Boosting Nigeria’s Declining External Merchandise

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ECONOMY

Apart from the huge economic distortions arising from the COVID-19 pandemic, the federal government must address inherent impediments to foreign trade as well as boost agricultural exports, writes James Emejo

The COVID-19 continues to exactly its toll on the Nigerian economic landscape with several impairments.

Nigeria’s relapse into a second recession last year – and its sudden exit from the downturn is still being debated – with the pandemic blamed for the travails.

Only last week, figures from the National Bureau of Statistics (NBS) further showed that on annual basis, Nigeria’s total merchandise trade declined to N32.42 trillion in 2020, compared to N36.15 trillion in 2019.

This represented the first fall in total trade since 2019, after an annual consecutive increase from 2015.

Experts attributed the decrease in trade to the adverse effects of the pandemic, which had slowed down global businesses and almost brought them to go their knees.

However, total trade increased 8.9 per cent to N9.12 trillion in the fourth quarter of 2020 (Q4 2020), compared to N8.37 trillion in the preceding quarter.

According to the Foreign Trade in Goods Statistics (Q4 2020), the Q4 performance was nonetheless, lower by 9.9 per cent when compared to the N10.1 trillion in Q4 2019.

The value of trade in Q4 was the highest recorded over the past year, the NBS noted.

But, the value of imports nearly doubled the value of exports, as trade deficit widened to its highest level and a fifth consecutive quarterly deficit at N2.73 trillion, representing an increase of 14.30 per cent compared to Q3 2020.

The export component of trade stood at N3.19 trillion, representing an increase of 6.7 per cent over the N2.99 trillion in the preceding quarter.

In addition, the share of exports in total trade declined to 35 per cent in Q4 from 47 per cent in Q4 2019.

On the other hand, total imports reached a record high at N5.93 trillion in the quarter under review, representing an increase of 10.1 per cent over the N5.38 trillion in the preceding quarter.

Crude oil remained the predominant export which was valued at N2.42 trillion, representing 81.02 per cent of total exports while non-crude oil exports stood at N568.2billion, or 18.98 per cent of total export during the review period.

On annual basis, the value of total imports in 2020 stood at N19.89 trillion or 17.3 per cent higher than the previous year, while total exports was valued at N12. 52 trillion or 34.8 per cent less than in 2019.

The annual merchandise trade deficit in 2020 stood at N7.37 trillion, according to the statistical agency.

India remained the top export destination for Nigeria during the quarter under review with N547.0 billion or 17.12 per cent total exports.

Exports to Spain, South Africa, the Netherlands and the U.S.A. stood at N313.4 billion or 9.8 per cent, N256.7 billion or 8.03 per cent, N194.5 billion or 6.09 per cent, and N170.4 billion or 5.33 per cent respectively.

These five countries collectively accounted for 46.39 per cent of the value of total exports in Q4 2020.

Analysts, however, told THISDAY that the federal government needed to install critical reforms in ports administration, address poor infrastructure as well as inefficiency and bureaucracy of border administration in order to boost external trade, which recorded about N7.37 trillion deficit in 2020.

They also called on the government to remove trade barriers, adding that a generally poor business environment does not mean well for foreign trade.

The analysts, in separate interviews with THISDAY, pointed out that the decline in the annual performance was a direct consequence of the negative impact of COVID-19 pandemic on merchandise trade, and urged both the fiscal and monetary authorities to sustain ongoing interventions to stimulate the economy.

The experts, among other things, prevailed on government to boost efforts aimed at encouraging value addition to export commodities including cocoa, sesame seeds, yam as well as work towards their acceptability in more countries of the world.

Speaking on the development, President, Capital Market Academics of Nigeria, Prof. Ache Unalike, said the improvement recorded in Q4 was a reflection of the increase in economic activities following the ease of lockdowns and restrictions and accounted for the impact of the interventions especially by the Central Bank of Nigeria (CBN) on production and volume of trade.

He said if sustained, the increase in merchandise trade will have positive implications for the economy depending on whether or not the trade balance is favorable as well as opportunities for job creation.

Also, Managing Director/Chief Executive, Credent Investment Managers Limited, Mr. Ibrahim Shelleng, said the average lead times for shipments remained some of the biggest hindrances to foreign trade in the country.

According to him, the average time for importation in Nigeria is about 33 days while average time to export is about 22 days.

He said these factors greatly impact on the cost of trade and ultimately affect the country’s ability to be competitive in global trade.

He said: “Relying on one major port alone (Apapa) is also a significant bottleneck and is part of the reasons for poor turnaround times. We must bring up other ports up to speed and utilise technology to provide a more efficient and modern port.”

Managing Director/Chief Executive, Dignity Finance and Investment Limited, Dr. Chijioke Ekechukwu, said an improvement in the security situation in the country will further improve the volume of trade transactions.

He said the drop in external trade in 2020 compared to preceding year of 2019 was expected due to the impact of COVID-19 lockdowns adding that Nigerians being resilient people resumed business activities as soon as lock down was lifted, thus boosting the Q4 performance.

Also, Managing Director/Chief Executive, SD&D Capital Management Limited, Mr. Idakolo Gbolade, said the government should do more to provide additional incentives to exporters.

He said the current intervention in the export sector was not enough to enable local exporters compete with their counterparts in other African countries.

He said: “We need to move fast on the port reforms to enable products to be exported move faster from our port to their destinations in record time.

He added that the federal government should as a matter of urgency mandate his ambassadors and representatives in other countries to prioritise the marketing of Nigeria made goods as part of their engagement with their host.

He added: “I believe that CBN also has a major role in ensuring exchange rate stability to ease foreign trade.

“Nigeria needs to create enabling environment for manufacturing sector to be able to compete favourably and take advantage of the Africa free trade agreement.”

Yet, in what should be of major concern to the government particularly in its efforts to diversify the economy, the value of total trade in agricultural goods in Q4 stood at N588.2 billion, representing 6.45 per cent of total trade in Q4 2020.

Exports of agricultural goods was valued at N55.8billion or 1.75 per cent of total exports within the quarter, compared to N60.6 billion recorded in Q3.

According to the NBS, the value of agricultural exports fell by 8 per cent and by 18.2 per cent when compared to the corresponding quarter in 2019.