Following the implementation of land border closure, there has been heavy adjustment in trade relations with West African Countries as data shows that both imports and exports declined in the second quarter.
However, Nigerian seems to be on the advantage as net receiver of trade benefits as imports from West African countries declined 79% year on year.
On the other hand, the recent trade report shows that exports to the region also drop 31.2% year on year, though on quarter on quarter basis, exports to West Africa countries was slashed by about 50%.
While total exports of goods and service from Nigeria declined 57% year on year, total imports rose marginally.
Experts attributed the imbalance in trade to the global health challenge, though Federal Government land border closure policies impacted trade relations with West African countries.
It would be recalled that in August 2019, Nigerian government closed its border to stop dumping, infiltration of lower standard, much cheaper goods into the country.
The Nigerian manufacturing sector has been operating under a quite tough environment with most of the operators spending heavy on energy.
Lack of comparative advantage otherwise available in other West African countries made Nigerian products quite un-competitive, both in price and quality terms.
The National Bureau of Statistics recent data on trades shows that total value of Nigeria’s merchandise trade in Q2:2020 declined by 37.6% quarter on quarter and 27.5% year on year to ₦6.2 trillion.
The figure indicates a weakest level of trade record since Q4:2017, as reported by the NBS.
As a result, the moderation in trade deficit in the preceding quarter was short-lived as it worsened to -₦1.8 trillion in Q2:2020 from -₦139.9bn in Q1:2020.
This was driven by a sharp decline in exports.
NBS revealed that this is the third consecutive trade deficit recorded since Q4:2019 and the worst performance on record.
In its macroeconomic note, Afrinvest noted that in dollar terms, Nigeria’s trade balance plunged by 360.4% year on year to $5.0 billion as exports tanked 58.9% year on year to $6.1 billion while imports declined by 14.6% to $11.1 billion.
Across regions, Nigeria’s trade with West Africa suffered a 50.3% year on year and 44.4% quarter on quarter decline due largely to a significant drop in exports.
Specifically, Afrinvest observed that imports from West Africa fell year on year by 78.7% while there was a 9.7% quarter on quarter rise in imports.
Similarly, exports to West Africa declined, down 31.2% year on year and 49.6% quarter on quarter.
“We attribute the weakness in trade with West Africa mainly to the land border closure implemented in August 2019”, Afrinvest stated.
Nigeria’s trade data shows that exports fell 51.7% year on year and 45.6% quarter on quarter to ₦2.2 trillion in Q1:2020.
There was a broad-based decline in oil and non-oil exports on a quarter on quarter basis, largely driven by the 47.2% and 56.2% decline in the export of crude oil and raw materials respectively.
However, on a year on year basis, non-oil exports spiked by 55.1%, driven by a 139.6% and 6.3% increase in the export of manufactured and agricultural goods respectively, while export of crude oil plunged by 60.5%.
Afrinvest attributes the moderation in crude oil exports to the 12.6% quarter on quarter and 10.4% year on year decline in oil production to 1.81 million barrels per day (mbpd), as Nigeria enforced partial compliance with the output cuts it agreed to as a member of OPEC/OPEC+.
In addition, low oil price which averaged $31.4 per barrel (bbl) in Q2:2020 from $50.5/bbl in the previous quarter, also explains the lacklustre performance in exports during the period.
Afrinvest said despite the resumption in economic activities across many sectors, it expects exports growth to remain weak largely due to weak oil production and oil prices.
Afrinvest stated that in line with expectation of a slower rise in imports, total imports rose marginally by 0.4% year on year but declined by 10.7% quarter on quarter to ₦4.0 trillion.
The quarter on quarter moderation in imports was driven by a sharp 82.4% quarter on quarter drop in the import of mineral fuel which masked the increases recorded in the importation of raw materials, solid mineral and energy goods.
Meanwhile, the year on year marginal rise was supported by a 129.8% surge in the importation of energy goods from China in Q2:2020.
Generally, Afrinvest said the slower increase in imports can be mainly attributed to the foreign exchange (FX) liquidity challenges witnessed during the quarter following the elevated risks induced by the COVID-19 pandemic.
Nigeria’s imports from China, its major trading partner, grew by 13.9% on quarter on quarter basis, supported by the country’s quick recovery from the pandemic.
However, imports from other significant trade partners including USA, India and Netherlands declined, indicating the impact of trade restrictions due to COVID-19 as US and EU suffered a devastating outbreak.
“In subsequent quarters, we anticipate a gradual increase in imports given an expected improvement in FX funding as the CBN resumes sales in the FX market”, Afrinvest stated.
Border Closure: Imports from West African Countries Drop 79%