Evident in Nigeria’s trade surplus is the revenue challenge that currently faces its federal government as crude oil export weakened in the first quarter of 2019, against crude oil prices which increased 27.11 percent to $68.39 from $53.80 during the period.
According to merchandise trade data released by the National Bureau of Statistics (NBS), Nigeria’s trade balance remained in a surplus in the first three months of the year. It, however, moderated 4.8 percent to N831.6 billion in the same period from N873.8 billion in Q4 2018. During the review period, imports expanded faster than exports.
While Nigeria has maintained a trade surplus position since the fourth quarter of 2016 on a year-on-year basis, trade surplus plunged 53 percent from N1.7 trillion in Q1 2018.
Imports continued to accelerate, increasing 25.8 percent and 3.4 percent on year-on-year and quarter-on-quarter basis respectively, driven by an expansion in the importation of capital goods and industrial supplies against fuels and lubricants import which contracted during the period.
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According to a report by Afrinvest, “Imports growth moderated in Q1 2019, compared to the average of 69.5 percent in the previous quarters which was partly due to import of large-sized one-off capital equipment. Although we expect sustained growth in imports driven by industrial and household demand, we expect the pace to moderate in subsequent quarters.”
Meanwhile, Nigeria’s export contracted 3.9 percent to N4.5 trillion in Q1 2019 from a year earlier, driven by a 5.7 percent y/y moderation in crude oil exports to N3.4 trillion.
“We attribute this to a reduction in oil production which contracted 1.0 percent y/y to an estimated 1.96 mb/d in Q1 2019 and oil price which was 5.8 percent lower at US$63.3/bbl,” Afrinvest stated.
However, exports rose 1.8 percent from previous quarter, supported by improved oil production even as oil prices moderated. The NBS revised downwards the crude oil exports data for Q4 2018 to N3.6 trillion from N4.2 trillion, and in turn total trade data to N18.5 trillion in Q4 2018 from N19.1 trillion. For non-oil exports, there was a moderate 4.6 percent increase y/y to N604.4 billion, although this was faster at 159.9 percent on a q/q basis.
“We expect exports growth to remain weak in subsequent quarters mainly due to weak oil prices,” Afrinvest explained.
Continuous slowdown in export growth against faster growth in import levels tend to create a trade deficit possibility going forward as witnessed in the first 3 quarters of 2016.
A push factor to this reality is Nigeria current weak crude oil production stage below production capacity of 2.3 million b/d and building downward pressure crude oil price in the international market, hence, posing a threat to the revenue base of the federal government.
Late into Q2 2019, crude oil began to reverse to dip 15.12 percent to $63.29 as at Friday last week.
David Ibidapo
