This week, we assess Nigeria’s external sector performance with a focus on Commodity Terms of Trade (ToT) to provide perspective on the recent goods trade trend and implications for the economy. Recall that in Q1:2025, goods trade fell by 1.6% q/q but rose 6.2% y/y to ₦36.0tn.
Precisely, exports improved 2.9% q/q and 7.4% y/y to ₦20.6tn, while imports fell 7.0% q/q to ₦15.4tn (up 4.6% y/y). Following, the merchandise trade balance for the quarter strengthened 51.1% q/q and 16.8% y/y to ₦5.2tn. While this headline trade surplus underscores the strength of export income relative to import expenses, the ToT index provides insight to external trade competitiveness and purchasing power.
For context, the ToT represents the ratio of a country’s export prices to its import prices in form of an index. An index level above 100 signals that a unit of export income can purchase more than one unit of import, while increase over time suggests that export prices are rising faster than import costs. In other words, an improvement in ToT means the country can secure more imports for the same volume of exports, effectively implying stronger purchasing power – with implications for FX earnings and exchange rate dynamics.
Analysis of the Q1:2025 ToT index published by the National Bureau of Statistics (NBS) shows that Nigeria’s average import price index (changes in the prices paid for goods imported to Nigeria) declined by 0.3% between January and March, driven by softer price growth in chemical products, raw hides & leather and base metals (each down 0.3ppt), alongside softer declines in prices of machinery (down 0.2ppt) and plastics & rubber (down 9bps) products. Despite the quarterly dip, the average Q1 import index rose 1.5% y/y to 114.2 points, up from 112.5 in Q1:2024, indicating a rise in import prices.
Export Price Index
Similarly, the export price index (changes in the prices Nigerian firms receive for the products they export) fell by 0.2% within Q1:2025 (January to March) owing to pressure on price growth for plastics & rubber (down 0.8ppt), wood (down 0.8ppt) and textiles (down 0.7ppt). Notwithstanding, the export index increased 1.0% y/y to average 115.6 points in Q1:2025 (less than import price growth), compared to 114.5 in the same period last year. Against this backdrop, the overall ToT pared 0.5% to an average of 101.3 points in Q1:2025 (Q1-2024: 101.8 points).
At the Q1:2025 average ToT, every ₦1,000.00 of export earnings would be able to purchase about ₦1,012.80 of imports in 2025, which is lower than what exports earnings in 2024 could afford (₦1,017.80). This implies a mild 0.5% decline in trade purchasing power which, when applied to Q1:2025 exports of ₦20.6tn, suggests a (theoretical) price-effect loss of about ₦100.4bn in import purchasing power. While the ToT does not suggest actual import bill but potential, when other factors are held constant, it signals purchasing power gains or losses.
In the broader picture, a mildly weaker ToT (though still above 100.0 points) highlights a firmer rise in import prices growth than corresponding export prices. We attribute this slippage largely to rising costs of imported goods owing to global supply headwinds (lingering impact of trade route blockage, among other events), while modest gains in export prices could indicate competitive gaps in Nigerian products. Notably, even though export value expanded significantly (+7.4% y/y) compared with the softer rise in import bills (+4.6% y/y) in Q1:2025, we note that the strong trade balance in Q1:2025 was likely driven more by volume effects – mainly weaker import demand due to costly imports – than by favourable export price dynamics.
On the positive side, the combination of solid export growth and a net trade surplus provides some cushion for the external account. However, if import prices continue to outpace export prices, Nigeria’s trade purchasing power could diminish over time. This means that even with recurring trade surpluses, the real value derived from exports may weaken and potentially impact FX dynamics.
Domestic Equities Market: Local Bourse Loses Momentum… ASI down 2.5% w/w
This week, the local bourse extended losses into a second consecutive week as the NGX-ASI fell 2.5% w/w to 141,004.14 points. The bearish performance was largely driven by sustained selloffs in bellwether stocks, particularly in the Industrial Goods (DANGCEM, BUACEMENT, WAPCO) and Banking (STANBIC, GTCO, ZENITH) sectors, as investors continued to reprice risks amid rising yields in the fixed income market and cautious positioning ahead of corporate earnings releases.
Consequently, the YTD return moderated to 37.0% (previously 40.5%), while market capitalisation shed 2.5% w/w to ₦89.2tn. Meanwhile, trading activity varied as average volume traded fell 5.2% to 1.3bn units, while average value traded surged 243.6% to ₦13.9bn. The top traded stocks by volume were UNIVINSURE (434.2m units), AIICO (237.0m units) and MBENEFIT (204.7m units), while TRANSPOWER (₦8.8bn), NB (₦5.4bn), and GTCO (₦4.9bn) were the top traded by value.
Across sectors under our coverage, performance was lackluster as five indices closed in the red while the Consumer Goods index rose 0.8% w/w, on the back of gains in INTBREW (+4.8%) and DANGSUGAR (+7.2%). Leading the laggards, the Industrial Goods index declined 8.4% w/w due to selloffs in DANGCEM (-9.9%) and BUACEMENT (-10.0%). Similarly, the Insurance and Banking indices fell 4.2% and 3.5% w/w respectively, owing to profit taking in NEM (-18.2%), WAPIC (-11.6%), STANBIC (-15.4%) and GTCO (-3.8%). Price depreciation in MTNN (-2.2%), OANDO (-6.0%) and CONOIL (-10.0%) dragged the AFR-ICT and Oil & Gas indices lower by 1.2% and 0.8% w/w, accordingly.
Investor sentiment, as measured by market breadth, worsened to -0.22x (previously 0.02x) as 43 stocks gained, 54 lost and 49 closed flat. The top gainers for the week were AUSTINLAZ (+20.8%), NCR (+20.7%) and ENAMELWA (+19.4%) while THOMASWY (-18.9%), NEM (-18.2%), and STANBIC (-15.4%) were the top losers. In the coming week, we expect a mixed performance with a bearish tilt as investors continue to reassess portfolio positioning amid H1:2025 interim dividend declarations, sustained pressure on blue-chip stocks, and the absence of strong positive catalysts.
Afrinvest
