Nigeria’s Trade Balance Drops To N14.6trn In Q1, 2023 Despite Low Imports
Nigeria’s foreign trade in the first quarter of this year (Q1, 2023) declined 17.5 percent to N12.05 trillion from N14.6 trillion recorded in 2022, the latest data released by the National Bureau of Statistics (NBS) has shown.
Despite the decline in Q1 foreign trade, there was a slight increase of 2.8 percent over N11.72 trillion recorded in the last quarter of 2022 as Nigeria’s petroleum exports reached N5.15 trillion, accounting for 79.4 percent of total exports.
This shows that total exports at N6.49 trillion exceeded the value of total imports at N5.56 trillion during the three months to give a positive trade balance.
According to the report, total exports increased in Q1, 2023 by 2 percent quarter-on-quarter (q/q) but declined by 8.66 percent year-on-year (y/y) compared to the amounts recorded in Q4, 2022 (N6.36 trillion) and Q1, 2022 (N7.10 trillion), respectively.
In the same vein, total imports increased by 3.67 percent q/q in Q1, 2023 compared to the value recorded in Q4, 2022 (N5.36 trillion), but declined by 25.83 percent y/y when compared to the value recorded in the corresponding quarter of 2022 (N7.49 trillion).
“We note that the foreign trade statistics for Q1 2023 are positive and signal economic recovery, and the positive trade balance, which increased by 335.58 percent y/y to N927.2 billion, is a welcome development compared to the trade deficit of N393.6 billion in Q1 2022,” analysts at Cowry Research, a Lagos based investment, and financial advisory firm, stated in an emailed note.
The analysts stated that “the increase in trade in Q1 2023 was driven by several factors, including the rise in global oil prices, the increase in demand for Nigerian exports from China and other Asian countries, and the depreciation of the naira despite the currency crunch crisis, which made Nigerian exports more competitive during the quarter.”
Commenting on the decline, analysts at Proshare Research attributed the decline to the impact of the cash crunch occasioned by the Central Bank of Nigeria’s (CBN’s) cash withdrawal policy which was in place in Q1 2023.
Poorly executed CBN’s local currency redesign policy had led to severe scarcity of cash in Africa’s largest economy during the first quarter of the year resulting in a near collapse of the economy until the Supreme Court judge ruled the apex bank out of order and extended the deadline for withdrawal of higher denominations of the old Naira notes which the bank wanted to phase out.
Despite the overall decline in foreign trade, Nigeria achieved a positive trade balance of N927.2 billion in Q1 2023, indicating a slight improvement compared to the previous quarter’s figure of N996.8 billion.
This positive balance could be attributed to the increase in crude oil production, with an average daily output of 1.51 million barrels per day (mb/d) during Q1 2023, surpassing the average production of 1.49 mb/d in 2022.
Analysts say the dominance of the country’s export profile by petroleum products continues to underscore the country’s heavy reliance on oil and gas, which altogether constituted 90 percent of the total exports during the same period.
“This over-dependence on a single sector emphasizes the urgent need for diversification and the expansion of exports to reduce vulnerability to fluctuations in oil prices and enhance the resilience of Nigeria’s economy,” analysts at Lagos-based Proshare Research wrote in an emailed note on Tuesday.
The analysts noted that N1.49 trillion in Premium Motor Spirit (PMS) was imported in the three months between January and March 31, 2023. According to them, the PMS quarterly import corresponds to a monthly PMS import of N496 billion.
It is hoped that the country will manage its foreign currency reserves better when the Dangote Refineries become operational, and PMS and other petrochemicals are procured locally, though it may be technically classified as imports, the trade would be primarily settled in Naira.
Nigeria’s Top Export & Import Partners In Q1, 2023.
According to the NBS, Nigeria’s top export destinations in Q1, 2023 were the Netherlands which attracted a total sum of N837.65 billion in export earnings, the United States which yielded N579.35 billion in revenue, and Spain N488.17 billion. France attracted N487.34 billion and India N456.69 billion.
According to the country’s statistics office, exports to the top five countries amounted to 43.92 percent of the total value of exports, with petroleum oils and oils obtained from bituminous minerals, crude which accounted for N5.15 trillion emerging as the commodity with the largest export values in the period under review.
This was followed by Liquefied Natural Gas which accounted for N622.36 billion and ‘Urea N146.79 billion.
For imports, the top import origins for Nigeria are China with imports valued at N1.3 trillion, the Netherlands N575.23 billion, Belgium N518.12 billion, India N427.40 billion, and the USA N283.94 billion.
The commodities with the largest values of imported products were ‘Motor Spirit Ordinary’ (N1.49trn), Gas Oil (N472.40bn), ‘Durum Wheat (not in seeds)’ (N249.22bn), Cane Sugar (N75.79bn), and Kerosene type jet fuel (N70.16bn) accordingly.
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