Recent terms of trade statistics gleaned from a report by the National Bureau of Statistics (NBS) shows that Nigeria recorded a total trade of N9.8 trillion in the first quarter of 2021, up 6.9 per cent compared to the N9.1 trillion recorded in the last quarter of 2020.
The economy of the most populous black nation was however hit by a merchandise trade deficit of N3.94 billion in Q1 2021, its highest in a quarter since 2011. According to the Abuja-based national statistical agency, as the country’s import rate in the first three months of 2021 represented a 1095.3 per cent year-on-year increase and a 44.4 per cent quarter-on-quarter surge in imports, while exports suffered a 54.3 per cent year-on-year plunge.
Asia, led by China, emerged Nigeria’s dominant trade partner with a record N3.3 trillion or 48.45 per cent goods originating from the world’s largest continent, while Nigeria exported products worth N1.1 trillion to the Asian continent, with India emerging the leading export destination as N282.2 billion (16.8 per cent) worth of goods were received by the world’s third largest oil consumer.
On the other hand, Nigeria recorded a lower trade value in Africa as products worth N183.4 billion (2.68 per cent) were imported within the continent while products valued at N449.84 billion were exported to other African countries.
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Commenting on the economic impact of deficit trading on Nigeria’s economy, economic analysts asserted that the country’s foreign trade is largely import driven and the country is heavily reliant on petroleum export which stood at 66.38 per cent, while non-oil revenue in the period under review was at a subdued 33.62 per cent. They further averred that a negative trade balance indicates gloomy macroeconomic conditions for Africa’s largest economy and a realisation that the present administration’s drive to boost economic diversification is far flung from achieving the desired result. This, they warned, is likely to stall economic recovery if effective measures are not implemented.
Ayorinde Akinloye, investment research analyst at United Capital Plc., described the recent trade deficit as a ‘worrisome situation’ considering that Nigeria experienced a decline in its quarterly export figures and is still strongly dependent on oil as a major export commodity despite its volatility and the transformation of many developed countries into green energy consumption at the detriment of oil. He further averred that Nigeria’s reliance on oil as a dominant export shows the vulnerability of the economy to just crude oil, which cannot sustain the economy in the long run.
“We need to be more intentional in diversifying our export base in order to ensure that we are not vulnerable to shocks in the crude oil market,” he advised.
Reacting to the low export/import trade relationship within the African region, Akinloye explained that many African economies are commodity-export dependent, which is similar to the situation in Nigeria.
According to him, African countries are not productive enough to produce what is needed from each other, which means most African countries rely on more industrialised economies who process raw commodities into finished products.
He also noted that Nigeria is not prepared to take advantage of the regional trade benefits set by the African Free Trade Continental Agreement (AfCTA) as the country lacks a lot of productivity in the aspect of finished goods.
The research expert suggested that African countries need to improve on the aspect of producing finished goods at industrial level to bolster the developments established by the (AfCTA). He added that for Nigeria to serve as an attractive market to other African countries, there must be an improvement on the infrastructure and production systems within the agricultural value chain and the country needs to be more focused on manufacturing consumables rather than producing just raw materials that still need to be processed.
On his part, Chijioke Ekechukwu, chief executive officer, Dignity Finance & Investment Limited, said factors affecting Nigeria’s agriculture including; insecurity, increasing attacks of farmers in many cash crop producing regions, post-harvest losses as well as low capacity of the local manufacturing and mining sectors , contributed to the plunge in output and export volumes recorded in the non-oil sector. He warned that the country would continue to experience dwindling revenue in its non-oil exports if the domestic capacity is not enhanced and effectively exploited.
Wilson Erumebor, senior economist, Nigeria Economic Summit Group, opined that Nigeria is not prepared to foster its non-oil revenue diversification plan. According to him, harnessing agriculture to tackle food insecurity and increase exportation in the world market goes beyond ‘pumping’ funds and loans into the sector as finance is not the only issue affecting it.
He stressed that if factors such as increased mechanization, training local farmers on improved agricultural practices, value chain development, access to markets outside Nigeria amongst others are not facilitated, the country will continue to experience the same lapses in its trade figures.
Taiwo Oyedele, fiscal policy partner at PricewaterCoopers (PwC), said Nigeria is yet to make substantial figures from its exportation of agricultural commodities, noting that the country is more focused on its raw produce output without actually adding value to what is being produced. Processing and packaging, he explained, places more value on export commodities and serves as the best measure towards ensuring a better trade balance with other countries.
Promise Amahah, chief executive officer, Mainstay Agro-Allied Services Ltd., noted that agriculture is a more encompassing sector which many farmers and the government have been unable to fully exploit. Amahah pointed out that for Nigeria to close its foreign trade gap, areas such as mental reconstruction of farmers, investment advisory, increased youth engagement, farmer-to-business connection, research data analysis, market survey and general moral support structures need to be brought to fore to actualize a paradigm shift in the agricultural sector.
In its assessment of investments made in Nigeria’s biggest non-oil revenue (agriculture), FBNQuest Capital, a subsidiary of FBN Holdings Plc, noted that, at the end of February 2021, interventions by the Central Bank of Nigeria (CBN) and state-owned development banks resulted in a total disbursement amounting to N1.5 trillion.
The report added that N686.6bn of the total amount was disbursed under the Commercial Agricultural Credit Scheme (CACS) while N601.8 billion was disbursed under the Anchor Borrowers Programmes (ABP) to 3,038,649 farmers. Additionally, the CBN reportedly disbursed N111.62 billion to 28,961 beneficiaries under its Agribusiness Small and Medium Enterprises Investment Scheme in which about 70 per cent of the beneficiaries are in the agriculture sector.
The report attributed disruptions in agricultural supply chains occasioned by bandits and herdsmen in food-producing areas of the country, as well as structural challenges ranging from poor storage and logistics for the discouraging results in the agricultural sector. For Nigeria to achieve its full potential in its diversification plans, internal factors responsible for supply bottlenecks need to be addressed to boost earnings and job creation, the report suggested.