Trade Nigeria’s FX Payments Beat Inflow in Q4 amidst FCY Scarcity
Godwin Emefiele, CBN Governor

Trade: Nigeria’s FX Payments Beat Inflow in Q4 amidst FCY Scarcity

Due to unfavourable trade balance, Nigeria’s foreign exchange (FX) receipts fell below outflow of foreign currency for import bills settlement in the fourth quarter of fiscal year 2020 despite foreign currency (FCY) scarcity in the country.

Negative trade position indicates that Nigeria did not perform well in the foreign trade market as demand for FCY for import bills payment expanded above exports earnings, thus resulted to N1.8 trillion negative position in Q4.

The Central Bank of Nigeria (CBN) official foreign exchange rate has depreciated 92.4% in the last five years amidst unmet rising demand for foreign currencies in the country.

In 2016, Nigeria’s official exchange rate was ₦197 to a US$1 in 2016 as against ₦379 today’s rate quoted by the apex bank, indicating that movement of Naira alone has impoverish Nigerians.

Due to FX scarcity of foreign currency amidst rising demand, the Central Bank of Nigeria has initiated various measures to attract inflow and reduce outflow, but situation has remained the same over the years.

Recalled that the CBN banned some items from accessing foreign exchange for importation, restrained repatriation of dividend offshore and announced decision to pay N5 on every dollar inflow via remittances.

Noted by the policy authority that the country is well diversified but foreign receipts from oil still account for significant chunk of foreign receipts.

While oil prices has maintained uptrend after recovery from pandemic condition that saw oil contango in 2020, accretion into external reserves has been limited.

In fact, the Nigerian external reserve greatly shy away from $36 billion amidst disagreement with the International Monetary Fund’s $1.5 billion loan disbursement.

The CBN has refused to tone down disparity in its multi-tiered exchange rate which IMF has cited as condition for loan disbursement for the nation.

In a new report, the National Bureau of Statistics data showed that Nigeria commodity exports to 5 countries generated N1.382 trillion in the final quarter of fiscal year 2020 despite the ravaging incidence of coronavirus on the global economy.

However, with the same countries, Nigeria imported goods and services worth N3.14 trillion, according to data from the Bureau.

NBS report shows that the top five countries include India (N547.02 billion), Spain (N313.38 billion), the Netherlands (N194.50 billion), the United States (N170.36 billion) and China (N156.78 billion).

It was noted in the report that the All-commodity group import index increased by 0.13% between October and December 2020.

This was driven mainly by an increase in the prices of Base metals and articles of base metals (1.0%), Boilers, machinery and appliances; parts thereof (1.03%), and Products of the chemical and allied industries (0.75%).

However, the report said the index was negatively affected by animal and vegetable fats and oils and other cleavage prod. (-1.06%), prepared foodstuffs; beverages, spirits and vinegar; tobacco (-0.66%) and Plastic, rubber and articles thereof (-0.37%)

NBS said between October and November 2020, the all-commodity group import price index decreased by 0.23%.

It stressed that the index was driven by decreases in the import prices of Boilers, Machinery and Appliances (-1.77%), Prepared foodstuffs, Beverages, spirits and Vinegar (-1.35%) and Animal and Vegetable fats and Oils (- 1.20%).

It however was offset by increase in the prices of Products of the chemical and allied industries (1.48%), Wood and articles of wood, wood charcoal and articles (1.18%) and Mineral products (0.49%)

“Between November and December 2020, the All-commodity group import index grew by 0.36%, driven by increase in import prices of Boilers, Machinery and Appliances (2.80%) as well as Base metals and Articles (1.91%)”, NBS stated.

It said this was negatively affected by fall in prices for products of the chemical and Allied industries (- 0.73%), mineral products (-0.71%) and Wood and Articles of wood, wood charcoal and Articles (-0.58%).

Meanwhile, NBS revealed that the All-commodity group export index decreased by 0.25% between October and December 2020, noting that due to decreases in the prices of wood and articles of wood, wood charcoal and Articles (-0.49%).

These also include Vehicles, Aircraft and Parts (-0.44%), Base Metals and Articles of Base Metals (-0.41); which was partly mitigated by an increase in the prices of boilers, Machinery and Appliances (0.66%)

NBS reported that between October and November 2020, the All-commodity export price index fell by 0.49% as a result of decreases in the prices of wood and articles of wood, wood charcoal and articles (-0.98%), Vehicles, aircraft and parts (-0.88%) and Base metals and Articles of Base Metals (-0.83%).

Again, it noted that this was offset by the prices of prepared foodstuffs, beverages, spirits and Vinegar (1.60%), Boilers, Machinery and Appliances (1.31%).

All-region export index decreased by 0.25% between October and December 2020 due to declines in export prices to All-regions except Asia (Africa -1.18%, Europe -0.27%, America -0.19 % and Oceania0.17%). During the quarter, exports to Asia recorded an increase of 0.16%. The month –on-month changes show a decrease of 0.49% in November and a slight increase of 0.23% in December.

