- Government must depend less on oil – Analysts
Despite the depreciation and scarcity of the naira in the first quarter of 2023, Africa’s largest economy recorded a positive trade balance with the volume of exports exceeding imports, a development economic analysts have described as a win for Nigeria. Quarter on quarter, according to data released by the National Bureau of Statistics recently, trade value increased by about 2.8 percent to N12.05 trillion compared with N11.72 trillion in the last quarter of 2022. Cowry Research opines that the increase in Nigeria’s foreign trade in the review period is a positive development and indicates that Nigeria’s economy is growing amidst the growing demand for Nigerian goods and services. However, the experts have also cautioned that the increase in trade was driven by the increase in crude oil exports and echoes the need to focus on diversifying the economy with non-oil exports and reducing reliance on oil exports. BAMIDELE FAMOOFO reports.
The latest trade statistics published by the National Bureau of Statistics showed that Nigeria’s total trade value increased by 2.77 percent quarter on quarter from N11.72 trillion in the fourth quarter of 2022 to N12.05 trillion in the first quarter of 2023.
This shows that total exports at N6.49 trillion exceeded the value of total imports at N5.56 trillion during the period to give a positive trade balance.
Year on year, total trade value declined by 17.5 percent to N12.05 trillion in the first quarter of 2023 from N14.60 trillion in the corresponding quarter of 2022.
The growth was due to the rise in exports, which exceeded the increase in imports. Analysis of the data reveals that the share of exports in total trade stood at 53.85 percent, as Nigeria’s export trade in the first quarter of 2023 was dominated by crude oil exports valued at N5.15 trillion and accounting for 79.37 percent of total exports.
The trade performance in the review period however reflects efforts by the government to diversify the economy by increasing revenue generation from non-crude oil exports.
Figures released by the NBS showed that non-crude oil exports value stood at N1.34 trillion, or 20.63 percent of total exports, of which non-oil products contributed a total of N652.29 billion, representing 10.06 percent of total exports.
Analysts at Cowry Research in a report noted, that the increase in trade in Q1 2023 was driven by a number of 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.
According to the report, total exports increased in Q1:23 by 2 percent q/q but declined by 8.66 percent 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 then again 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% y/y to N927.2 billion, is a welcome development compared to the trade deficit of N393.6 billion in Q1 2022”
“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% y/y to N927.2 billion, is a welcome development compared to the trade deficit of N393.6 billion in Q1 2022,” Cowry Research disclosed.
Explaining the figures, the experts noted: “This was due to the increase in exports, which exceeded the increase in imports. Analysis of the data reveals that the share of exports in total trade stood at 53.85%, as Nigeria’s export trade in Q1:23 was dominated by crude oil exports valued at N5.15 trillion and accounting for 79.37% of total exports, while non-crude oil exports valued at N1.34 trillion, or 20.63% of total exports, of which non-oil products contributed a total of N652.29 billion, representing 10.06% of total exports.”
On the contrary, the value of total exports stood at N5.56 trillion in the same period, which indicates a 3.67 percent increase from the prior quarter (Q4).
Imports’ share of total trade in Q1 2023 accounted for 46.15 percent of total trade, bringing the trade balance to N927.2 billion in the period under review.
Johnson Chukwu, Group Managing Director, Cowry Asset Management Company Limited also hinted that the increase in total trade in Q1 2023 is a positive sign for the Nigerian economy.
“It suggests that the country is becoming more integrated into the global economy and that businesses are becoming more confident in the economy. The increase in exports is also a positive sign, as it suggests that the country’s manufacturing sector is growing. However, the increase in imports is a cause for concern, as it suggests that the country is still heavily reliant on imports,” he added.
Cowry Research also indicated that the positive trade balance is also a positive sign, noting that it was only positive due to the increase in crude oil and natural gas exports.
“The government needs to focus on diversifying the economy and reducing its reliance on oil and gas exports in order to maintain a sustainable trade balance. This will help make the economy more resilient to shocks in the oil market. Also, the government should invest in infrastructure and human capital, which will help attract foreign investment.”
According to the Abuja-based statistics agency, Nigeria’s top export destinations in Q1:23 were the Netherlands (N837.65bn), USA (N579.35bn), Spain (N488.17bn), France (N487.34bn), and India (N456.69bn), while 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 (N5.15trn) emerging as the commodity with the largest export values in the period under review, followed by “natural gas, liquefied’ (622.36bn) and ‘Urea (N146.79bn). For the imports, the top import origins for Nigeria are China (N1.3trn), the Netherlands (N575.23bn), Belgium (N518.12bn), India (N427.40bn), and the USA (N283.94bn), while 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.
