- CBN says situation not peculiar to Nigeria
James Emejo in Abuja
Analysts wednesday called on the federal government to intensify the opening up of the economy as well as ensure compliance with the COVID-19 protocols in order to reverse the decline in external merchandise trade, which fell by 27.3 per cent in the second quarter of the year.
However, the Central Bank of Nigeria (CBN) has allayed fears over the decline, saying though unfortunate for Nigeria, it’s not peculiar to the country.
The analysts also urged the government to create additional incentives to enhance the ease of doing business, particularly by creating tax incentives.
They urged the federal government to privatise the Nigeria Commodity Exchange and provide incentives for the development of commodity exchanges, while the apex bank should scale up interventions in the agriculture value chain.
The country’s external merchandise trade declined by 27.30 per cent to N6.24 trillion in the second quarter of the year (Q2 2020) compared to N8.59 trillion in the preceding quarter, the National Bureau of Statistics (NBS) stated yesterday.
The performance further indicated a drop of 27.46 per cent when compared to Q2 2019 when the country recorded N8.61 trillion in trade.
According to the Foreign Trade in Goods Statistics (Q2 2020) report released by the bureau, the country posted a trade deficit of N1.80 trillion, marking the third consecutive quarter of negative trade balance.
Total trade within the year, however, stood at N14.82 trillion, indicating a drop of 11.96 per cent compared to half-year 2019.
The value of imports stood at N4.02 trillion, representing a drop of 10.69 per cent in Q2 compared to N4.50 trillion recorded in Q1. But it showed an increase of 0.39 per cent year-on-year.
According to NBS, the value of exports amounted to N2.21 trillion of total trade, indicating a decline of 45.64 per cent compared to the N4.08 trillion posted in the preceding quarter and 51.73 per cent compared to Q2 2019.
According to the report, trade in goods deficit stood at N421.3 billion in Q1 compared to N579.06 billion recorded in Q4 2019.
The value of imported agricultural goods rose by 59.01 per cent in the review period compared and 66.28 per cent in Q1 2019 as raw material imports increased by 85.69 per cent in Q2 compared to Q1 and 64.69 per cent year-on-year.
On the other hand, total exports fell by 45.64 per cent in Q2 as agricultural goods export dropped by 38.2 per cent.
NBS stated that raw material goods export recorded a decrease of 56.2 per cent in the period under review.
Total trade in agricultural goods stood at N493.7billion, of which exported agricultural goods accounted for N78.1 billion.
Trade in raw material stood at N585.4 billion with import and export components valued at N570.6 billion and N14.8vbillion respectively.
However, Spain, India, France, China and The Netherlands were the country’s five major trade partners in terms of exports within the period.
Commenting on the trade figures, CBN Director, Corporate Communications, Mr. Isaac Okorafor, explained that since the fourth quarter of 2019, all emerging markets have been facing challenges, adding that the Nigeria challenge is also being experienced globally due to the COVID-19.
He stated that the situation is, however, under control by CBN.
He said: “Today, there is a recession in the United States, England and indeed in China. So, COVID-19 has had its impact on growth and the drop in crude oil prices has had its impact on not only flows but also on growth. We believe that as the uncertainty in the global economy due to the pandemic reduces, flows would pick up.”
A former Director-General, Abuja Chamber of Commerce and Industry (ACCI), Dr. Chijioke Ekechukwu, also told THISDAY that the country’s performance could largely be attributed to the COVID-19 lockdown.
He said the government should sustain current efforts at re-opening the economy in the midst of observation of COVID-19 protocols.
“International travels will start on the 6th of September. That is the right step. There should be the availability of foreign currencies to all sectors that want to engage in the importation and the Investor and Exporter FX Window should be vibrant again.
“When we compare the Q2 figures, with the figures for the same period in 2019, we still recorded growth year-on-year in some sectors. The implication is that although there is a decline compared to Q1 2020, Nigeria hasn’t suffered a drastic drop compared to 2019,” he added.
On his part, an economist, Dr. Muhammad Rislanudeen, canvassed predictable monetary and fiscal policies to incentivise more businesses towards export expansion, especially during the pandemic period where investors are faced with a plethora of equally competing investment options.
He stated that improved export trade would help in supporting current economic diversification efforts and provide foreign exchange market stability, adding that the government needs to create additional incentives towards the ease of doing business, inclusive of tax reliefs.
However, Professor of Finance and Capital Markets at Nasarawa State University, Prof. Uche Uwaleke, said external merchandise trade would receive a boost if the country could develop the commodity trading ecosystem.
He noted the need for the recapitalisation of NEXIM Bank to enable it to extend the scope and increase the size of financing for merchandise exports.
According to the former Imo State commissioner for finance, efforts should be made to take advantage of naira devaluation to promote exports and earn forex.
He said: “To this end, the government should privatise Nigeria Commodity Exchange and provide incentives for the development of commodity exchanges in the country.
“CBN can scale up interventions in the agriculture value chain in particular.”