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Business News

Nigeria’s trade balance hits recession low, records N579 billion deficit in Q4 2019

The Nigerian economy ended 2019 in what appears to be another major setback, as trade balance posted N579 billion deficit in the fourth quarter of 2019.

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Nigeria’s trade balance hits recession low, records N579 billion deficit in Q4 2019

The Nigerian economy ended 2019 in what appears to be another major setback, as trade balance posted N579 billion deficit in the fourth quarter of 2019, no thanks to the surge in importation within the period.

According to the latest foreign trade report released by the National Bureau of Statistics (NBS) for full year 2019, this is the first time the Nigerian economy recorded deficit trade balance in a quarter since 2016m when it witnessed recession.

Nigeria’s trade balance historical trend (2016 – 2019)

It is worthy of note that at the end of 2019, Nigeria’s total trade was estimated at N36.15 trillion, a 108% rise when compared to N17.34 trillion recorded in 2016. This implies that Nigeria’s foreign trade has witnessed significant growth in recent years.

Nigeria’s trade balance hits recession low, records N579 billion deficit in Q4 2019

However, it is important to provide some insights into what is driving growth in the country’s foreign trade and the key implications ahead. Basically, foreign trade is the value of goods (import and export) a country traded with the rest of the world within a period.

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[READ MORE: BOOM: Crude oil price crash below $30 in worst trading day since 1930)

So, if a country has more exports than imports, it is in a favourable trade position (surplus). On the other hand, if a country imports more than exports, then it is in an unfavourable trade position (deficit).

In 2016 Q1, Nigeria’s trade balance entered the negative territory, an unfavourable trade position with a N253.3 billion trade deficit, and this was largely driven by marginal increase in import. This followed consecutive trade deficits in Q2 and Q3 2016. By the end of Q2 2016, Nigeria had entered recession.

Over the years, since the post-recession era, Nigeria’s total import had dropped marginally below export, thereby leading to favourable trade balance. In 2019, Nigeria recorded positive trade balance between Q1 and Q3 2019, until a significant trade deficit was recorded at the end of Q4 2019. The trade deficit recorded in 2019 Q4 coincided with the period when the Nigerian government had ordered the customs to shut its land borders.

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Nigeria’s trade balance hits recession low, records N579 billion deficit in Q4 2019

Import surge on the back of border closure

The quantum of illegally imported goods that flow into Nigeria has always been a constant sore spot for the country; hence, in August 2019, Nigeria closed its land borders in order to control the proliferation of smuggled items into Nigeria. However, critics of the government condemned the policy, stating that it would stifle businesses and lead to inflationary pressure.

Following the border closure, import has surged significantly, and inflation is equally on the rise, as the Nigerian economy continues to grapple with the impact of the closed borders. The surge in import suggests that goods formerly traded and those smuggled through the land borders are partly being redirected through sea.

The increase in import is expected to have a strong effect on the country’s depleting foreign reserves, and the Central Bank may be left with little or no choice but to consider another devaluation.

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While Nigeria is yet to resolve the fallout from the closed borders as negotiations with other neighbouring countries are still ongoing, import may yet rise further, as Nigeria remains largely import dependent.  This means the country may be in for another trade deficit in subsequent quarters, which will amount to increased pressure for another round of recessionary cycle for the economy.

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[READ ALSO: BLOODY WEEKS: Coronavirus costs investors N1 trillion, triggers devaluation fears)

Recession concerns intensify as Coronavirus dampens growth outlook

The outbreak of Coronavirus (COVID-19) in China, and subsequent rapid spread across countries, has crashed the global oil price. As at the time of this writing, Brent crude oil price has dropped to $35 a barrel, while WTI dropped to $31.

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The drop in oil price due to COVID-19 has been driven by low demand for crude oil in China (second-largest economy in the world), as oil inventory continues to pile up. It should be noted that Brent oil at $35 a barrel is largely below Nigeria’s 2020 budget benchmark of $57. On the side, Nigeria may further have to approach the debt market.

Already, Nigeria is considering reviewing the budget benchmark; this has become necessary as oil price continues to plunge. Despite the decision of OPEC and its allies to cut oil production by 1.5 million barrel a day in the second quarter, this may not have significant push on oil price as the global oil demand continues to drop faster than supply.

For the Nigerian economy, while experts have predicted that Nigeria may not devalue naira in 2020, recent developments with the surge in import bill are expected to deplete the country’s external reserves further, and pressures will mount further on the Central Bank of Nigeria to pull the plug on naira in the medium term.

Samuel is an Analyst with over 5 years experience. Connect with him via his twitter handle

1 Comment

1 Comment

  1. Rex

    March 9, 2020 at 10:53 pm

    Insightful analysis.
    Let me add!
    “Despite the decision of OPEC and its allies to cut oil production by 1.5 million barrel a day in the second quarter,”

    Concerning the above quoted statement, there is no agreement between OPEC + member to cut down oil production by 1.5 million barrels. Russia turned down the offer on Saturday.

