The value of raw materials imported into Nigeria surged by 160.9% year-on-year in the second quarter of 2024 (Q2’24), despite manufacturers’ efforts at backward integration aimed at reducing production costs, particularly those associated with foreign exchange for raw materials.
The depreciation of the naira, coupled with foreign exchange scarcity and inflationary pressures, has significantly increased manufacturers’ direct costs, leading many into substantial losses, according Vanguard.
According to the National Bureau of Statistics, ‘Foreign Trade in Goods Statistics’ for Q2 2024, the impact of naira depreciation on import costs is evident.
On a quarter-on-quarter basis, the value of imported raw materials rose slightly by 0.96% from N1.467 trillion in Q1 2024.
In contrast, raw material exports for the same period totaled N366.91 billion, marking a 151.96% increase from N145.62 billion in Q2 2023 and a 4.01% rise from N352.75 billion in Q1 2024.
Trade statistics indicate that key imported raw materials during this period included cane sugar for sugar refineries, preparations of milk containing vegetable fats and oils (powdered or granulated), and glutamic acids and their salts.
The report stated “The total trade value of the raw materials sector stood at N1.848 trillion in the second quarter of 2024 of which imports were valued at N1.482 trillion, while exports stood at N366.91 billion.
“The major raw material goods exported were ‘Urea whether or not in aqueous solution’ was exported to Brazil at a value of N103.56 billion. This was followed by exports of Nonmonetary Gold (including gold plated with platinum) in powder form to Switzerland valued at N47.45 billion.
“In terms of imports, cane sugar meant for sugar refinery worth N188.67 billion was imported from Brazil, this was followed by ‘Prep. of milk containing vegetable fats and oils, powdered or granular’ imported from Ireland valued at N21.35 billion, while oher glutamic acid and its salts imported from China was valued at N41.93 billion.”
Commenting, David Adonri, Vice Chairman, Highcap Securities, said that besides inflation and naira devaluation, insecurity also plays a part as it hampers local sourcing of raw materials.
He stated “Nigeria’s economy has been grappling with cost push inflation for several years occasioned by insecurity which is crippling domestic sourcing of raw materials and depreciation of the Naira causing imported raw materials to be costly.”
