Onwubuke Melvin
Analysts at Cowry Asset Management Limited have stated that the country’s trade will improve if the government can rehabilitate transportation networks, and ports, and streamline export procedures to ease logistics costs, based on the NBS report reviewed.
The NBS report showed that the country’s total trade in goods increased by 37.21 per cent year on year to N71.88tn in 2023, compared with N52.39tn for the previous year.
During the period under review, total exports slightly surpassed total imports, standing at N35.96tn and N35.92tn, respectively, thus leading to a positive trade balance of N2.90bn, marking a sharp 99.8 per cent year-on-year decline from the previous year’s N1.21tn.
On the decline, the analysts said, “Nigeria’s low trade balance of N2.90bn in 2023 comes from the country’s weak position in trade earnings from minimal trade engagements from which Nigeria recorded a slight increase in total exports earnings amid rising imports during the period.
Additionally, it can be said that the country’s overreliance on and escalating demand for foreign goods, influenced by economic conditions and a significant exchange rate depreciation of over 50 per cent in 2023, contributed to this modest trade balance in 2023.”
According to the analysts at Cowry Asset Management, Nigeria’s excessive reliance on imports of consumer goods and limited involvement in exports suggests that it will have negative trade balances which are likely to affect its current account balance due to less attractive exports and higher import cost.
“The analysed trade data for the fourth quarter indicates that a lower trade balance contributes to current account deficits, which encompass services, income, and transfers. Financing such deficits may require borrowing from foreign sources, potentially leading to a rise in foreign debt and posing challenges to economic stability. Cowry Research opines that a comprehensive approach to addressing Nigeria’s trade deficit may be a panacea, including promoting export diversification beyond crude oil and encouraging sectors like agriculture, solid minerals, and manufacturing to reduce dependency on oil revenue.
“Additionally, investing in export infrastructure is vital for enhancing efficiency and competitiveness. Upgrading transportation networks, ports, and streamlining export procedures can reduce logistics costs and bolster Nigeria’s global appeal,” the review stated.
