Rising global trade tension puts Africa’s biggest economy at risk as Nigeria comes behind 110 other countries in the International Monetary Fund’s new measure for the level of trade uncertainties across the world.
Nigeria improved quarter-on-quarter to an index point of 6.237 in the second quarter of 2019, but lags the global average of 3.028, data published by the Washington-based fund Monday shows.
The World Trade Uncertainty Index is a quarterly data which tracks trade uncertainty across 143 countries and is acclaimed by the IMF to be a pioneering measure of uncertainty related to trade among a large set of advanced and developing economies. A higher score connotes a greater level of uncertainty.
The newly minted measure has been created amid a trade war between the United States and China that has depressed global financial markets and dampened the growth of economies around the world. The importance of the index according to the IMF is a relationship between the increase in uncertainty and significant output declines.
Already, the effect of the tariff war is weighing on the outputs of China and United States, the biggest economies in the world. Beijing’s economy slowed to a 27-year low while Washington’s also disappointed in the second quarter. The ripple effect of trade uncertainties is felt in other parts of the world- mostly in advanced economies.
“Based on our estimates, the increase in trade uncertainty observed in the first quarter of 2019 could be enough to reduce global growth by up to 0.75 percentage point in 2019,” the IMF said. It maintains a pessimist outlook on global growth with forecast at 3.2 percent in 2019, picking up to 3.5 percent in 2020.
The index assesses trade uncertainty from 1996 but shows increased uncertainty starting around the third quarter of 2018; the period coincides with a heavily publicized series of tariff increases by the United States and China.
Trade uncertainty, however, declined in the fourth quarter of 2018 following announcements of a truce by the US and Chinese officials at the G-20 meeting in December in Buenos Aires. However the respite was brief as uncertainty surged significantly in the first quarter of 2019 following a substantial expansion of American tariffs on imports from China on March 1.
For Nigeria, the level of uncertainty spiked to 11.252 in the first three months of 2019 as global risk soared to an all-time high by IMF’s measure. This was the first time since 1996 the measure was greater than zero and Nigeria ranked 117 out of 143 countries, according to BusinessDay computation.
As global uncertainty level fell, Nigeria was able to improve six notches lower as the country cut its gap to the world average by half to 3.209. The deviation to global levels was by 6.612 basis points in the first quarter.
Compared to peers, South Africa, Egypt, Kenya, and Ghana currently outperform Nigeria while Brazil and China lag the country among emerging and developing markets.
