Analysts Seek Measures to Boost Local Production, Exports

•Nigeria records N3.94tn deficit in foreign trade in Q1

By James Emejo

Analysts yesterday called on the federal government to address structural factors, which have jacked up the cost of production of goods, thereby encouraging importation over local production.

The advice came on the heels of the country’s N3.94 trillion trade deficit in goods in its external merchandise trade for the first quarter of the year, following higher level of imports over exports.

However, total trade increased to N9.76 trillion during the review period, representing 6.99 per cent rise over the N9.12 trillion recorded in Q4 2020.

The analysts in separate interviews with THISDAY urged the federal government to also narrow the trade imbalance by making exports more attractive than imports, adding that “though devaluation becomes a tool in achieving this.”

Among other recommendations, they urged the government to invest in value addition to raw materials and agricultural produce as well as create a conducive environment for manufacturers.

According to the National Bureau of Statistics (NBS), Nigeria’s total external merchandise increased to N9.76 trillion in the first quarter of the year, representing a 6.99 per cent rise over the N9.12 trillion recorded in the preceding quarter.

This also represented a 14.13 per cent increase compared to N8.55 trillion recorded in Q1 2020.

The Foreign Trade in Goods Statistics (Q1 2021), the report released yesterday by the statistical agency showed that the export component of trade stood at N2.91 trillion, representing 29.79 per cent of the total trade.
Import was valued at N6.85 trillion or 70.21 per cent of total trade.

However, the higher level of imports over exports resulted in a trade deficit in goods of N3.94 trillion, the NBS added.

The value of crude oil export stood at N1.92 trillion, representing 66.38 per cent of the total export in the review period. Non crude oil export accounted for 33.62 per cent of the total export.

The total value of trade in agricultural goods in Q1 stood at N757.4 billion, with the export component amounting to N127.2 billion. The import was valued at N630.2 billion.

The value of manufactured goods trade stood at N4.78 trillion, representing 49.01 per cent of total trade. The export component accounted for N250.4 billion while the import component was valued at N4.53 trillion.

By country, most goods were exported to India, with their value totalling N488.1 billion or 16.8 per cent of exports. Spain’s share of trade was N287.2billion or 9.9 per cent), China N190.1 billion or 6.5 per cent and The Netherlands N160.billion or 5.5 per cent.

In terms of regional trade, Nigeria exported most products to Asia, which accounted for N1.13 trillion, Europe N997.79 billion, America N316.62 billion, and Africa N449.84 billion. Also, goods worth N282.2 billion were exported to ECOWAS.

However, speaking on the performance, analysts said the current insecurity in the country continued to pose a significant barrier to general economic growth.

The Managing Director/Chief Executive, Credent Investment Managers Limited, Mr. Ibrahim Shelleng, said given Nigeria’s current economic situation, “we cannot continue with this trajectory of relying on imports for the most basic things.”

He said importation is presently discouraging local production and putting a strain on foreign reserves as well as weakening the economy.

Shelleng said structural constraints should be addressed to reduce cost of local production, which remained significantly high.

He said: “Whilst the structural challenges may require a long term approach to resolve, the government could adopt a backward integration mechanism that will seek to add value to key sectors and encourage more investment and participation.”

He also advocated the provision of secured hubs that allow for the production of the most valued exports, adding that once producers and processors in these hubs are able to efficiently produce, process and export, this would attract more players and greater investment.

He added: “Nigeria needs to address its foreign trade by adding value to goods before they are exported and that can only happen by improving the structural challenges that limit production in the country.
“We export raw materials for a pittance and import the finished goods at 10 times the price. Nobody needs a PhD in Economics to see that as a major issue.”

He added that while the COVID-19 lockdown and border closures would have had an impact on the trade figures, the increase in food importation could be attributed to the multiple issues plaguing the agricultural sector, which limited production and necessitated increased imports.

On his part, Managing Director/Chief Executive, Dignity Finance and Investmemt Limited, Dr. Chijioke Ekechukwu, said as a matter of urgency, the country should refine its petroleum products to reduce heavy foreign exchange payments for importation.

According to him, insecurity has continued to cause major havoc to the economy, while urging the government to take proactive steps to subdue it.

Ekechukwu called for incentives for exporters and less for importers, adding that tariffs and taxes can be used as tools to achieve the objectives.

He said: “Much as we have experienced a growth in our international trade trajectory, though marginal, this tells us that we could have done far better under a normal secure environment.

“That our import constitutes 70.21 per cent of our international trade and export, 29.79 per cent explains why our currency continues to be devalued.

“The demand for the foreign currency can not be matched substantially by supply from export. This figures show that we are an import-dependent economy.”
Similarly, Managing Director/Chief Executive, SD&D Capital Management Limited, Mr. Idakolo Gbolade, said the country’s trade performance could be better.

According to him, increased importation has continuously put a strain on the foreign exchange balance.
He said the country should deepen relationship with its major export partners while ensuring that countries like the USA are brought back to the group of major export partners.

Gbolade said Nigeria must take advantage of the African Growth and Opportunity Act (AGOA) and other measures offered by the US government to improve export.

He said: “We must also look critically at the African Free Trade Agreement and use it to our advantage in exporting goods to African countries.

“From the trade statistics, agricultural export, manufactured goods and non-oil products increased in export percentage performance, which really buttressed my point that if Nigeria can add value to our raw materials and agricultural produce and create a conducive environment for our manufacturers, then the trend can change to our advantage.”