October 13, 2022/United Capital Research

According to the Q2-2022 Commodity price indices and Terms of Trade (TOT) report by the Nigerian Bureau of Statistics (NBS), the All-Products TOT Index on average rose by 11bps, with the highest price increases in “Wood and articles of wood, wood charcoal and articles”, “Paper making material; paper and paperboard”, and “Miscellaneous manufactured articles”. The All-Commodity Group Import Index on increased by 7bps on average. Conversely, the All-Commodity Group Export Price Index also increased by 18bps on average.

Notably, the All-Region Export Index rose by 18bps in the period under review. With the exception of the Americas, there was an increase in export prices in all regions, particularly Africa (+0.95), Oceania (+0.65) and Asia (+0.35). However, regional imports grew marginally by 7bps. The report showed that India was Nigeria’s largest trade partner and biggest export market, with export trade to India valued at N1.1tn, 14.8% of total exports. Of this, Petroleum oils and oils obtained from bituminous minerals and crude accounted for N1.0tn. On the other hand, Nigerian imports from India were valued at N459.2bn, with imported Kerosene (N56.0bn) of the highest value. Nigeria had a trade surplus with its 5 largest trade partners, its biggest surplus with Spain at N983.9bn.

The improved terms of trade implies that Nigeria can purchase more units of imported goods for every unit of exports sold. It also has a beneficial effect on Nigeria’s domestic cost-push inflation as the improvement indicates falling import prices relative to export prices. However, with Oil exports constituting the bulk of earnings, the TOT export indices were supported by elevated crude oil prices which grew 10.0% to $114.81/bbl. in Jun-22. With the outlook for global oil demand less certain, as reflected in current Brent crude prices ($92.66/bbl.), it is uncertain if the TOT will remain positive in the short to medium term.