Nigeria’s H1 2023 foreign trade data raises questions about economic balance

In the first half of 2023, Nigeria engaged in trade amounting to N24.79 trillion in goods and services with global partners, resulting in a N2.2 trillion trade surplus, as reported by the National Bureau of Statistics (NBS). While these figures indicate a -12.68% decline compared to the N28.39 trillion traded in the same period of 2022, they also signify a significant +258% year-on-year (Y-o-Y) increase in trade surplus, highlighting a potential enhancement in Nigeria’s international net trade. Total imports for H1 2023 amounted to N11 trillion, with total exports reaching N13.50 trillion, contributing N2.2 trillion to the country’s foreign exchange earnings. The data reveals that crude oil remains Nigeria’s dominant export product for H1 2023, constituting approximately 79.50% of exports, while other oil products make up 10.57%, manufacturing 2.54%, and agriculture 4.15%. This suggests that despite reduced crude oil production, oil still heavily influences the nation’s exports, indicating a lack of comparative advantage in non-oil products. In contrast, Nigeria’s imports for H1 2023 predominantly comprised manufactured products at 47.99%, oil products at 33.17%, agriculture at 8.21%, and raw materials at 9.95%. Analysts believe that due to substantial domestic productivity gaps, reliance on imported fuel is likely to continue undermining the country’s foreign exchange position. A breakdown of trading partners reveals that Nigeria’s largest trading partners are Europe (46% of total exports) and Asia (25%), while intra-African trade accounts for a modest 19%. Likewise, Nigeria’s primary sources of imports are Asia (42%) and Europe (38%), with other African nations contributing 15% to imports. The relatively limited trade relations with other African countries in favor of India (Asia), the Netherlands (Europe), and the United States (America) may restrict Nigeria’s ability to maximize the benefits of the African Continental Free Trade Agreement (AfCFTA). *Culled from Proshare

Global current account balances to narrow in 2023 -IMF

Global current account balances increased for the third consecutive year in 2022 and are projected to narrow in 2023, the International Monetary Fund (IMF), has said. According to the Fund, the widening over the three years reflects several factors, including the unequal impact of the COVID-19 crisis in 2020–21 and the increase in commodity prices fueled by the economic recovery in 2021 and supply concerns following the Russia-Ukraine war.   In a report titled, ‘External rebalancing in turbulent times; the Fund stated that the absence of widespread sudden stops during the pandemic enabled deficit economies to avoid an abrupt contraction of their current account deficits. “Currency markets exhibited significant fluctuations in 2022, driven by changes in the terms of trade and monetary tightening,” the Fund stated.   The report stated that an accumulation of official foreign exchange reserves played a limited role in net capital outflows from emerging market and developing economies just as net creditor and debtor positions remained at historically high levels. “Over the medium term, global current account balances are expected to narrow as the impacts of the pandemic and Russia’s war in Ukraine recede. However, several risks surround this outlook, including a renewed increase in commodity prices, a slower-than-expected recovery in China, or a slower fiscal consolidation in economies with current account deficits. While the impact of geoeconomic fragmentation on global current account balances is unclear, it would unambiguously reduce global welfare. The excess global current account balances (defined as the sum of absolute values of current account surpluses and deficits in excess of their norms) have remained unchanged since 2021, after being on a declining trend for several years. While the widening of global current account balances is not necessarily a negative development, excess global current account balances can fuel trade tensions and protectionist measures or increase the risk of disruptive currency and capital flow movements. “Narrowing excess global current account balances would reduce the risk of financial crisis and improve welfare. Policy efforts, in both excess surplus and deficit economies, are required to promote external rebalancing. Where excess current account deficits in 2022 partly reflected larger-than-desired fiscal deficits, fiscal consolidation will help stabilize debt-to-GDP ratios and close current account gaps.” The Fund pointed out in the report that in economies where excess current account surpluses persist, higher fiscal spending in targeted areas will help them to meet their goals in climate, digital, and energy security, while reducing their excess surpluses. “Economies with lingering competitiveness challenges will need to address structural bottlenecks. Multilateral cooperation will help counter risks of geo-economic fragmentation, including efforts to strengthen the current rule-based trading system, and facilitate the green transition. Successfully completing the 16th General Review of Quota would ensure that the IMF is adequately resourced to serve as an anchor of the global financial safety net,” it further explained.

Nigeria eyes $5bn from outsourcing industry in 2024

The Nigerian Export Promotion Council (NEPC) has said Nigeria targets to earn $5 billion dollars from the outsourcing industry in 2024. NEPC’s Executive Director, Dr Ezra Yakusak said this at the National Conference on International Trade-in-Service organised by the council on Wednesday in Abuja. According to Yakusak, the outsourcing industry has the capacity to boost human capital, drive the economy and bring about emerging technologies. He said that some of the services outsourced are financial, advertising, courier, customer support services, logistics, etc. “In recent years, Nigeria has become an increasingly attractive destination for outsourcing, particularly in areas of call center operations, software development, and back office support. “The country’s high population and relatively low labour cost, favourable time zone, and English proficiency make it an appealing location for business seekers to outsource certain tasks or functions,’’ he said. According to him, Nigeria is moving gradually and focusing more on the export of services because it is an area that has been neglected for a long time. He said it was a sector where we could get high revenue exchange earnings. “It has so much potential but if our services sector is well harnessed we can earn more than the 4 .8 billion dollars we are earning from our products. “We are looking at five billion dollars in 2024,’’ he said. Yakusak said trade in services had emerged as the driving force that shapes the global economic landscape of countries. “In essence, the future of global trade is services,’’ he said. Also speaking, Dr. Evelyn Ngige, Permanent Secretary, Ministry of Industry, Trade and Investments, said that outsourcing, particularly in the field of information technology-enabled services revolutionised the global business landscape. Represented by Mr. Suleiman Audu, Director of Trade in the ministry, Ngige said that the sector transcended geographical boundaries and enabled organisations to leverage expertise. She added that it reduced costs and improved efficiency by tapping into talent pools around the world. “Nigeria, with its immense human capital, has the inherent potential to become a leading player in this transformative industry. “The country boasts of a large pool of educated and skilled professionals, including an English-speaking workforce, which is advantageous for English-language outsourcing services. “Nigeria has seen growth in areas such as call centers, data entry, software development, and content moderation,’’ Ngige said. She said that to harness opportunities presented by outsourcing and ITES, Nigeria must adopt a multi-faceted approach that encompasses several key areas. Ngige emphasised that it was essential to create a competitive location and conducive business environment for the growth of the outsourcing industry. “This involves implementing policies that create a favorable business climate, ensuring ease of doing business, and providing a level playing field for both local and international players. “We must streamline bureaucratic processes, simplify regulatory frameworks, and offer attractive incentives to investors and businesses seeking to establish or expand their operations in Nigeria,” Ngige said.