Nigeria records first trade deficit with UK in seven years

The negative growth of the economy and low crude oil output has weakened Nigeria’s international trade with most of its partners, particularly the United Kingdom, IFE OGUNFUWA writes

Nigeria has recorded its first trade deficit with the United Kingdom since 2009, with merchandise imports from the former colonial master in 2016 exceeding shipments of Nigerian merchandise to it. An analysis of international trade data from the National Bureau of Statistics showed that Nigeria imported N362.87bn worth of goods from the UK and exported N300.66bn to the European country last year, recording a negative trade balance or net export of N62.21bn. The value of imports from the UK to Nigeria grew by 28 per cent year-on-year from N283.76bn, while export to the UK from Nigeria shrank by 28 per cent from N414.85bn in 2015. Analysts said this was a reflection of the state of foreign trade in the country in 2016, in which imports out performed exports by N290.13bn as a result of the plunging revenue from crude oil exports. The country imported products worth N8.82tn and exported merchandise valued at N8.53tn.

“The terms of trade worsened in a way that the volume of exported products dropped significantly,” the Managing Director/Chief Executive Officer, Cowry Assets Management Limited, Mr. Johnson Chukwu, said.

Before 2016, the data showed that Nigeria had recorded trade surpluses with the United Kingdom for six consecutive years, with the highest positive balance of trade of N1.11tn in 2012. The statistics indicated a trade surplus of N4.91bn in 2010, which expanded to N970.42bn in 2011 and peaked at N1.11tn in 2012. In 2013, the NBS data indicated that the balance of trade between both countries shrank to N362.87bn; grew to N535.63bn in 2014 and further reduced to N131.09bn in 2015. Despite the shortfall in export by Nigeria to the European country in the year under review, the UK remained one of Nigeria’s top 10 export destinations. Further analysis showed that Nigeria’s trade with Europe as a whole in 2016 also resulted in a negative balance of trade of N1.05tn as against a trade surplus of N1.31tn in 2015.

Explaining the factors responsible for the negative balance of trade, Chukwu said the global fall in oil prices and shrinking volume of crude oil produced had adversely affected the value of Nigeria’s export to the UK. He stated, “Nigeria’s export to the UK is majorly crude oil. If you observe, in the last quarter of last year, the country started recording negative trade balances. Even if we still exported the same volume of crude to the UK, the price had dropped drastically; therefore, the value of our export was quite low.

“It was principally due to low prices of crude oil last year. In the case of Nigeria, we had double whammy; the price of crude went down and the volume dropped because of heightened militancy in the Niger Delta. These two factors are why the trade balances with most of our trading partners became negative and the overall balance of trade was negative in 2016.”

The Forcados export terminal, through which one of Nigeria’s largest crude oil grades is being exported, was shut down around February last year for more than a year after militants’ attacked the oil pipeline. The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, had said that between January and June 2016, over 1,000 incidents of vandalism were recorded and resulting in a loss of 109 million litres of petroleum products and 560,000 barrels of crude oil, with the country producing 1.5 million barrels per day as against the 2.2 million bpd targeted in the budget. According to the Director-General, Lagos Chamber of Commerce and Industry, Mr. Muda Yusuf, the UK may not be buying much of Nigeria’s crude oil again because about 80 per cent of the country’s export to it was oil.

“If there was any country that was buying our oil before and for any reason stopped buying our oil, it will immediately show in our balance of trade. The UK may be buying elsewhere as against buying from Nigeria. Because the oil price and output dropped, our capacity to export was also affected,” he stated.

Nigerian importers and exporters had entertained fears that the referendum by the UK on whether to remain or leave the European Union would impact their business interests, with many delaying their international trade business decisions due to uncertainties of Brexit’s effect on existing trade policies. However, the British High Commissioner to Nigeria, Paul Arkwright, had last year assured Nigerians that the Brexit would not change the existing bilateral trade relationship between the two countries. He, however, emphasised that there would be no attempt by the UK to remain inside the EU or re-join the continent as there would be no second referendum.

The envoy gave an assurance that investment in Nigeria by British companies and cultural links between the two countries would not waver. He urged Nigerians to strengthen trade and investment ties between both countries by taking advantage of the Brexit to attract British business interests divesting from other regions to Nigeria.