The National Bureau of Statistics (NBS) latest report on foreign trade in goods shows the total value of trade in Q3, 2021 was up 10 per cent quarter-on-quarter and 59 per cent year-on-year to N13.3 trillion. The total value of exports was flat, but was up 71 per cent Y-o-Y. The net result was a deficit of N3.0 trillion. The trade deficit in Q3 is the eighth in a row.
Analysts stated that Nigeria’s continual foreign trade deficit continues to pile more pressure on the country’s exchange rate as negative trade dampens Nigeria’s current account position and the foreign reserves.
Despite moves by the federal government and the Central Bank (CBN) to diversify the economy and create substitute export value for crude oil, it seems to have not reflected substantially in Nigeria’s international trade numbers.
A cursory look at the data showed that crude oil still accounted for 90 per cent of Nigeria export value, after multiple investments in other sectors of the economy to ensure local production, especially in the agricultural sector.
The CEO of Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf said that the trade balance was in a deficit of N3 trillion in the third quarter of this year, which was an increase of 26.5 per cent on year-on-year comparative analysis, saying that this is not remarkably different from the trend in previous quarters.
According to Yusuf, the fundamental issues remain the over dependence on oil and gas for our export earnings. The huge import bill on petroleum products and the weak competitiveness of the non-oil economy were major contributory factors to the unfavourable balance of trade position.
In fixing the balance of trade position, he said that we need to give exporters unfettered and unconditional access to their foreign exchange, saying that we need to create a fast track for exporters at the ports.
He explained that “If we can have a fast track for imports, it is even more imperative that we have a fast track for export. Meanwhile, export processes remain very frustrating at our ports. The shipping companies and the terminal operators do not accord the desired priority to export. This should change.”
He added that “We should provide access to intermediate inputs on concessionary terms to exporters in order to make their exports competitive both in quality and on price. We should set up export clusters and deepen the activities of our export processing zones in order to boost export earnings; connect to global value chains based on our competitive advantage; and terminal operators and shipping companies should be compelled to prioritise export.”
The director-general of Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Ambassador Ayoola Olukanni said the huge trade deficit was a reflection of the fact that the country has not rigorously implemented its policies to truly consume and produce what it consumes, noting that from the beginning of last year, the Chamber had at every opportunity raised alarm about Nigeria’s growing trade deficit.
“This was as we observed the growing gap between import and export, which was also reflected in the pressure on the naira and loss of its value in the forex market,” he said
The NACCIMA DG said this year, Nigeria must rigorously pursue policies especially as envisioned in the 2022 Budget to reduce importation and improve on her non-oil export.
He also said that there is the need to deal with our well-known problem of infrastructure-deficit across the country, saying “We must empower our local industries to significantly improve their productive capacity to meet local needs.”
The president of Lagos Chamber of Commerce and Industry (LCCI), Dr. Michael Olawale-Cole noted there has been a sustained expansion in the country’s trade deficit from the start of 2020 into 2021, with a cumulative trade deficit at N3.02 trillion in the first nine months of 2021 as exports have grown less rapidly compared to imports.
He stated that the structure of Nigeria’s export basket remained unchanged as crude exports accounted for 74 percent of total exports while manufactured goods dominated imports bills between the first and third quarter.
According to Olawale-Cole, the sustained growth in imports in the three quarters of 2021 could be attributed to the relaxation of global and domestic restriction measures, which boosted economic activities. The surge in imports highlights the fact that economic activities are gradually recovering from COVID-19 disruptions. The exchange rate depreciation might have also contributed to higher import costs.
“The numbers expose the poor state of the non-oil sector and the continued dependence on crude oil for foreign exchange income despite the implementation of several policies and programs aimed at boosting domestic production and driving economic diversification. Persisting trade deficit across non-oil product categories from agriculture, manufacturing, raw materials to solid minerals reflect the numerous productivity challenges confronting the real sector. Over-reliance on crude oil for fiscal revenue and forex earnings will continue to expose the economy to fluctuations in the oil market even as the country lacks adequate buffers to absorb external shocks.”
The LCCI president insisted that government at all levels in conjunction with trade finance institutions needs to channel efforts towards the enhancement of value addition in non-oil exports.
“Import substitution policies should be further encouraged to minimize importation and boost domestic production. Even within the oil sector, we need to diversify away from crude oil exports to boost refining capacity, production of petrochemical products and accelerate reforms to halt the importation of petroleum products.
“Effective harmonization of fiscal, monetary, trade and regulatory policies is needed to support businesses in the real sector. There is a need for a greater investment-friendly disposition of the government towards enhancing the quality of Nigeria’s trade infrastructure and better border management,” he said.
He further said that “Nigeria’s trade dynamics with the global community are expected to remain almost unchanged in the short term. With imports continuing to outpace exports, the trade deficit is expected to widen to almost N4 trillion in full year 2021, and that may put more pressure on forex.”
Looking ahead in 2022, he said “We expect crude oil to sustain its dominance in Nigeria’s export while manufactured imports will most likely dominate the country’s import bill. We anticipate a sustained trade deficit in agriculture, manufactured goods, and raw materials goods this year.”