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Coronavirus

Cost of Ivermectin soars after research suggest 75% chance of cutting Covid-19 deaths

Ivermectin prices have risen after Research published by the International Ivermectin Project Team shows drug can reduce Covid-19 deaths

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As Azuka laid down in bed feverish, he had resigned to his fate believing he was not going to make it to the next day.

Just 3 days into the new year and all the fun he had, attending weddings and burial ceremonies in the east all seemed like a big mistake. He must have caught covid-19 at one of those events, he thought.

Since attending the last event, he fell sick and has been exhibiting the symptoms of Covid-19 and just waiting to die until someone recommended Ivermectin, a little known drug as a potential medicine that could help save his life.

READ: Only 68.8% of Nigerians believe Covid-19 is real – SBM Intel

A few days later he recovered and spread the news to friends and family – he believes Ivermectin cured him.

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The rush to purchase Ivermectin in Lagos has increased of late after stories similar to that of Azuka (not his real name) spread. As Nigeria’s caseloads rise past 120k cases, some Nigerians are increasingly worried about contracting Covid-19, rushing to pharmacies to purchase a drug that they all believe is the most portent to fight Covid-19.

READ: Hepatitis C drugs may be effective against COVID-19, virus may spread through high-rise buildings

What is Ivermectin?

According to the World Health Organisation, Ivermectin was originally produced in the 1980s as a veterinary drug used largely for nematode control in cattle, horses, pigs, and dogs and became the standard for control of the ectoparasitic disease, scabies. It soon became the world’s most profitable veterinary drug.

Since then, Ivermectin has been used on humans for controlling strongyloidiasis, a human pathogenic parasitic roundworm causing the disease strongyloidiasis. According to medical sources, it is also known in the US as threadworm, UK, and Australia as pinworms.

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In Nigeria, it has been used to treat worms, according to a pharmacist who spoke to Nairametrics.

READ: Nigeria, others to receive first-ever HIV generic drug for babies in the first half of 2021

“Originally it’s a worm expeller (Antihelminthic) used in the elimination of parasitic worms from the body. They use it in combination with doxycycline. They also use Vitamin C in combination with Axrthromycin.”

However, more recently, the drug is now being used for the treatment of Covid-19 pushing demands for the drug high across pharmacies in Lagos. A Nairametrics survey suggests the drug cost as high as N100,000.

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Another pharmacist who craved anonymity explains.

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“It was one of the available free drugs dispensed to patients at clinics in Nigeria – for eliminating different types of worms from the body. People usually don’t buy it from pharmacies because of the low price, thinking it’s not good quality tabled for expelling worms. It was not expensive and almost cost next to nothing, but now it sells for as high as N200 per tablet”

At N200 per tablet, a pack of 500 tablets could go for as high as N100,000. From all indications, the prices are unstable and could be purchased from as little as N20,000 per pack of 500 tablets to as high as N100,000. It all depends on demand and supply and who is under pressure to get a “cure”.

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READ: COVID-19: WHO warns against Gilead’s remdesivir drug approved by US FDA

Is the drug credible?

Several social media posts and videos allude to the efficacy of the drug in “preventing and curing” Covid-19 but this is yet to be certified by the WHO.

The drug however came into the limelight after a Financial Times article claimed the drug had a chance of cutting covid-19 deaths by up to 75%.

The article was based on research published by the International Ivermectin Project Team led by the University of Liverpool lecturer Andrew Hill. A Nigerian Olufemi Emmanual Babalola, from Bingham University/Lagos University, Nigeria is also part of the group.

READ: WHO study reveals new discovery about remdesivir drug’s effect on Covid-19 patients

Here is an excerpt of the result of the research conducted by the group

“Ivermectin was associated with reduced inflammatory markers (C-Reactive Protein, d-dimer, and ferritin) and faster viral clearance by PCR. Viral clearance was treatment dose- and duration-dependent. Ivermectin showed significantly shorter duration of hospitalization compared to control. In six RCTs of moderate or severe infection, there was a 75% reduction in mortality (Relative Risk=0.25 [95%CI 0.12- 0.52]; p=0.0002); 14/650 (2.1%) deaths on ivermectin; 57/597 (9.5%) deaths in controls) with favorable clinical recovery and reduced hospitalization. “

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Currently, the only other drug with the same level of worldwide unofficial approval for treatment of Covid-19 is Remdesivir, after it also showed an effect on improving recovery rate for Covid-19 patients.

READ: US Mission recognises Nigerian doctor who helped develop COVID-19 vaccine

The choice between waiting for a vaccine or self-medication

More recently, the search for cures for Covid-19 has been overshadowed by vaccine breakthroughs across the world. For most governments, preventing covid-19 is better than curing it which is why more effort is geared towards vaccine distributions and other preventive measures such as insisting on facemasks and introducing new lockdowns.

