Nigeria’s trade surplus surged to the highest in five years and three months in the third quarter of this year largely on the naira devaluation, a BusinessDay analysis of the latest foreign trade statistics report has shown.
The report by the National Bureau of Statistics (NBS) shows that Africa’s biggest economy recorded a positive trade balance of N1.89 trillion for the fourth straight time in Q3, a 166.2 percent increase from N708.9 billion in the previous quarter. It improved from a trade deficit of N409.4 billion on a year-on-year basis.
A trade surplus which is an economic measure of a positive balance of trade occurs when a country’s exports exceed its imports.
The country’s total trade increased to N18.8 trillion in Q3 from N12.2 trillion in the previous quarter. It also grew year-on-year by 52.8 percent from N12.3 trillion.
“Nigeria’s total merchandise trade in Q3 rose significantly due to the increase in exports and imports resulting in a positive trade balance,” the NBS report said.
It added that the significant rise in exports and imports in the quarter compared to the preceding and corresponding quarters was largely driven by an increase in trade activities within the period.
“Looking at the data, crude oil exports increased significantly even as non-oil exports decline,” Israel Odubola, a Lagos- based research economist, said.
He said the official rate also weakened between the second and third quarter. “In essence, the increased trade surplus can be linked to the devaluation effect, with the country getting more naira from export proceeds per dollar.”
According to Odubola, having a positive trade surplus is favourable to the current account as it helps to reduce external pressure. “Trade surplus is quite significant in current account composition.”
Exports are in dollars, so the exchange rate would automatically lead to a jump in exports, Muda Yusuf, chief executive officer of Centre for the Promotion of Private Enterprise, said.
The Central Bank of Nigeria in June merged all segments of the foreign exchange market into the Investors and Exporters window, and reintroduced the willing buyer, willing seller model.
The naira has continued to depreciate against the dollar and other major foreign currencies since then.
The official exchange rate increased from N463.38/$ to N927.19/$ as of Friday. At the parallel market, the naira depreciated to N1,164/$ from 762/$.
The high cost of sourcing FX was one of the major factors that pushed Nigeria’s inflation rate to an 18-year high of 27.33 percent in October from 26.72 percent in the previous month, according to the NBS.
“Exports would improve significantly because the naira is weaker which would attract more dollar inflows whether in the form of trade or any other form,” Abiodun Keripe, managing director at Afrinvest Consulting, said.
He added that stable crude oil prices and the gradual recovery in oil production also contributed to the trade surplus. “Even though the sector is still in negative; the rate of contraction is declining which is speaking to the increase in oil put.”
Crude oil production is a major source of revenue for Nigeria’s economy. According to the Nigerian Upstream Petroleum Regulatory Commission, the country produced 1.35 million barrels per day in September this year from 998,602 barrels per day in April. On a year-on-year basis, it also rose from 937,766 barrels per day in September 2022.
Data from information websites like Oilprices.com and Statista, show that global Brent oil prices averaged at $93.7 per barrel in September from $82.5 per barrel in January.
A breakdown of the NBS report revealed that the value of total exports in Q3 stood at N10.3 trillion indicating an increase of 60.8 percent when compared with the value of exports in Q2 (N6.44 trillion) and by 74.4 percent when compared with the value recorded in Q3 of 2022 (N5.93 trillion).
The value of total imports stood at N8.46 trillion in Q3, this represents an increase of 47.7 percent compared with the value recorded in Q2 (N5.73 trillion) and increased by 33.3 percent against the value recorded in the corresponding quarter of 2022 (N6.34 trillion).
“However, analysis by traded products shows that the largest export value in Q3 remained ‘petroleum oils and oils obtained from bituminous minerals, crude’ with N8.54 trillion representing 82.5 percent. This was followed by ‘Natural gas, liquefied’ with N1.02 trillion accounting for 9.82 percent, and ‘Urea, whether or not in aqueous solution’ with N109.68 billion or 1.06 percent of total exports,” the report said.
According to the NBS, the commodities with the largest values of imported products were ‘Motor Spirit Ordinary’ valued at N1.92 trillion or 22.71 percent, ‘Gas oil’ with N736.7 billion or 8.71 percent and ‘Durum wheat (not in seeds)’ with value amounting to N331.8 billion or 3.92 percent of total imports.
“Analysis by trading partners in Q3, shows that Spain recorded the highest exports from Nigeria with a value of N1.27 trillion or 12.3 percent of the country’s total exports, this was followed by India with N1.02 trillion or 9.81 percent.”
The Netherlands had N988.66 billion or 9.56 percent, Indonesia with N758.6 billion or 7.33 percent, and France with N720.5 billion or 6.96 percent of total exports.