Figure 1: Merchandise Trade Balance in Nigeria (2015-2018)
Source: UNCTAD 2019, UNCTADStat Database.
Total merchandise imports to Nigeria have increased to -USD 43.0 billion in 2018, from an annual average of -USD 36.9 billion from 2015 to 2017[1]. Exports also increased to USD 62.4 billion in 2018 from an annual average of USD 42.4 billion from 2015 to 2017[2]. The stronger growth in exports has improved Nigeria’s merchandise trade balance to a surplus of USD 19.4 billion in 2018 from a volatile surplus averaging USD 5.4 billion from 2015 to 2017[3]. The increase in export earnings has also led to a short-term improvement or increase in gross official reserves.
Figure 2: Gross Official Reserves in Nigeria (2016-2024)
Sources: IMF 2019, Nigeria 2019 Article IV Report; IMF 2017, Nigeria 2017 Article IV Report. Note: (*) Figures from 2019 onwards are projections from the IMF, 2019.
Gross official foreign exchange reserves increased to USD 42.6 billion in 2018 from an annual average of USD 31.9 billion from 2015 to 2017[4]. During this period, the NGN depreciated by -0.1% in 2018 to NGN 306.1 per USD (2017: -22.0%)[5]. The depreciation in currency was largely due to sustained pressure on the previously pegged exchange rate between the NGN and the USD due to lower export earnings from oil after 2014. This forced Nigerian authorities to: start implementing foreign exchange restrictions on a list of goods that have local substitutes since 2015; devalue the NGN; and introduce a dual exchange rate system with one fixed official exchange rate for a set of formal transactions and an alternative floating exchange rate determined by the Central Bank of Nigeria’s import-export windows for all other transactions since 2017[6]. The NGN depreciated by an annual average of -18.6% from NGN 195.5 per USD in 2015 to NGN 305.8 per USD in 2017[7]. Gross official reserves are projected to decrease to USD 38.5 billion in 2019, which is equivalent to 6.3 months’ import cover[8]. In the forward-looking medium-term from 2020 to 2024, gross official reserves are projected to decrease further to an annual average of USD 34.1 billion (approx. 5.1 months’ import cover)[9]. The export growth has been insufficient to support improvement in Nigeria’s current account balance, which has deteriorated further due to the widening services trade deficit and rising foreigners’ income from Nigeria.
Nigeria’s current account balance deteriorated to a deficit of -USD 1.6 billion in 2018, from a surplus averaging USD 7.2 billion from 2015 to 2017[10]. In spite of the growth in exports, which improved the current account balance, this has been undermined by the widening services trade deficit and rising foreigners’ income from Nigeria leading to further deterioration of the current account balance. The balance of services trade is projected to deteriorate to a deficit of -USD 19.8 billion in 2018 from a deficit averaging -USD 12.6 billion from 2015 to 2017[11]. Net foreign income is projected to deteriorate to a deficit of -USD 13.8 billion in 2018 from a deficit averaging -USD 10.9 billion from 2015 to 2017[12]. The current account balance is projected to deteriorate to a deficit of -USD 1.6 billion (approx. -0.4% of GDP) in 2019[13]. In the forward-looking medium-term from 2020 to 2024, the current account balance is projected to improve to a narrow surplus averaging USD 20.0 million (approx. .02% of GDP)[14].
Figure 3: Current Account Balance in Nigeria (2016-2024)
Sources: IMF 2019, Nigeria 2019 Article IV Report; IMF 2017, Nigeria 2017 Article IV Report. Note: (*) Figures from 2019 onwards are projections from the IMF, 2019.
However, Nigeria is still heavily dependent on crude oil and natural gas exports which have been affected by commodity price volatility and the general decline in commodity prices since 2014. For example, Brent crude oil prices declined by an annual average of -24.0% from USD 98.9 per barrel in 2014 to USD 44.0 per barrel in 2016, before recovering to USD 54.4 per barrel in 2017[15]. Natural gas prices declined by an annual average of -18.0% from USD 17.0 per Million Metric British thermal unit (MMBtu) in 2014 to USD 7.2 per MMBtu in 2017, before recovering to USD 9.8 per MMBtu in 2018[16]. Crude oil and natural gas contributed 91.6% of total exports in 2018 which has increased from an annual average of 90.6% from 2015 to 2017 (2014: 94.2% of exports) [17]. In addition to this concentration of exports, Nigeria is very poorly integrated in terms of regional trade with neighbouring countries in ECOWAS but its trade is unbalanced.
The top export from Nigeria to ECOWAS is also crude oil, which constituted 3.4% of total exports in 2018 (2015-‘17: 4.3% of total exports)[18]. The value of crude oil exports from Nigeria to ECOWAS increased to USD 2.1 billion in 2018 from an annual average of USD 1.7 billion from 2015 to 2017[19]. The other four exports in the top-five from Nigeria to ECOWAS are ships, tobacco, electricity and food, which are less significant in comparison to the crude oil exports. The total value of the top-five exports from Nigeria to ECOWAS increased to USD 2.5 billion in 2018 from an average of USD 1.8 billion from 2015 to 2017[20].
The value of total exports from Nigeria to ECOWAS increased to USD 2.9 billion (approx. 4.7% of total exports) in 2018 from an average of USD 2.1 billion (approx. 5.0% of total exports)[21]. These are very poor levels of intra-regional trade given that the ECOWAS average intra-regional exports level was 17.9% of total exports in 2018. The ECOWAS intra-regional exports, meaning total exports amongst ECOWAS countries, as a share of total exports to the world decreased from an average of 20.8% from 2015 to 2017[22].
