Nigeria last year recorded the worse ever trade deficit of N7.4 trillion in the full year ended in 2020, no thanks to the COVID-19 pandemic, the National Bureau of Statistics (NBS) has said.
A trade deficit refers to a situation where imported goods imported exceed exported ones.
The NBS said the trade deficit is the first by Nigeria since 2017, but the worse performance on record.
The poor trade record obviously trickled down from the 10.3 per cent fall total merchandise trade by 10.3 per cent during the year under review to N32.4 trillion.
Across regions, Nigeria’s trade with West Africa suffered a 39.5 per cent year-on-year (y/y) decline in 2020 due largely to a significant drop in exports. Imports from West Africa fell y/y by 39.8 per cent while there was an 8.4 per cent q/q rise in fourth quarter of 2020. Similarly, exports to West Africa fell by 39.5 per cent y/y but rose 24.5 per cent in fourth quarter of 2020.
“We attribute the weakness in trade with West Africa to the restrictions from the pandemic and the land border closure”, said analysts at Afrinvest.
Exports fell 34.8 per cent y/y for 2020 following weak performance in the crude oil market and trade restrictions to contain COVID-19 spread. There was a broad-based decline in oil and non-oil exports on a y/y basis, largely driven by the 35.7 per cent and 31.6 per cent decline in the export of crude oil and raw materials respectively. The moderation in crude oil exports is attributed to the 32.6 per cent y/y reduction in average crude oil price to $43.3/bbl. in 2020. In addition, as Nigeria enforced partial compliance with the OPEC+ output cuts, crude oil production declined 10.4 per cent y/y to 1.8mbpd, compounding the decline in total exports. Conversely, exports rose by 6.5 per cent quarter-on-quarter (q/q) to N3.1 trillion in fourth quarter of 2020.
Analysts said, this reflects the gradual resumption of trade on hopes of vaccine distribution and the 3.6 per cent q/q increase in the average crude oi price. The recovery in Q4:2020 was supported by an 18.4 per cent and 4.0 per cent increase in non-oil exports and export of crude oil in that order. With the resumption of economic activities across many sectors, we expect growth in exports to accelerate on the back oqf the recovery in oil prices and a possible increase in oil production.
Total imports rose by 17.3 per cent y/y to the highest on record at ₦19.9tn in 2020 just as it climbed 10.1 per cent q/q to N5.9 trillion in fourth quarter of 2020. Despite the general slowdown in economic activities and foreign exchange (FX) illiquidity, the growth in imports was driven by a 12.2 per cent y/y and 15.8 per cent y/y increase in the import of machinery and mineral products. Nigeria’s imports from China, its major trading partner, grew by 2.0 per cent and 32.5 per cent in fourth quarter and full year of 2020 respectively, supported by China’s fast-paced recovery from COVID-19. Meanwhile, imports from India, Nigeria’s second largest trading partner was down 22.6 per cent y/y in full years of 2020 but grew 42.9 per cent in the fourth quarter of 2020.
