March 10, 2021/Proshare

by CSL Research

This week, the National Bureau of Statistics (NBS) released its Q4 202o foreign trade report. In the release, total trade (Import + Exports) grew 8.9% q/q to N9.12trn but declined 9.9% y/y (Q4 2020 compared with Q4 2019). On an annual basis, total trade dipped 10.3% y/y for FY 2020.

The total value of trade in FY 2020 was N32.42trn. In the period, export rose (6.7% q/q) from Q3; however, compared to Q4 2019, it dropped 33.3% y/y. Import, on the other hand, grew 10.1% q/q from Q3 2020, comparing Q4 2020 to Q4 2019 (up 10.8% y/y), and annually up 17.3% y/y in 2020 compared with 2019. These led to a merchandise trade deficit of N7.38trn for Nigeria in FY2020, reversing the trend of three consecutive years of trade surplus.

Activities in FY 202o tapered, as the Federal Government restricted economic activities by implementing lockdowns and prohibition of social gatherings commencing in Q2 2020. Although the lockdown began to be eased gradually later in Q2, the pandemic’s far-reaching effect burdened export activities.

Thus, despite increasing over Q3 position in Q4 2020, exports still plunged on an annual basis by 34.8% y/y to N12.52trn. The decrease was on the back of a decline in the exportation of Solid Minerals (down 46.2% y/y), Energy (down 40.3% y/y), Manufactured Goods (down 53.7% y/y), Crude Oil (down 35.7% y/y), and other Oil Products (down 17.1% y/y) in FY 2020. In Q4 2020, crude oil export retained its dominance as the major source of foreign exchange receipt as it generated c.81.0% of the total export proceeds in the period.

Following the relaxation of lockdown worldwide, Imports rose in Q4 2020, up 10.1% q/q. On an annual basis, imports were up 17.3% y/y to N19.90trn in FY 2020. The increase in the annual importation of Agricultural Produce (up 78.6% y/y), Raw Materials (up 72.5% y/y) and other import lines reflect the structural bottlenecks and insecurity that continue to impede industrialization in Nigeria. These factors have triggered the sustained rise in the value of imports over the last five (5) years.

Despite the recovery in trade activities across the globe, we expect the weakness in the trade account to persist, due to the nation’s compliance with OPEC’s production cuts amidst continued reliance on imported raw materials, manufactured and capital goods.