March 15, 2019/InvestmentOne Report
· The National Bureau of Statistics released the Q4 2018 Foreign Trade report last week, showing a 43% year-on-year (y/y) rise in total trade to N8.6trillion.
· As regards trade balance, there was a 20% shrinkage on a y/y basis while it surged by 125% q/q in to N1.44trillion in Q4 2018. We highlight, however, that the Q4 figure still lagged behind preceding quarters.
· The country recorded a 70% y/y rise in imports, which printed at N3.6trillion. Importation was largely dominated by mineral products, machinery and appliances and vehicles & aircrafts. We highlight that these accounted for 65% of total imports.
· According to the report, crude oil exports unsurprisingly continued to constituted the lion share of total exports 84%, in the quarter in review.
· Further showcasing the dependence of the nation on crude oil and oil products is that mineral products accounted for about 95% of Q4 2018 exports, as has been the case in preceding quarters.
· The country reported a 36% y/y improvement in non-oil exports, printing at N233billion. This increase was driven by exports of ‘prepared stuffs’ (63% y/y) and ‘vegetable products’ (85% y/y) constituting about 49% of total non-oil exports.
· On a y/y basis, total trade for 2018 was up by 39% and so was trade balance (47%), printing at about N32trillion and N6 trillion respectively. This was led, as expected, by crude oil exports (82% of total exports and up 43% y/y) while non-oil exports saw an improvement.
· Regional exports trended upwards across all major economic regions. Focusing on Intra-African trade, commerce between Nigeria and other African countries in 2018 amounted to N2.99trillion, compared to N1.98trillion in 2017. Exports printed at about N2.5trillion, with crude oil responsible for over 80%.
· With oil and other oil products exports comprising of over 90% of total exports, we believe the government should prioritise protecting and growing the country’s major stream of revenues.
· While we expect relative stability in oil production levels, we highlight the potential for lower proceeds from oil exports on the back of the recent OPEC cap for Nigeria (1.68mpd excluding condensates) as well as lower oil prices relative to 2018 levels.
· 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 to long term.
· Additionally, we anticipate increased trade activity via the United Kingdom with Brexit necessitating a more bilateral trade approach from the European giant.
· However, on a more global scale, we cite the ongoing trade war as the major risk to foreign trade as global growth is set to take a significant hit.