September 13, 2018/InvestmentOne Report
· The National Bureau of Statistics released the Q2 2018 Foreign Trade report last week Thursday, which showed a 15% year-on-year (y/y) improvement and a 9% quarter-on-quarter (q/q) decline in total trade to N6.57trillion. Furthermore, there was a 400% y/y and 8% q/q increase in trade balance to N2.36trillion in Q2 2018; the highest in fifteen consecutive quarters. This was largely attributable to the 20% y/y and 16% q/q drop in imports.
· According to the report, total exports fell by 5% q/q to about N4.46trillion, following eight consecutive quarters of growth. However, it rose by 44% y/y.
· Foreign trade was unsurprisingly spearheaded by crude oil exports, which accounted for the lion share of total exports (84%).
· The country recorded a 20% y/y and 16% q/q decline in imports largely due to the slash in the ‘other oil products’ segment of the import bill. The decline is directly related to the 51% q/q decrease in importation of petroleum products.
· With oil and other oil products exports comprising of over 90% of total exports, we believe the government would prioritize protecting the country’s major stream of FX. As such, we expect the FG to remain committed to curbing oil pipeline vandalism and theft in the South-South region of the country as well as keeping to its amnesty agreement thereby ensuring peace for the remainder of 2018 and beyond.
· Away from oil, we believe the availability of FX as well as FG’s incentives to grow the non-oil economy should be a positive for non-oil production and exports in the medium term.
· With this said, we highlight that the difficulties faced by trucks in moving goods along the Apapa port roads (accounted for 96% of export and 51% of imports in Q2 2018) could frustrate the country’s external trading activities.
· On the other hand, we expect government’s self-sufficiency target especially through its Economic Recovery Growth Plan (ERGP) to reduce the country’s food importation.