Q1:2019 Trade Report: Weak Oil Export Pulls Trade Surplus Lower

This week, we analyse the long-awaited Q1:2019 merchandise trade data released by the National Bureau of Statistics (NBS). Nigeria’s trade balance remained in a surplus but moderated 4.8% to N831.6bn in Q1:2019 as imports expanded faster than exports.

Imports continued to accelerate, increasing 25.8% and 3.4% on a Y-o-Y and Q-o-Q basis respectively. This was mainly driven by an expansion in the importation of capital goods and industrial supplies as there was a surprising contraction in fuels and lubricants import. We note that imports growth moderated in Q1:2019, compared to the average of 69.5% in the previous quarters which was partly due to import of a large-sized one-off capital equipment. Although we expect sustained growth in imports driven by industrial and household demand, we expect the pace to moderate in subsequent quarters.

Exports contracted 3.9% on a Y-o-Y basis to N4.5tn in Q1:2019, due to a 5.7% Y-o-Y moderation in crude oil exports to N3.4tn. We attribute this to a reduction in oil production which contracted 1.0% Y-o-Y to an estimated 1.96mb/d in Q1:2019 and oil price which was 5.8% lower at US$63.3/bbl. However, exports rose 1.8% Q-o-Q, supported by improved oil production even as oil prices moderated. Notably, the NBS revised downwards the crude oil exports data for Q4:2018 to N3.6tn from N4.2tn, and in turn total trade data to N18.5tn in Q4:2018 from N19.1tn. For non-oil exports, there was a moderate 4.6% increase Y-o-Y to N604.4bn, although this was faster at 159.9% on a Q-o-Q basis. We expect exports growth to remain weak in subsequent quarters mainly due to weak oil prices.

AfCTA in Focus: How Nigeria Traded with Africa in Q1:2019
In our coverage of the ratification of the African Continental Free Trade Area (AfCTA) last week, we looked at the implications of Nigeria’s absence in the trade bloc. We noted that trade with Africa, in particular West Africa, could suffer. This week, in light of the recently released trade data, we look at Nigeria’s trade pattern with Africa. Total trade with Africa was worth N1.6tn in Q1:2019, with ECOWAS taking a large share at N328.3bn. Nigeria’s trade with Africa was 18.3% of its total trade while trade with ECOWAS was 20.8% of Nigeria’s intra-Africa trade. There was a trade surplus with Africa and ECOWAS at N292.7bn and N272.9bn respectively in Q1:2019.

Analysing the structure of Nigeria’s trade with Africa suggests that imports constituted 40.7% while this was 8.4% for trade with West Africa. The data does not provide the split of trade into oil and non-oil for countries; hence we are somewhat restricted in our analysis. However, we can glean insights from data on Nigeria’s top ten exports destination which was split into oil and non-crude oil. We observe that three countries serve as the destination for 73.0% of Nigeria’s exports to Africa – South Africa (4th largest trading partner), Angola (6th) and Ghana (9th) – and they all feature in the top ten destinations of Nigeria’s exports. Our analysis further reveals that 50.7% of Nigeria’s exports to these countries are non-crude oil. As a result, we believe Nigeria’s trade, especially non-crude oil, and knock-on effects such as FDI would suffer due to the refusal to sign AfCTA.