Nigeria has recorded a trade surplus for the first time in three years signifying that Nigeria’s export businesses are gradually clawing back most of the losses recorded after the Covid-19 worldwide shutdown.
This is contained in the recently released Foreign Trade report by the National Bureau of Statistics (NBS).
Nigeria’s foreign trade rose to a record level of N52.4 trillion in 2022, indicating an increase of 31.8% when compared to N39.75 trillion recorded in the previous year. A further breakdown of the total trade data shows Nigeria’s export surged by 41.7% to N26.8 trillion in the review year compared to imports which surged 22.5% to N25.5 trillion.
The result is a trade surplus of N1.2 trillion, the first since Covid.
Nigeria recorded back-to-back trade deficits in 2020 and 2021 when imports exceeded exports by N178.2 billion and N1.9 trillion respectively.
Export growth propels trade surplus
Total export of N26.8 trillion is the first time Nigeria is crossing the N20 trillion threshold in total exports. A major driver of Nigeria’s export performance was crude oil which constituted about 78.6% of total exports with non-oil exports making up the balance.
The Buhari administration made non-oil exports the cornerstone of the country’s foreign exchange earning strategy as it strived to wean itself out of crude oil. However, crude oil exports rose to a 5-year high of N21.9 trillion 46.4% year-on-year from N14.4 trillion recorded in 2021 to N21.09 trillion in 2022.
This is largely attributed to the oil price rally during the year, following the attack on Ukraine by Russia just as global economies reopened after the covid-19 lockdowns. But while crude oil exports rose rapidly, non-oil exports dragged.
Non-oil exports rose to N5.6 trillion in 2022 compared to N4.49 trillion in 2021 largely driven by raw material exports. During the year raw material exports doubled to about one trillion naira dwarfing exports of manufactured goods which printed at N781 billion.
The non-oil export performance buttresses the changing landscape of Nigeria’s business environment. In 2019, just before the covid-19 year, manufacturing exports was about N2 trillion while raw material export was just N117.9 billion.
Leading Nigeria’s export destination was Europe racking up about N11.7 trillion during the year. The closes to Europe was Asia with around N8 trillion. The performance of Europe is not surprising having led as Nigeria’s largest export destination since 2018.
The war in Ukraine and the global rush for crude oil and raw material supplies also added to the surge recorded during the year.
Imports still high
Despite recording a positive trade surplus, Nigeria’s. import figure is still high at about N25 trillion or 12.3% of the GDP. This is despite several actions by the central bank to curb dollar-related imports. Fuel and lubricants topped the import bill racking up about N10.1 trillion of the total.
Nigeria still relies on the importation of fuel and other petroleum products to meet its energy demands. It is opined that the operation of the Dangote Refinery may help reduce this bill by over 50% in the first year of operations.
Nigeria also spent N5.9 trillion on machinery and transport equipment while also splashing another N2.6 trillion on food and live animals. Highlighting its reliance on imported finished products, it also spent N1.9 trillion on manufactured goods and another N3.2 trillion on chemical-related products.
CBN Policies elevated exports
Apart from the effect of the oil price rally, some of the policies by the Central Bank to boost non-oil export has also paid off in 2022, considering that non-oil exports increased by 19.4% to their highest level on record at N2.56 trillion.
- Recall, that the CBN launched the RT200 non-export proceeds repatriation, which is aimed at raising $200 billion in foreign exchange through non-oil exportation over the next five years.
- This is coupled with the African Continental Free Trade Agreement as well as the Pan-African Payment and Settlement System, which is set to improve intra-regional trade on the African continent.
- In the same vein, the Apex bank has also recorded significant interventions in the Agricultural sector, to boost food production locally and in agro-export.
- According to the CBN Monetary Policy Communique, the apex bank has disbursed a sum of N1.07 trillion to over 4.6 million smallholder farmers cultivating or rearing 21 commodities across the country.
Nigeria needs to diversify export earnings
So much has been said in recent years about diversifying Nigeria’s export income. However, as good as this data is, a lot more needs to be done to harness the opportunities.
Nigeria’s export performance has traditionally been dominated by crude oil, which accounts for about 78.6% of total exports. However, there is potential for the country to diversify its export base and reduce its dependence on crude oil.
The government has pushed agriculture for the last 8 years however, the sector, albeit the largest in the country in terms of contribution to GDP, is still struggling to meet local consumption let alone exports. However, it remains a major export potential for the country.
Another sector with potential is solid minerals. Nigeria is rich in mineral resources, including tin, limestone, coal, and iron ore, among others. Developing the solid minerals sector and exporting minerals and processed mineral products can help to diversify the country’s export base. The government has launched initiatives such as the Solid Minerals Development Fund to promote investment in the sector but none has yielded the right momentum to contribute to exports.
Other sectors of potential export earnings are services, manufacturing, and technology. Nigeria’s growing technology sector, including fintech, e-commerce, and software development, has the potential to become a major export earner. Increasing investment in technology and promoting innovation could help to unlock this potential.