Q1:2021 Foreign Trade Statistics Report: Nigeria’s Woes Deepen on Lower-than-Expected Crude Oil Earnings

Q1:2021 Foreign Trade Statistics Report: Nigeria’s Woes Deepen on Lower-than-Expected Crude Oil Earnings

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Fresh data emerged this week on the worrisome state of Nigeria’s merchandise trade position with the rest of the world. According to the National Bureau of Statistics (NBS), Nigeria recorded a Goods trade deficit of ₦3.9tn in Q1:2021 (2.6% of GDP), the highest in more than twelve successive quarters. This was jointly driven by a 9.0% q/q (or 29.3% y/y) decline in export value to ₦2.9tn and a 15.6% q/q (or 54.3% y/y) increase in import value to ₦6.9tn.

The decline in export value was majorly driven by the 23.5% q/q (or 34.5% y/y) decline in crude oil export earnings to ₦1.9tn from ₦2.5tn and ₦2.9tn in Q4 and Q1:2020 respectively. This development is a major surprise, given its sharp departure from our model’s output which fed on the Q1:2021 GDP data (by NBS) and crude oil price movement. Specifically, the Q1:2021 GDP data revealed that Nigeria’s daily crude oil production averaged 1.7mbpd in Q1:2021, compared to 1.6mbpd in Q4:2020 and 2.1mbpd in Q1:2020. Oil price in Q1:2021 averaged $61.32/bbl. compared to $45.25/bbl. and $50.81/bbl. in Q4 and Q1:2020 respectively. Using the CBN official rate of ₦306/$1 for Q1:2020 and ₦379/$1 for Q4:2020 and Q1:2021, our model suggests that crude oil earnings in Q1:2021 should surpass both Q1 and Q4:2020 levels by a minimum of 5.0% given the spread of over $10 on every barrel sold in Q1:2021. Interestingly, there was no communication from the NNPC in Q1:2021 to suggest that Nigeria’s crude oil got stranded or rejected by its major buyers.

On the other hand, the value of non-crude oil export rose by 45.2% q/q to ₦977.4bn (from ₦673.2bn in Q4:20) but 16.1% below the ₦1.2tn reported in Q1:2020. We attribute the y/y shortfall in non-oil export to the slow recovery of major non-oil activity sectors (e.g. Trade sector, down 2.2% y/y) as highlighted by their weak performance in our Q1:2021 GDP report.

On the import leg, the major items which drove the increase were Food and Beverage (up 127.1% y/y to ₦964.2bn), Industrial Supplies (up 77.0% y/y to ₦1.5tn), Capital Goods & Parts (up 61.0% y/y to ₦1.9tn), Transport Equipment & Parts (up 9.5% y/y to ₦683.6bn), Consumer Goods (up 363.1% y/y to ₦830.7bn) and Goods not Specified (up 38.5% y/y to ₦73.9bn). We believe this was mainly due to the devaluation of the Naira over this period (from ₦306/$1 to ₦379/$1). However, the value of Premium Motor Spirit (Petrol) imported in Q1:2021 fell by 6.0% y/y to ₦687.7bn, but remains the single largest commodity of import as it accounted for 28.1% of the total import value for the period.

Given the CBN’s recent adoption of a new official exchange rate (₦410/$1) which makes Nigeria’s export value cheaper and import value more expensive, we expect the trade deficit to remain elevated in Q2:2021.


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