But for developing economies like Nigeria, where self-medication is prevalent, drugs like Ivermectin are easier to purchase over the counter as well as administer. Just like the demand for chloroquine, zinc, and vitamin C soared in the first wave of Covid-19, demand for Ivermectin is rising along with its price.

Fortunately, Ivermectin is backed by research even though the researchers expressed caution as more trials need to be conducted.

READ: Nigeria records 1,964 new cases of Covid-19, highest daily surge

“Despite the encouraging trend this existing data base demonstrates, it is not yet a sufficiently robust evidence base to justify the use or regulatory approval of ivermectin. However, the current paucity of high-quality evidence only highlights the clear need for additional, higher-quality and larger-scale clinical trials, warranted to investigate the use of ivermectin further.

“The maximum effective dose of ivermectin needs to be clarified and new clinical trials should use a consistent multi-day dosing regime, with at least 0.4mg/kg/day. The appropriate dose and schedule of ivermectin still requires evaluation and the current randomized clinical trials of ivermectin need to be continued until ready for rigorous review by regulatory agencies.” International Ivermectin Project Team 

Asides Ivermectin, Nigerians have also resorted to traditional medicine such as a beverage of lemongrass, dogonyaro leaves, garlic, ginger, and bitter kola to prevent and cure Covid-19, despite orthodox vaccines proven to be effective.

Perhaps it is because no one is sure when the vaccine will get to Nigeria after it was initially meant to arrive in January and since pushed to February 2021. And even if it does arrive in Nigeria, most people do not believe it will get to ordinary Nigerians on time especially when they cite the way the Covid-19 palliatives was handled.

For now, the need for self-reliance is driving people towards any drug they believe can cure covid-19.

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Obituaries

Veteran talk-show host, Larry King dies at 87

Legendary longtime CNN talk show host, Larry King is dead.

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Larry King, the multiple award-winning TV and radio host has died at the age of 87.

King who had a long-running show on CNN, Larry King Live was a household name for his many interviews with political leaders, celebrities and newsmakers.

King’s death was announced on his official Twitter handle stating that he passed on Saturday morning at Cedars-Sinai Medical Center in Los Angeles, California, USA.

The statement read in part:

“With profound sadness, Ora Media announces the death of our co-founder, host and friend Larry King, who passed away this morning at age 87 at Cedars-Sinai Medical Center in Los Angeles.

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“For 63 years and across the platforms of radio, television and digital media, Larry’s many thousands of interviews, awards, and global acclaim stand as a testament to his unique and lasting talent as a broadcaster.”

The statement did not however, reveal the cause of death, but sources say King was hospitalised for COVID-19 in early January.

Since the news broke, friends, colleagues and admirers have taken to different social networks to express their sadness and condole with the family of the celebrated broadcaster.

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What you should know about Larry King

  • King rose to fame in the 1970s with his radio programme The Larry King Show, on the commercial network Mutual Broadcasting System.
  • He hosted the Larry King Live on CNN for 25 years, between 1985 and 2010, carrying out more than 30,000 interviews, including every sitting president from Gerald Ford to Barack Obama.
  • King also wrote a column for the USA Today newspaper for over 20 years.
  • After leaving CNN, King hosted another programme, Larry King Now, broadcast on Hulu and RT, Russia’s state-controlled international broadcaster.

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Financial Services

Niger Insurance Plc gets shareholders nod to restructure business

Niger Insurance Plc has announced plans to restructure its insurance business into distinct but mutually dependent business entities.

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Edwin Igbiti

Niger Insurance Plc has obtained shareholders’ approval to restructure its insurance business into general, life and business insurance, with each segment to be structured as a separate legal entity.

This is part of the resolutions passed at the 50th Annual General Meeting of Niger Insurance Plc., held on 20th of January, 2021 at Peninsula Hotel in Lekki, Lagos.

The decision to restructure the company is in a bid to make it more efficient and profitable to stakeholders, especially as efforts are geared towards overturning a loss of about 1,1723.2% Year-on-Year, earlier made by the company in its last reported financial statement, Q2, 2020, as reported by Nairametrics.

Other key decisions reached at the 50th AGM include;

  • The re-appointment of Mr Ebi Enaholo and Mrs. Olufemi Owopetu as Directors of the company.
  • Acceptance of the presented financial statement for the year ended December 31, 2019 and the report of the audit committee, directors and auditors.
  • Directors were authorized to fix the remuneration of the auditors.
  • Directors were authorized to appoint external auditors to replace retiring auditors of the company.
  • The appointment of four individuals as members of the audit committee.
  • A decision to restructure the company’s business capital was also reached.

In case you missed it: The shareholders of Niger Insurance Plc in the 49th Annual General Meeting approved the decision by the company’s board to raise additional capital to the tune of N15 billion, in a bid to meet the revised recapitalization targets for general and life insurance companies.

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What you should know: The House of Representatives had in December 2020 directed NAICOM to suspend the mandatory deadline for the first phase of 50%-60% of the minimum paid-up share capital for insurance and reinsurance firms.

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