Published On: Sun, Jun 24th, 2018

Caution on Nigeria’s trade surplus

Recent report by the Nigerian Bureau of Statistics, NBS revealed cheering news for the nation’s trading balance. As an import dependent economy, achieving a balance of trade surplus had usually been challenging since we import practically everything and export only crude oil.

Caution on Nigeria’s trade surplus

And coming out of recession just a year ago, such development can only signal a positive change for the economy. It also implies that some of the economic policies of the government are beginning to produce the desired results.

According to the report, Nigeria’s trade surplus skyrocketed to N4.04 trillion in 2017 from a trade deficit of -N290.1 billion recorded in 2016. The Foreign Trade in Goods Statistics released by the NBS showed that Nigeria’s total trade stood at N23.16trn, which is 33.5 per cent higher when compared to the value in 2016 of N17.35trn.

For the fourth quarter of 2017, Nigeria recorded N6.02trn for total trade, which represented a decline of 0.7 per cent over the third quarter of 2017 and an increase of 13.9 per cent over the same period the previous year.

Trade balance for the fourth quarter of 2017 stood at a surplus of N1.90trn, up from the surplus of N1.09trn recorded in the preceding quarter and the surplus of N671.30bn in the corresponding quarter t in previous year.

Analysis of the report shows that the total imports for 2017 stood at N8.82trn which was 8.5 per cent lower than the 2016 trade import value of N9.56trn. Nigeria recorded total imports valued at N2.11trn in the fourth quarter of 2017, down from N2.49trn in the previous quarter.

However, the boost seems to come from rising export with total exports for 2017 standing at N13.60trn, up 59.47 per cent from the N8.53trn recorded in 2016. Total value of export rose to N3.91trn in the fourth quarter of 2017, up by 9.35 per cent over the third quarter of 2016 and by 31.27 per cent over the same period in 2016.

The report showed that India, USA, the Netherlands, France and Spain are Nigeria’s top export partners, while China, Belgium, USA, India and the Netherlands are her top import partners.

A further analysis of these facts suggests that the economy is improving, especially in the critical area of reducing imports. This government has strongly committed itself to reducing the nation’s dependence on imports which has virtually turned the country into a dumping ground for all sorts of goods.

Before the coming of this government, Nigeria was spending as much as $3 billion annually on rice import alone, and about $1.2 billion on fish. The government frowned at such situation and invested in rice production which is yielding positive results as several state governments and individuals followed the lead.

The Central Bank of Nigeria, CBN’s, Anchor Programme is transforming Nigeria into a self sufficient nation in rice production and eventually a net exporter. This is commendable as no country can be safe and strong without achieving sufficiency in food production. Rice has become a stable food for most Nigerians and the huge foreign exchange expended on its import justifies the importance being given to it by the present administration.

Government is also encouraging fish and poultry products production with massive investment by Bank of Industry, BOI, in support of farmers in these sectors to meet local demand. With government consistent policy on agriculture, it is expected that this trade surplus will improve further as the nation continues to reduce its imports.

However, it is not all rosy for the nation as the figure of total export could be misleading. Nigeria exports practically very little of non oil goods to change the trade balance to its favour.. Obviously the increase came from the rising price of oil and the nation’s production output.

Oil price has risen to as high as $85 per barrel from a bottom low of about $26 in 2016, while output rose to over 2million barrels per day. This is an unprecedented fortune for the country and reflected on the surplus trade balance.

So, it would be dishonest to attribute all the gains in our trade balance to concrete government policy. But this newspaper acknowledges the actions of government to reduce the nation’s import dependency and its consequent pressure on the naira; and calls for more creative ways to advance the policy as it would encourage local industry and boost the value of the naira.

At present most of the gains in import reduction have been in agriculture with the manufacturing and industrial sectors still in doldrums with attendant effect on unemployment and job creation. Manufactured local goods are uncompetitive because of the hostile business environment as a result of infrastructure deficit and other harsh operating conditions such as high cost of credit and multiple taxation. This is where emphasis should laid in the years ahead.

We, therefore caution that, it may be too early for government to gloat over this positive trade balance because there is more work to do than the report may suggest.

 

 

 

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