The First Quarter Economic Report for 2015 released by the Central Bank of Nigeria (CBN) last week indicates a significant slide in Nigeria’s external trade. The report shows that Nigeria recorded an estimated total external trade of $26.74 billion in the first quarter of 2015. This is a decline of 27.2 percent from the level recorded in the corresponding quarter in 2014. Figures recently released by the National Bureau of Statistics (NBS) have also corroborated the steep decline in our external trade. This poor economic outlook is a challenge to the President Muhammadu Buhari administration that is yet to come out with its economic blueprint.
From the CBN report, which profiled the overall trade balance and financial accounts within the first quarter of 2015, it is apparent that the sharp drop is largely due to the continuing fall in crude oil prices, the repatriation of investment income and lower foreign investment flows associated with the uncertain political environment during the general elections.
The report also revealed that the crude oil and gas exports components of our external trade declined from $18.96bn and $20.85bn in the fourth quarter of 2014 and first quarter of 2015 to $13.30bn. This accounted for 92.9 percent of aggregate exports of the period under review. Also, within the period under review, the price of crude oil, which is Nigeria’s main revenue earner, declined from an average of $70 per barrel in the fourth quarter of 2014 to $54.50 in the first quarter of 2015. A further breakdown of the external trade profile shows that aggregate merchandise exports plummeted by 35.4 percent, with attendant negative impact on our Gross Domestic Product (GDP).
The non-oil sector, which could have made up for the losses in crude oil sales, fell by 8.9 percent , while foreign inflows dropped by 28.7 percent. This CBN report calls for greater diversification of the economy. Agriculture and the solid minerals sector should be further developed to boost the economy. Impetus should be given to the manufacturing sector with particular emphasis on export products. It bears repeating that now is the time to look beyond oil as Nigeria’s main revenue earner.
Local industries should be encouraged to produce for the export market by removing factors that hamper local production. We need to increase power supply and improve access to funds with low interest rates. There should also be tax waivers and other incentives for entrepreneurial initiatives involving the production of exportable non-oil goods. Our agriculture needs to be mechanized if we expect it to boost our external trade statistics. Government policy planners, working with local entrepreneurs, should come up with a blueprint that will help correct our external trade deficits through increased foreign demand for made-in-Nigeria goods. Instructively, what the latest CBN Economic Report has shown is that Nigeria’s external trade profile will continue to deteriorate if we continue to be an import-dependent economy.
We should also look in the way of our under-tapped gas resources to boost our external trade profile. We believe that with a reported 188 trillion standard cubic feet (SCF) of gas resources, which places Nigeria seventh on the list of the world’s gas-rich nations, we could have saved the country from the uncertainties of crude oil prices if our gas reserves had been fully developed and strategically utilised.
A recent report by the Department of Petroleum Resources (DPR) noted that natural gas production in Nigeria is hampered by lack of infrastructure to convert and monetise it, resulting in the current wastage of the valuable resource. Nigeria currently flares 428 BCF of associated gas. This has been put at about 15 percent of gross gas production in 2013. It is, therefore, important for the government to put the necessary infrastructure in place for Nigeria to benefit optimally from gas exports.
Altogether, our external trade profile will likely worsen in the second quarter of this year, considering the crash of crude oil price to $53 per barrel, its lowest in four months. This situation calls for an expedited constitution of a crack team of economic experts to navigate the economy out of the woods. The nation sorely needs an economic blueprint to guide investors on the government’s plans to boost exports, if we are to reverse our falling external trade figures.
