Trade Report: Rising Imports Weigh on Trade Surplus

The Q2:2019 merchandise trade report released by the National Bureau of Statistics (NBS) shows that Nigeria’s trade surplus declined to N588.8bn from N831.6bn in Q1:2019 as imports continued to expand faster than exports. Imports sustained the upward trajectory since Q3:2018, rising 8.2% and 65.2% (vs 25.8% and 3.4% in Q1;2019) on Y-o-Y and Q-o-Q basis respectively. This was mainly driven by a sharp rise across the board, but the importation of fuel and lubricant saw a steeper rise at 22.1% and 168.5% to N886.0bn on Y-o-Y and Q-o-Q basis respectively. Similarly, the importation of transport equipment and parts rose strongly by 342.3% and 28.7% to N635.0bn on Y-o-Y and Q-o-Q basis respectively. The importation of food & beverage, capital goods and consumer goods followed a similar growth trend, with the exception of industrial supplies which contracted 36.8% Q-o-Q to N791.4bn but rose 27.8% Y-o-Y.

Exports expanded but at a slower pace of 2.1% Y-o-Y to N4.6tn in Q2:2019 (vs N4.5tn in Q1:2019) as a result of the increase in crude oil exports to N3.9tn. The rise in exports resulted from a 7.6% Y-o-Y increase in oil production to 1.98mbpd in Q2:2019 despite lower oil prices at US$68.5/bbl (vs US$74.9bbl in Q2:2018). However, on a Q-o-Q basis, exports rose much slower at 1.3%, due to a slight moderation in oil production even as average oil prices were higher in the quarter. Non-oil export growth rose by 4.1% Y-o-Y to N227.6bn while declining 62.3% Q-o-Q.

The moderation in growth surplus continues to affect Nigeria’s external balance, with external reserves declining US$1.1bn to US$43.4bn between Q1:2019 and Q2:2019. We expect trade surplus to remain weak in subsequent quarters mainly due to weak oil & gas exports and sustained growth in imports, particularly as we approach the festive season. However, we suspect that the partial closure of the Nigeria-Benin border may weigh on merchandise trade.