Analysts at Cowry Asset Management Limited have stated that the country’s trade will improve if the government can upgrade transportation networks, ports, and streamline export procedures to ease logistics costs.
They said the firm’s review of the country’s Foreign Trade Statistics for the fourth quarter of 2023 by the National Bureau of Statistics penultimate Friday.
The NBS report indicated a 37.21 per cent year-on-year rise in the country’s total merchandise trade, reaching N71.88tn in 2023, up from N52.39tn in the prior year.
During the period under review, total exports slightly surpassed total imports, standing at N35.96tn and N35.92tn, respectively, thus leading to a positive trade balance of N2.90bn, marking a sharp 99.8 per cent year-on-year decline from the previous year’s N1.21tn.
On the decline, the analysts said, “Nigeria’s low trade balance of N2.90bn in 2023 comes from the country’s weak position in trade earnings from minimal trade engagements from which Nigeria recorded a slight increase in total exports earnings amid rising imports during the period.
“Additionally, it can be said that the country’s overreliance on and escalating demand for foreign goods, influenced by economic conditions and a significant exchange rate depreciation of over 50 per cent in 2023, contributed to this modest trade balance in 2023.”
According to the Cowry Asset Management analysts, Nigeria’s heavy reliance on imported consumer goods and limited involvement in exports suggests impending negative trade balances, affecting its current account balance due to less appealing exports and increasing import expenses.
“The analysed trade data for the fourth quarter indicates that a lower trade balance contributes to current account deficits, which encompass services, income, and transfers. Financing such deficits may require borrowing from foreign sources, potentially leading to a rise in foreign debt and posing challenges to economic stability. Cowry Research opines that a comprehensive approach to addressing Nigeria’s trade deficit may be a panacea, including promoting export diversification beyond crude oil and encouraging sectors like agriculture, solid minerals, and manufacturing to reduce dependency on oil revenue.
“Additionally, investing in export infrastructure is vital for enhancing efficiency and competitiveness. Upgrading transportation networks, ports, and streamlining export procedures can reduce logistics costs and bolster Nigeria’s global appeal,” the review stated.
SOURCE: PUNCHNG
