Nigeria’s trade surplus amid naira devaluation ahead 2024

Oluwatosin Oladetan, (MBA, ACCA, PMP, NIM, FMVA, BIDA), a business and corporate strategist, financial analyst, project manager, process improvement and engineering professional, is a Volunteering Contributing Analyst

The total value of goods exported from Nigeria in the third quarter of 2023 exceeded the total value of goods imported into Nigeria by the greatest spread of ₦1.89 trillion over the last five years. The last time the trade balance had a positive spread of such magnitude was in the second quarter of 2018 and the spread then was ₦2.08 trillion. On a month-by-month comparison, August 2014 still has the highest export of goods above import (trade surplus) with a value of ₦1.72 trillion within the last decade. The month of June 2023 recorded the second-highest value in the last decade and the highest value so far in the year 2023 at ₦1.48 trillion. The trade surplus in September 2023 is the second highest value after June,  in the year 2023 contributing 76 percent of the total surplus performance recorded in the third quarter of 2023. On a YTD comparison, January – September 2014 has the highest trade surplus over the last decade with a value of ₦8.0 trillion, over the last five years 2023 has the largest trade surplus with a value of ₦3.5 trillion significantly higher than the corresponding period trade surplus of ₦209.4 billion in the year 2022. A new peak was set as the total trade value for the quarter positioned at ₦18.8 trillion, a 53 percent spike when compared with the total trade as of the third quarter of 2022. The month of September also recorded the highest monthly total trade value of ₦6.3 trillion, a 75 percent spike when compared with the total trade as of September 2022. The total trade for the Year till date September of 2023 was ₦43 trillion, a 6% spike when compared with the total trade of the year till date September of 2022.

The third quarter of 2023 marked the fourth time Nigeria will record a trade surplus on a quarter-on-quarter comparison as the last time a deficit was recorded at a quarterly level was the third quarter of 2022. It is particularly important to note that the values recorded within the third quarter of 2023 were impacted majorly by the naira devaluation. The narrative is slightly different when translating to international trade currency which is the US Dollars by the average conversion rate for each month. For the year 2023, the month of March has the highest trade surplus with a value of $2.0 billion, the third quarter of 2023 still has the highest surplus within the year 2023 with a value of $2.5 billion from a previous deficit position which last occurred in the third quarter of 2022. The third quarter of 2019 has the highest performance over the five-year cycle with a value of $4.5 billion. The total trade, Year till September, dipped by 23 percent between 2022 and 2023 to $75,073.94. The total trade for the year 2023 had its peak in January with a value of $10.1 billion while September 2023 dipped year on year by 2% to $8.7 billion. The month of June 2023 has the greatest share of Exports to total trade over the last five years.

The total value of goods exported within Q3-2023 was $13.5 billion, a spike of 9% from the value of goods exported in Q2-2023 and a sag of 4% from the total $ value exported as of Q3-2022. The total export value is split between Crude Oil at 82.5 percent, Other Petroleum Products at 10.95 percent, Agriculture at 2.13 percent, Manufactured Goods at 1.93 percent, Raw Materials at 1.83 percent, and other fractional parts like Solid Minerals at 0.4 percent and Energy Goods 0.26 percent. The increase in the price and volume of crude oil exported accounted for the impressive performance within the third quarter of 2023 as the average monthly price and volume exported peaked at an all-year high in September 2023; when compared to the previous year 2022. There is an increase in the average performance of crude oil produced and exported despite it being lower than the average volume of crude oil produced and exported in the volume of crude produced and exported. This is not as high as the production volume of 2.2 million barrels per day and export volume of 1.8 million barrels per day of crude as of 2014. Agriculture recorded the most significant increase among all categories of the commodity export performance between Q3-2022 and Q3-2023 with a spike of 161 percent in naira terms and 46 percent in dollar terms. From a dollar value view, there was a total decline of 2% in the total value of goods exported attributable to raw materials that dipped 43 percent, other petroleum products sagged 24 percent, and manufactured goods dipped 15 percent.

Within Q3-2023, Europe served as the major destination for Nigerian exports having a chunk share of 44.7 percent, then Asia with a share of 28.5 percent. Spain has a 12.31 percent share of Nigerian exports (Crude Oil: 75 percent and Non-Crude Oil: 25 percent), India has a 9.81 percent share of total exports (Crude Oil: 89 percent and Non-Crude Oil: 11 percent), the Netherlands, which used to be the highest in previous times, was third with a 9.56 percent share of the Nigerian exports (Crude Oil: 91 percent and Non-Crude Oil: 9%). Among the top ten export destinations of Nigerian goods only Spain, India, and the United States have less than 90 percent share of Crude Oil to total value of sales exported.

The total value of goods imported into Nigeria within Q3-2023 was $11.1 billion, a spike of 33 percent in naira terms and a dip of 27 percent in international currency terms against the performance of Q3-2022. Despite the 48 percent rise in the naira value of imports, the international currency value shrunk by 6% during the Q3-2023 performance compared with the performance of Q2-2023. The total import value is split between Manufactured Goods at 46.78 percent, Other Petroleum Products at 33.71 percent, Raw Materials at 11.24 percent, Agricultural Goods at 7.61 percent while there exist some fractional sectors such as Solid Minerals at 0.65 percent, and Energy Goods 0.00%. There was a decline in year-on-year international currency value of Agricultural Goods by 30 percent, Manufactured Goods by 22 percent, and Solid Minerals and Raw Materials both dipped by 18 percent. 

However, this report did not go further to explain the impact factors such as affordability, tariffs, pricing, consumption habits, availability of local substitutes, duties, growing market, and others would have had on the declined value of goods imported into Nigeria. Nigeria imported 44.5 percent of its goods from Asia and 41.6 percent of its goods from Europe. The total value of goods imported into Nigeria was from China at 23.33 percent, Belgium at 11.78 percent, India at 9.48 percent, Malta at 6.64 percent, United States at 5.95 percent among others. 

Motor Spirit topped the total value of goods imported into the region with a value of 22.71 percent. Food and Live Animals account for 12 percent of the total goods imported into Nigeria for the period is a point of concern as Nigeria is majorly an agrarian economy and should not have up to that proportion of the total share of import.

The year 2024 is fast approaching and the government needs to address the following issues to maintain a healthy trade balance in the coming period.

• Tackling pipeline vandalism and illegal mining of crude oil will enable the nation to have an increased level of crude oil production and export irrespective of the oil prices as that is the major source of foreign currency attraction into the country’s treasury and reserve.
• Government intervention in social projects to enhance a reduction in the average cost of manufacturing a good within Nigeria.
• Creating a viable environment for multiple players to participate collaboratively in advancing commercial agriculture on a large scale
• Stimulating a healthy environment for semi-finished product manufacturers who have access to the farm or mine gate to add more value to the products before exporting them to other countries
• Investment in storage and distribution network of goods across the nation
• Addressing the issue of insecurity, bureaucracy in processing exports and imports, transparency in trade, and symbiotic trade partnerships with countries such as China, and India, among others.
• Governmental and Multilateral support to increase output from public and private refineries to enable Nigeria to reduce her demand for processed fuel and boost opportunity for foreign exchange savings, investments, and reserves.

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