The National Bureau of Statistics said on Tuesday that the country recorded a decline of N793.5bn in the first quarter merchandise trade to close at N2.72tn from N3.51tn in the fourth quarter of 2015, the first time in the last seven years.
The bureau, in the trade statistics report released on Tuesday, said the drop in the first quarter trade represented a decline of about 22.6 per cent over what was recorded in the preceding quarter.
It attributed the decline in the first quarter trade to a sharp drop in both import and export trade.
For instance, the report stated that while the country experienced a decline of N671.1bn, representing 34.6 per cent, in the value of exports, imports also dropped by N122.4bn or 7.8 per cent.
The report noted that the difference between the country’s total exports, which was put at N1.269tn, and total imports of N1.454tn made Nigeria to record a negative trade balance of N184.1bn in the first quarter.
The report read in part, “The total value of Nigeria’s merchandise trade at the end of Q1 2016 stood at N2.72tn. From the preceding quarter’s value of N3.51tn, this was N793.5bn or 22.6 per cent. This development arose due to a sharp decline in both imports and exports. Exports saw a decline of N671.1bn or 34.6 per cent, while imports declined by N122.4bn or 7.8 per cent.
“The steep decline in exports brought the country’s trade balance down to -N184.1bn, or N548.7bn less than in the preceding quarter.
“The crude oil component of the total trade decreased by N716.7bn or 46.6 per cent against the level recorded in Q4 2015.”
The report explained that the import trade stood at N1.45tn at the end of the first quarter of 2016 as against the preceding quarter’s value of N1.57tn.
The structure of Nigeria’s import trade, according to the report, was dominated by the import of machinery and transport equipment, fuel and chemical-related products.
These, the NBS report stated, accounted for 34.7 per cent, 17.4 per cent and 14.7 per cent, respectively.
On the other hand, the report stated that commodities such as oils, fats and waxes; beverages and tobacco contributed the least, accounting for 1.5 per cent, 0.8 per cent and 0.6 per cent, respectively.
In terms of exports, the report revealed that the highest export product for Nigeria in the first quarter was mineral products, which accounted for N1.05tn or 83 per cent of the total export earnings.
Further analysis of the report showed that in terms of exports by continent, Nigeria mainly exported goods to Europe and Asia, which accounted for N467.1bn or 36.8 per cent and N360.6bn or 28.4 per cent, respectively.
Furthermore, Nigeria exported goods valued at N161.3bn or 12.7 per cent to the continent of Africa, while that of the Economic Community of West African States was put at N50.4bn.
Financial analysts blamed the negative trade balance recorded in the first quarter of 2016 on the country’s inability to formulate an effective strategy to boost exports.
They also said the inability of exporters to know the economic direction of the government owing to the delayed passage of the 2016 budget as well as overdependence on revenue from oil were some of the major reasons for the decline in merchandise trade.
The Head, Banking and Finance Department, Nasarawa State University, Uche Uwaleke, said the negative trade balance recorded at the end of the first quarter of 2016 and the fact that a significant proportion of the exports were mineral products underscored the need to diversify the export base.
He said. “The fact that imports declined by just 7.8 per cent speak volumes of the weak elasticity of imports in spite of the high exchange rate. This revelation goes to buttress my position that devaluation of the naira will not make any significant impact on our trade balance given the inelastic nature of imports and the country’s shallow export base.
“The NBS report also shows that the bulk of Nigeria’s imports is from China. By implication, a lot of pressure will be taken off the dollar if the Nigeria-China agreement on yuan transactions is well implemented.
“The naira will also firm up as a direct consequence of settling imports from China in yuan instead of the dollar.”
Also reacting to the negative trade balance for the first quarter, the President, National Association of Nigerian Traders, Ken Ukaoha, said a lot of factors contributed to the development.
He said, “We have for so long remained import-dependent; we have also continued to cultivate a mono product economy, which is oil, and our earnings from oil is presently disappointing. Apart from the fact that the price of oil is depreciating, you also find out that the quantity of our export is going so terribly low as a result of vandalism.
“In terms of other non-oil exports, the country has still not yet got its act together. This is because diversification, which should have pioneered our exports, has not been effective. As we speak today, we don’t have a trade policy in place and we don’t have an export strategy in place.
“We are talking about import substitution, but all the strategies needed there are not in place. Also, the delay in the passage of the budget made all the private sector operators who are major players in exports to relax waiting for the budget passage in order to know the next line of action.”
On what could be done to reverse the trend, Ukaoha said the National Economic Management Team should as a matter of urgency come up with a trade policy.
Other economic experts said the negative trade balance meant the nation would likely record a severe negative balance of payment for the first quarter of this year.
This, they said, had serious negative consequences for the economy as the nation’s external reserves would deplete further.
“The implication of a negative trade balance for a country that does not have invisible imports is that we are going to have a severe negative balance of payment; the implication of this is that our external reserves will deplete further because we will need to use much of it to pay for imports,” the Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, said.
He advised the Federal Government to develop a strategy to grow non-oil exports in the face of the global plunge in oil prices.
The Head, Investment Research, Afrinvest, an investment bank and research firm, Mr. Ayodeji Ebo, said the negative trade balance further buttressed the challenges facing the economy.
While linking the decline in imports to the Central Bank of Nigeria’s restrictive foreign exchange policy, the expert said the decrease in exports could be linked to the sharp drop in global oil prices and production.
“It is a further call on the CBN to implement the flexible exchange rate policy it has announced. This will help to boost exports,” Ebo added.