September 7, 2021/CSL Research
Based on the foreign trade in goods statistics released by the National Bureau of Statistics (NBS), the total value of Nigeria’s merchandise trade increased by 23.3% q/q and 88.7% y/y to N12.0trn in Q2 2021 from N9.8trn in Q1 2021 and N6.4trn in Q2 2020. An increase in exports (up 74.7% q/q primarily drove the significant rise in total trade during the quarter to N5.1trn) as imports also increased, albeit marginally, up 1.5% q/q to N7.0trn in Q2 2021. The trade deficit narrowed to N1.9tn in Q2 2021 from N3.9tn in Q1 2021. Nevertheless, this is the seventh consecutive quarter of the trade deficit.
The increase in total trade reflects the gradual recovery in the global economy supported by the widespread rollout of vaccines across the globe, which has hastened recovery from historic economic blows caused by the pandemic. This has led to a rebound in the global economy and improved growth projections by multilateral institutions. Analysis of the data revealed that the rise in exports was driven by increased receipts from crude oil (up 111.3% q/q and 162.4% y/y to N4.1trn in Q2 2021), which made up 80.3% of the total exports during the review period, indicating that the nation’s exports remain skewed to crude oil and the emergence of any renewed shock may send the country back to a severe revenue crisis. The significant jump in oil receipts was solely driven by an increase in brent prices and not volumes. The country’s crude oil production (including condensate) averaged 1.61mb/d in Q2 2021, lower than 1.72mb/d in Q1 2021 and 1.81mb/d in Q2 2020. On the other hand, the average brent price in Q2 2021 was US$68.7/bbl., higher than US$61.3/bbl. in Q1 2021 and US$27.8/bbl. in Q2 2020.
The marginal rise in imports in Q2 when compared with Q1 2021 was largely driven by a rise in raw materials goods (up 25.6% q/q to N840.5bn in Q2 2021) as manufactured goods which make up the larger part of Imports (62%) tapered, down 5.1% q/q to N4.3tn in Q2 2021. We expect the rising input costs to be passed on to consumers in form of higher prices. Looking ahead, we believe the continued global recovery may see the trade deficit narrow. Also, the recent decision by OPEC and its allies to ease production cuts gradually implies legroom for growth in crude oil receipts. However, the emergence of the Delta strain, which is highly transmissible, remains a downside risk.
