New Telegraph

Analysts expect Nigeria’s trade deficit to persist

As reactions continue to trail the Q4’20 foreign trade report released by the National Bureau of Statistics (NBS) last week, analysts at CSL Research have said that they expect the country’s trade deficit to persist despite recovery in economic activities across the globe.

 

The analysts, who stated this in a report obtained by New Telegraph at theweekend, said their prediction was due to Nigeria’s “compliance with OPEC’s production cuts amidst continued reliance on imported raw materials, manufactured and capital goods.”

 

According to the NBS report, total trade (import + exports) grew 8.9 per cent q/q to N9.12trillion but declined 9.9 per cent y/y (Q4’20 compared with Q4’19). Also, on an annual basis, total trade dropped 10.3 per cent y/y for FY’20.

 

Specifically, the report showed that the total value of trade in FY’20 was N32.42 trillion and that while during the period, export rose (6.7 per cent q/q) from Q3, however, compared to Q4’19, it dipped 33.3 per cent y/y.

 

On the other hand, import  grew 10.1 per cent q/q from Q3’20; it rose by 10.8 per cent y/y when Q4’20 is compared with Q4’19, and annually up 17.3 per cent y/y in 2020 compared with 2019.

 

Consequently, the nation recorded a merchandise trade deficit of N7.38 trillion in FY’20, reversing the trend of three consecutive years of trade surplus.

 

The analysts noted: “Activities in FY’20 tapered, as the Federal Government restricted economic activities by implementing lockdowns and prohibition of social gatherings commencing in Q2’20.

 

Although the lockdown began to be eased gradually later in Q2, the pandemic’s far-reaching effect burdened export activities.”

 

They further pointed out that following the relaxation of lockdown worldwide, imports rose in Q4’20, up 10.1 per cent q/q. On an annual basis, imports were up 17.3 per cent y/y to N19.90 trillion in FY 2020.

 

The increase in the annual importation of Agricultural Produce (up 78.6 per cent y/y), Raw Materials (up 72.5 per cent y/y) and other import lines reflect the structural bottlenecks and insecurity that continue to impede industrialisation in Nigeria.

 

These factors have triggered the sustained rise in the value of imports over the last five years. Industry watchers point out that despite efforts by the country’s authorities to end Nigeria’s dependence on oil revenue, the NBS data shows that crude oil export increased by 3.98 per cent between Q3’20 and Q4’20, while the non-crude oil exports and non-oil exports rose by 18.37 per cent and 12.14 per cent respectively.

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