 2018 amounted to N853.8billion, compared to N748.5billion in Q2 2018.
· Noteworthy is the recent dip in Brent crude oil prices to US$60 per barrel on the back of oversupply concerns. Although the recently concluded OPEC meeting should support price levels- with the consensus vote to cut production levels by about 1.2 million barrels per day- we anticipate lower export values in the medium term.
· Away from oil, we believe the availability of FX as well as FG’s incentives to grow the non-oil economy should be a positive for non-oil production and exports in the medium to long term.
· Additionally, we anticipate increased trade activity with the United Kingdom with Brexit necessitating a more bilateral approach from the European giant.