Nigeria’s foreign trade with the United States has averaged N2 trillion in the last 3 years but is on track to fall to its lowest since 2015 as Covid-19 lockdowns affect trade between both countries.
The situation is worse for Nigeria which continues to operate a trade deficit with the world’s largest economy swinging from a surplus between 2016 to 2018 to a deficit in 2019 and on track to report the highest trade deficit since 2013.
Nigeria’s expanding trade deficit with the US is due to a fall in exports in the third quarter of the year. Nigeria only exported N212.75 billion of goods to the country compared to an import of N1.3 trillion.
The drop in Nigeria’s export to the US this year is mostly due to Covid-19 as the world’s largest economy also doubles as the epicenter for Covid-19 cases in the world.
Since the Shale Oil Boom shut out US global demand for oil in 2010, demand for Nigeria’s crude has fallen annually and contributed to taking the US out of the top 10 export destinations for Nigeria.
As Nigeria and US trade continues to falter, China remains a stronger and growing trade partner with the largest economy in Africa. According to data from the National Bureau of Statistics, China/Nigeria trade topped N4 trillion in the first 9 months of 2020 compared to N3.6 trillion in the same period in 2019.
Small Businesses in Nigeria seem to prefer China for several reasons. For example, obtaining a Visa to travel to China is significantly easier when compared to most European countries.
Another reason is that in China, businesses in Nigeria can find willing partners able to replicate some goods (especially fashion products) made in other countrues. Perhaps the biggest reason is that China also offers a cheaper production cost at any scale for most Nigerian businesses.
Nigeria’s trade with its African neighbours fell by a whopping 42% in the first 9 months of 2020 compared to 2019. Nigeria’s total trade with African countries was N2.29 trillion compared to N3.8 trillion same period in 2019.
Nigeria did more business with its African neighbours in 2019 after it recorded an all time high of N5 trillion in total trade.
The poor performance this year is largely due to a fall in exports to its African neighbours. The NBS data does not explain why but this could be attributed to the closure of the borders.
The last time Nigeria recorded export through the Seme land border was in the fourth quarter of 2019 and it was one of the lowest on record with a value of N23.8 billion only. It has been zero since then.
Nigeria became the 34th African country to fully ratify and submit its Instrument of Ratification of the African Continental Free Trade Area (AfCFTA) last week.
The AfCFTA is expected to expose Nigeria to a market of over 1 billion people with a GDP of about N3 trillion.
If Nigeria’s is to expand its balance of trade, then Africa will need to be a center peice of its trade policies.
We believe this will lead to an eventual reopening of the land borders.