Nigeria’s trade surplus hits 5-yr high on weaker naira

Nigeria’s trade surplus surged to the highest in five years and three months in the third quarter of this year largely on the naira devaluation, a BusinessDay analysis of the latest foreign trade statistics report has shown.

The report by the National Bureau of Statistics (NBS) shows that Africa’s biggest economy recorded a positive trade balance of N1.89 trillion for the fourth straight time in Q3, a 166.2 percent increase from N708.9 billion in the previous quarter. It improved from a trade deficit of N409.4 billion on a year-on-year basis.

A trade surplus which is an economic measure of a positive balance of trade occurs when a country’s exports exceed its imports.

The country’s total trade increased to N18.8 trillion in Q3 from N12.2 trillion in the previous quarter. It also grew year-on-year by 52.8 percent from N12.3 trillion.

“Nigeria’s total merchandise trade in Q3 rose significantly due to the increase in exports and imports resulting in a positive trade balance,” the NBS report said.

It added that the significant rise in exports and imports in the quarter compared to the preceding and corresponding quarters was largely driven by an increase in trade activities within the period.

“Looking at the data, crude oil exports increased significantly even as non-oil exports decline,” Israel Odubola, a Lagos- based research economist, said.

He said the official rate also weakened between the second and third quarter. “In essence, the increased trade surplus can be linked to the devaluation effect, with the country getting more naira from export proceeds per dollar.”

According to Odubola, having a positive trade surplus is favourable to the current account as it helps to reduce external pressure. “Trade surplus is quite significant in current account composition.”

Exports are in dollars, so the exchange rate would automatically lead to a jump in exports, Muda Yusuf, chief executive officer of Centre for the Promotion of Private Enterprise, said.bus

The Central Bank of Nigeria in June merged all segments of the foreign exchange market into the Investors and Exporters window, and reintroduced the willing buyer, willing seller model.

The naira has continued to depreciate against the dollar and other major foreign currencies since then.

The official exchange rate increased from N463.38/$ to N927.19/$ as of Friday. At the parallel market, the naira depreciated to N1,164/$ from 762/$.

The high cost of sourcing FX was one of the major factors that pushed Nigeria’s inflation rate to an 18-year high of 27.33 percent in October from 26.72 percent in the previous month, according to the NBS.

“Exports would improve significantly because the naira is weaker which would attract more dollar inflows whether in the form of trade or any other form,” Abiodun Keripe, managing director at Afrinvest Consulting, said.