Figure 4: Nominal Exchange Rate in Nigeria (2015-2018)
Sources: CBN 2018, 2018 Annual Report; CBN 2015, 2015 Annual Report; CBN 2014, 2014 Annual Report.
Nigeria’s top-five imports from ECOWAS are petroleum, liquified natural gas, vegetable oil and petrochemical products. Although these imports are slightly diversified, they only constituted 1.0% of total imports to Nigeria in 2018 (2015-‘17: 0.6% of total imports)[23]. The value of the top-five imports from ECOWAS to Nigeria increased to USD 448.7 million in 2018 from an annual average of USD 226.9 million from 2015 to 2017[24].
The value of Nigeria’s total imports from ECOWAS increased to USD 685.8 million (approx. 1.6% of total imports) in 2018 from an annual average of USD 629.9 million (approx. 1.7% of total exports) from 2015 to 2017[25]. These are very poor levels of intra-regional trade given that the ECOWAS average intra-regional imports level was 20.9% of total imports in 2018[26]. The ECOWAS intra-regional imports, meaning total imports amongst ECOWAS countries, as a share of total imports from the world increased only slightly from an average of 20.7% from 2015 to 2017[27].
Table 1: ECOWAS Regional Trade for Nigeria (2015-2018)
Source: UNCTAD 2019, UNCTADStat Database.
Nigeria maintains a persistent merchandise trade surplus in ECOWAS which increased to USD 2.2 billion in 2018 (2015-’17: USD 1.5 billion). Hence, there is significant room for Nigeria to increase its imports from ECOWAS countries given the trade surplus that the country enjoys. In addition, there is significant room to diversify Nigeria’s exports to ECOWAS given the concentration in crude oil. This would also make Angola’s intra-regional trade balance more equitable.
[1] UNCTAD 2019. UNCTADStat Database, United Nations Conference on Trade and Development: Geneva. Available At: https://unctadstat.unctad.org/ [Last Accessed: 26 September 2019].
[2] UNCTAD 2019. UNCTADStat Database, ibid.
[3] UNCTAD 2019. UNCTADStat Database, ibid.
[4] IMF 2019a. Nigeria 2019 Article IV Report; International Monetary Fund: Washington, D. C. Available At: https://www.imf.org/ [Last Accessed: 18 October 2019]; IMF 2017. Nigeria 2017 Article IV Report, International Monetary Fund: Washington, D. C. Available At: https://www.imf.org/ [Last Accessed: 18 October 2019].
[5] CBN 2018. 2018 Annual Report, Central Bank of Nigeria: Abuja. Available At: https://www.cbn.gov.ng/ [Last Accessed: 16 October 2019].
[6] CBN 2015a. Inclusion of Some Imported Goods and Services on the List of Items not Valid for Foreign Exchange in the Nigerian Foreign Exchange Markets, Central Bank of Nigeria: Abuja. Available At: https://www.cbn.gov.ng/ [Last Accessed: 16 October 2019]; CBN 2015b. Further Explanation on Selective Forex Restriction: CBN Replies The Economist, Central Bank of Nigeria: Abuja. Available At: https://www.cbn.gov.ng/ [Last Accessed: 16 October 2019]; CBN 2016. Re‑Introducing and Operationalising Nigeria’s Flexible Exchange Rate Market, Central Bank of Nigeria: Abuja. Available At: https://www.cbn.gov.ng/ [Last Accessed: 16 October 2019]; CBN 2017. Establishment of Investors’ and Exporters’ FX Window, Central Bank of Nigeria: Abuja. Available At: https://www.cbn.gov.ng/ [Last Accessed: 16 October 2019].
[7] CBN 2018. 2018 Annual Report, ibid.; CBN 2015c. 2015 Annual Report, Central Bank of Nigeria: Abuja. Available At: https://www.cbn.gov.ng/ [Last Accessed: 16 October 2019].
[8] IMF 2019a. Nigeria 2019 Article IV Report; ibid.
[9] IMF 2019a. Nigeria 2019 Article IV Report; ibid.
[10] IMF 2019a. Nigeria 2019 Article IV Report; ibid.; IMF 2017. Nigeria 2017 Article IV Report, ibid.
[11] IMF 2019a. Nigeria 2019 Article IV Report; ibid.; IMF 2017. Nigeria 2017 Article IV Report, ibid.
[12] IMF 2019a. Nigeria 2019 Article IV Report; ibid.; IMF 2017. Nigeria 2017 Article IV Report, ibid.
[13] IMF 2019a. Nigeria 2019 Article IV Report; ibid.
[14] IMF 2019a. Nigeria 2019 Article IV Report; ibid.
[15] IMF 2019b. IMF Primary Commodity Prices, International Monetary Fund: Washington, D. C. Available At: https://www.imf.org/ [Last Accessed: 4 October 2019].
[16] IMF 2019b. IMF Primary Commodity Prices, ibid.
[17] UNCTAD 2019. UNCTADStat Database, ibid.
[18] UNCTAD 2019. UNCTADStat Database, ibid.
[19] UNCTAD 2019. UNCTADStat Database, ibid.
[20] UNCTAD 2019. UNCTADStat Database, ibid.
[21] UNCTAD 2019. UNCTADStat Database, ibid.
[22] UNCTAD 2019. UNCTADStat Database, ibid.
[23] UNCTAD 2019. UNCTADStat Database, ibid.
[24] UNCTAD 2019. UNCTADStat Database, ibid.
[25] UNCTAD 2019. UNCTADStat Database, ibid.
[26] UNCTAD 2019. UNCTADStat Database, ibid.
[27] UNCTAD 2019. UNCTADStat Database, ibid.