Earlier this month, the National Bureau of Statistics (NBS) published the Foreign Trade Statistics report for Q2’22 which showed that Nigeria’s trade balance further improved to a surplus of NGN2.0trn (from NGN1.2trn in Q1’22). This is the country’s highest trade balance in the last 16 quarters. The increased trade, in our view, is on account of (1) the expansion in export earnings by 4.3% q/q (and 47.5% y/y) to NGN7.4trn and (2) the decline in imports by 7.9% q/q to NGN5.4trn.
The rise in export earnings in Q2’22 may be linked to the comparably higher average crude oil price of USD111.91/b in the quarter (compared with USD98.69/b in Q1 ’22), despite weaker oil production output in Nigeria (on account of oil theft and evacuation challenges).
On the other hand, the fall in the country’s import bill is likely due to fx scarcity amidst tighter fx controls by the central bank, limiting manufacturers and importers spending activities. Also, the slow pace of economic activities in China (new lockdowns), which accounts for a significant portion of imports, may have affected the import bill.
In terms of sub-components, crude oil sales rose 5.1% q/q (and 45.1% y/y) to NGN5.9trn while non-oil exports grew by 1.3% q/q to NGN1.5trn. There was subdued growth in non-oil exports (compared with oil exports) despite the federal government’s non-oil export initiatives.
• Nigeria recorded a trade surplus with 4 regions: Europe (NGN1.3trn), Americas (NGN605.1bn), Africa (NGN220.4bn), and Oceania (NGN6.8bn). However, it recorded a trade deficit of NGN162.1bn with Asia. India, Spain, and Netherlands were the top export destinations for Nigeria with export totalling NGN3.0trn. On the flipside, the top import sources were China, Belgium, and India with imports totalling NGN2.3trn.
• With the robust H1’22 outing of Nigeria’s foreign trade balance of NGN3.2trn (compared with a deficit of NGN1.6trn in H1’21), we expect the momentum to remain strong over the H2’22. Also, we expect oil export receipts to remain buoyed by relatively higher crude oil prices. The impact of Nigeria’s trade surplus would, however, be limited on Nigeria’s external reserve due to dynamics in Nigeria’s capital account.