The monthly percentage change between October and November 2020 was due to decreases in the prices of exports to All-regions except Asia (which increased by 0.33%)

The monthly change between November and December 2020 stood at 0.23%. This was a result of higher export prices to All-regions with the exception of Asia (-0.17%).

The All-region group import index rose 0.13% between October and December 2020 due to increases in import prices across All-regions except Africa and Europe as Oceania recorded 0.75% uptick, Asia 0.59% and America 0.53%.

Africa and Europe recorded price declines 0.22% and 0.24% respectively, NBS stated. It added that monthly percentage change showed a decrease of 0.23% in November but an increase of 0.36% in December.

Between October and November 2020, the All-region import index declined by 0.23% due to decreases in the import prices from Asia (-1.25%) and Africa (-0.44%). This was offset by higher import prices from Oceania (1.47%), America (1.04%) and Europe (0.21%).

NBS added that between November and December 2020, the All-region group import index recorded an increase of 0.36% driven by Asia (1.84%) and Africa (0.22%) but offset by Oceania (-0.73%), America (- 0.52%) and Europe (-0.45%).

“The terms of trade by region declined by 0.26% in November and 0.13% in December. The All-region terms of trade on average declined by -0.39% due to unfavourable terms of trade across all regions”, it explained.

INDIA

Total exports to India in Q4 was valued at N547.02 billion or 17.12% of total export. NBS said the largest export commodity to India was Petroleum oils and oils obtained from bituminous minerals, crude valued at N516.82 billion.

This was followed by Natural gas liquefied and Leather further prepared after tanning/crusting, including parchment-dressed leather of sheep/lam valued at N26.66billion and (N2.13billion) respectively.

On the other hand, the value of import trade from India was valued at N506.00 billion, accounting for 8.54% of total imports. Import trade was dominated by imported motorcycles and cycles, imported completely knocked down (CKD) by established manufacturers >50cc<=250cc, valued at N87.95 billion, followed by Gas Oil (N55.97 billion) and Other Antibiotics (N40.30billion).

SPAIN

NBS report showed that the value of total exports to Spain stood at N313.38billion or 9.81% of total export. However, the dominant export product to the country was Petroleum oils and oils obtained from bituminous minerals, crude valued at N243.02billion accounting for 77.54% of total export.

This was followed by Natural liquefied gas worth N63.81 billion and Leather further prepared after tanning/crusting without wool on of goats or kids valued at N3.02 billion.

However, the value of imports during the quarter stood at N84.90 billion. Motor Spirit ordinary billion ranked at the top of imports, valued at N29.05billion, followed by Mixed alkyl benzenes & mixed alkyl naphthalene, valued at N15.74 billion and Gypsum; anhydrite whether or not coloured, with/without small quantities of accelerators, worth N5.61billion.

The Netherlands

Nigeria’s export trade with the Netherlands in Q4 2020 was valued at N194.50 billion or 6.09% of total exports. Of which major export products were: Petroleum oils and oils obtained from bituminous minerals, crude valued at N190.74 billion.

These were followed by Superior quality raw cocoa beans, and Good Fermented Nigerian Cocoa Beans valued at N1.93 billion and N1.38 billion respectively.

However, the value of imports stood at N424.49, with the main commodities imported being Motor Spirit ordinary, which amounted to N165.50 billion, Other Antibiotics (N108.78billion) and Gas oils (N47.12 billion).

USA

Similarly, Nigeria’s export trade with the United States was valued at N170.36 billion accounting for 5.33% of total exports. The major commodities exported during the period were Petroleum oils and oils obtained from bituminous minerals, crude; Other petroleum gases etc. in gaseous state and Natural gas, liquefied, valued at N142.60 billion, N22.92 billion and N2.58 billion respectively.

On the import side, value of imports amounted to N448.64 billion, with the main commodities imported being Used Vehicles, with diesel or semi diesel engine, of cylinder capacity >2500cc, amounting to N155.13billion.

Other products imported were Other Durum wheat (Not in seeds) (N54.61 billion) and Used Vehicles, with diesel or semi diesel engine, of cylinder capacity >1500.

CHINA

NBS said exports to China was valued at N156.78 billion or 4.91% of total exports during the period, largely dominated by Crude (N57.5billion), Natural Gas liquefied (N45.83billion) and Sesame seeds, whether or not broken (N18.13billion).

On the other hand, the value of imports from China stood at N1,675.55 billion representing 28.28% of total imports. The largest import commodity from China was Machines 4 the reception, conversion & transmission or regeneration of voice, images or…; Bending, folding… machines (incl. presses), numerically controlled; and Air conditioning machine, Window/wall types, self-contained / split system, presented CKD valued at N53.13 billion, N41.08 billion and N35.14 billion respectively.

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Trade: Nigeria’s FX Payments Beat Inflow in Q4 amidst FCY Scarcity