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FX unification boosted Nigeria’s trade surplus in Q3 – Report




The unification of the segments of the foreign exchange market has been fingered as a factor in the net trade surplus reported in the third quarter.

Analysts at Cowry Asset Management Limited in a report disclosed, “The emergence of a net trade surplus in Q3’23 is a noteworthy deviation from previous quarters, underscoring Nigeria’s trade resilience amid global economic shifts. This positive development is intricately linked to the impact of recent currency devaluation, strategically employed to enhance the competitiveness of the country’s exports.

“The weakened domestic currency, in tandem with robust global oil prices, has positioned Nigeria favourably, potentially stimulating export volumes as a response to escalating import costs. In essence, the Q3’23 trade landscape reflects a convergence of factors, including resilient crude oil exports, improved global oil prices, increased production, and strategic economic measures, collectively shaping Nigeria’s adaptive response to the intricate dynamics of the global economic landscape.”

Speaking on the general trade figures, the update said that the substantial upswing in trading activities is “Buoyed by favourable global oil prices exceeding $90 per barrel during the period, coupled with a slight increase in domestic and condensate production, reaching an average daily output of 1.45 million barrels per day.

“This production level surpasses the daily average observed in Q3’22 by 0.25 million barrels per day and exceeds Q2’23 figures. Contributing factors include a moderation in pipeline vandalism and oil theft, attributable to ongoing repairs and maintenance at crucial oil facilities, and the recent removal of fuel subsidies.”

The latest Foreign Trade figures from the National Bureau of Statistics showed that the net trade surplus stood at N1.88tn, a first since Q2’2018.

Nigeria’s total trade in the third quarter of 2023 stood at N18.804tn while exports were valued at N10.346tn and total imports stood at N8.457tn.

Within nine months, Nigeria’s total merchandise trade value stood at N43.01tn as total exports continued to outperform the total import value at N23.27tn and N19.74tn to give a net trade balance of N3.52tn for the first time since 2018 (9M: N4.49tn).

In the face of the surge in total merchandise trade during the period under review, the trade surplus for the period recorded an improvement to N1.88tn for the first time since the second quarter of 2018 when Nigeria’s trade surplus hit N2.08tn.

This comes as export earnings outweigh the surging import bills to maintain the uptrend in the total trade balance for the fourth consecutive quarters since Q3:2022 after the N409.4 billion recorded in trade deficit at that time.

Mid-June, the Central Bank of Nigeria harmonised segments of the nation’s foreign exchange market which led to a significant weakening of the nation’s currency. This weakening was exacerbated by the high demand for the dollar amid poor supply.