Wednesday September 08, 2021 / 12:30 p.m. / by AbdulQudus Isiaka, Proshare Research / Header Image credit: NBS

Nigeria’s exports to Africa fell 25% in the first half of 2021 year-on-year; this is according to foreign trade data recently released by the National Bureau of Statistics (NBS). The drop in African exports occurred despite the African Continental Free Trade Agreement (AfCFTA), which began in January 2021.

Analysts had expressed optimism about the country’s trade prospects under the free trade agreement, which is expected to increase intra-African trade by 50% in 2022.
Meanwhile, total merchandise trade, which stabilized at 12.03 tr N in the second quarter of 2021, increased 88.71% year-on-year. The rise in merchandise trade was driven by strong growth in exports, which climbed 26% year-on-year. Compared to the first three months of the year, total trade increased by 23%, from N9.75tr in Q12021 to N12.03tr in Q22021. Meanwhile, the country’s import bill rose 1.45%, from 6.85 tr N in the first quarter of 2020 to 6.95 tr N in the second quarter of 2020. The rise occurred as exports increased 74.7%, from 2.9 rpm in Q12021 to 5.07 rpm in Q22021.

Getting Down to Nitty Gritty – A Sector Analysis

SNB data for the second quarter of 2021 shows that crude oil transactions accounted for 80.29% of total merchandise trade, the largest in volume. Other traded goods accounted for 10.6%, while manufactured goods accounted for 4.17% of total merchandise trade. The agricultural sector contributed 3.25% to total trade during the period considered. Analysts believe that the contribution of the crude oil sector increased during the period under review under the influence of rising crude oil prices. (See graph 1).

Graph 1: Sectorial Export analysis (Q2 2021) (N’trn)



Source: NBS, Proshare research

The share of total exports attributable to crude oil increased in the first half of the year from 68.7% in January to 80.8% in April before declining slightly to just under 80% of total trade in June. Meanwhile, oil exports increased 33.5% between the first and second quarters of 2021, although non-oil exports only increased by 6.3% between the first quarter of 2021 and the second quarter of 2021. .

The landmine of the trade deficit

Analysis of trade data showed that while exports represented 6.95 trn (57.78% of total trade), the additional 42.22% valued at 6.95 trn were contributed by imports carrying the trade deficit. for the period at 1.87 trn.

Nigeria recorded a trade deficit of 3.94 billion naira in the first quarter of 2021, indicating a -52.5% reduction in the trade deficit during the quarter. Together, imports grew 60% year-over-year, from 8.59 billion naira in the first half of 2020 (during the pandemic) to 13.8 billion naira in the first half of 2021. Exports increased increased over the same period but only 26%. As expected, the trade deficit increased 157% year-on-year, from n 2.25 billion in the first half of 2020 to n 5.81 billion in the first half of 2021. (See graph 2).

Graph 2: Total trade and trade deficits (H1 2021) (N’trn)

Proshare Nigeria Pvt.  Ltd.

Source: NBS, Proshare research

Exports by destination: A revival inspired by India

According to BNS data released earlier in the week, exports to all regions except Africa increased during the period under review. Exports to Africa increased from 1.38tr in the first half of 2020 to 1.03tr in the first half of 2021, implying a -25% year-on-year reduction. The country’s exports to the United States increased 109%, from $ 163 billion to $ 342 billion; a similar trend occurred in Europe where total Nigerian exports increased from 2.55tr in the first half of 2020 to 2.82tr in the first half of 2021, a 10.4% increase in exports.

However, Asia saw the largest increase in exports – a 46% jump in exports from $ 2.03 billion in H12020 to $ 2.98 billion in H12021. The increase is the result of the recovery of the Indian economy, which is the largest importer of Nigerian products. Southeast Asian economy grew 20% after contracting 7.1% in January-March 2021 (See graph 3).

Graph 3: Analysis of exports by destination (H1 2020-H1 2021) (N’trn)

Proshare Nigeria Pvt.  Ltd.

Source: NBS, Proshare research


Leverage the AfCFTA to boost exports

Following Nigeria’s ratification of the AfCFTA in 2020, the agreement entered into force on January 1, 2021. Hopes were high that the country would take advantage of the tariff removal of up to 90% (under the deal) to gain access to the $ 1.3 billion African market, increase its exports and reduce its trade deficit.

However, business analysts have argued that the trade deal is a zero-sum game that creates winners and losers. Newly released NBS data shows that Nigeria’s exports to Africa declined by 25% between the first half of 2020 and the first half of 2021, raising doubts about Nigeria’s readiness and positioning to take advantage of the free trade agreement.

Nigeria’s agricultural sector offers exciting opportunities. However, the level of insecurity in and around the country has incredibly threatened the growth of the industry and stifled investments that could have created jobs and wealth for many Nigerians. Nigeria has a comparative advantage in rice, yam, cassava and ginger. Currently Nigeria is the second largest producer of ginger in the world and the largest producer of yam in the world. Yet two-thirds of the produce rots mainly due to the lack of modern facilities. The right policies can unlock a massive agricultural value chain to see farmers increase their productivity through efficient technology. The complexity index the country’s exports can also be enhanced by encouraging transformation, putting the country in pole position to get the most out of the AfCFTA.

Proshare Nigeria Pvt.  Ltd.

Related news

1. Trade deficit widens in first quarter 2021 due to increased imports

2. Nigeria’s merchandise trade deficit worsens in first quarter 2021 due to rising imports

3. New $ 50 billion health, trade and finance roadmap to end pandemic and secure global recovery

4. AfCFTA: reorganizing Nigeria’s infrastructure for global trade

5. Another trade deficit in the fourth quarter of 2020

6. Nigeria’s foreign trade in the fourth quarter of 2020: the difficulties and pitfalls of being focused on imports

7. Fourth quarter 2020 foreign trade report: recovery is not enough

8. Total trade up 8.9% in Q4 2020, down 10.3% in fiscal 2020

9. Monetizing Nigeria’s Deficit Could Increase Macro Stability Risks

ten. A fourth consecutive trade deficit

11. Trade deficit hits new four-year high in third quarter 2020

12. Trade increased in the third quarter of 2020 due to a faster increase in imports but a slower recovery in exports

Proshare Nigeria Pvt.  Ltd.

Proshare Nigeria Pvt.  Ltd.


Source link

Leave a Reply

Your email address will not be published.