Breakdown of Q1 imports
The value of total imports stood at about N5.56 trillion in the first quarter of 2023, this represents a 3.67 percent rise when compared with the value recorded in Q4, 2022 (N5.36 trn) but declined by 25.83 percent compared to the value recorded in the corresponding quarter of 2022 (N7.50 trn).
Breakdown of the nation’s imports in the review period showed that the value of imports of agricultural goods in Q1 2023 stood at N471.39 billion showing an increase of 5.97 percent and 6.32 percent compared to the value recorded in the Q1 of 2022 (N444.82 billion) and in the corresponding quarter of 2022 (N443.36 billion) respectively.
The value of raw material imports stood at N555.47 billion in Q1, 2023. This value fell by 0.68 percent compared to the value in Q4, 2022 (N559.25 billion) but rose by 3.15 percent compared to the value recorded in Q1, 2022 (N538.53 billion) while the value of solid minerals imports in the first quarter of 2023 stood at N44.83 billion, this value was 31.38 percent higher than the value recorded in Q4, 2022 (N34.12 billion) and 9.10 percent higher than the value recorded in Q1, 2022 (N41.09 billion).
The value of energy goods imports stood at N0.07 billion in Q1, 2023 while the value recorded in the fourth quarter of 2022 and the corresponding period of 2022 were N0.001 billion and N0.03 billion respectively.
The value of imported manufactured goods in the quarter under review stood at N239 trillion, showing a decline of 2.11 percent compared to the value recorded in Q4, 2022 (N2.45 trillion) and by 19.38 percent compared to the value recorded in Q1, 2022 (N2.97 trillion).
The value of other oil products imports in Q1 2023 stood at N2.09 trillion 1.89 billion indicating an increase of 11.46 percent from the value recorded in Q4, 2022 (N1.88 trn) but the value decreased by 40.24 percent when compared to the value recorded in the corresponding quarter of 2022 (N3.50 trn).
Breakdown of Q1 exports
The value of total exports in Q1, 2023 stood at N6.49 trillion indicating an increase of 2.0 percent when compared with the value of exports in Q4, 2022 (N6.46 trn) but decreased by 8.66 percent when compared with the first quarter of 2022 (N7.10 trn).
Breakdown showed that the value of agricultural goods exports stood at N279.64 billion in Q1, 2023, this shows an increase of 63.92 percent and 38.72 percent compared to the value recorded in Q4, 2022 (N170.59 billion) and Q1, 2022 (N201.59 billion) respectively.
“The government needs to focus on diversifying the economy and reducing its reliance on oil and gas exports in order to maintain a sustainable trade balance. This will help make the economy more resilient to shocks in the oil market”
The value of raw material goods exports in Q1, 2023 was valued at N199.89 billion showing a decrease of 5.17 percent and 22.96 percent when compared to the value recorded in Q4, 2022 (N210.78 billion) and Q1, 2022 (N259.48 billion) respectively.
Solid minerals exports in Q1, 2023 was valued at N26.02 billion indicating an increase of 23.73 percent and 32.17 percent compared to the value recorded in Q4, 2022 (N21.03 billion) and in the corresponding quarter in 2022 (N19.69 billion). The exports value of energy goods in Q1, 2023 stood at N15.59 billion indicating a decrease of 17.19 percent when compared to the value recorded in Q4, 2022 (N18.83 billion) and declined also by 8.37 percent compared to Q1, 2022 (N17.02 billion).
The value of manufactured goods exports was valued at N131.15 billion in Q1, 2023. This shows a sharp decrease of 57.83 percent and -40.14 percent when compared to the value recorded in Q4, 2022 (N311.01 billion) and Q1, 2022 (N219.08 billion) respectively.
The value of crude oil exports in Q1, 2023 stood at N5.15 trillion, indicating an increase of 4.82 percent compared to the value recorded in Q4, 2022 (N4.91 trillion); and though declined by 8.40 percent when compared to the same period in 2022 (N5.62 trn).
The value of other oil products exports in Q1, 2023 was N686.17 billion, this showed a decline of 4.09 percent and 10.22 percent when compared to the value recorded in Q4, 2022 (N715.45 billion) and the value in the first quarter of 2022 (N764.27 billion) respectively.