EUR 3.54 For Business Accounts Only

Nigeria Strategy Report H2 2017 Excerpts - Trade Balance to Survive Muddy Waters

• We continue with our series of excerpts from our core strategy document – The Nigeria Strategy Report. In today’s piece, we review Nigeria’s trade balance over H1 17 and delineate our outlook for same over the rest of the year.

• Nigeria’s trade balance extended its surplus position into a second consecutive quarter in Q1 17 (N719 billion), following another sturdy rise in exports (+109% YoY to N3.0 trillion) relative to a 35% increase in value of imports. Increases across Petroleum oils and oils obtained from bituminous minerals, crude” and “Natural gas, liquefied” kept exports on its strongest growth trajectory in over thirteen quarters.

• Elsewhere, imports moderated 0.92% from Q4 16 levels despite currency gains (+21% over H1 17 at the parallel market). Prior to the claw-back, expectation was for excitement over currency gains to motivate importers to ramp up their scale of orders having seen how bad things could get in prior periods. In our view, the deviation from expectation may have been underpinned by importers’ optimism over ongoing currency policies that may have forced them to push forward some orders in anticipation of further naira gains.

• Going forward, the re-opening of Trans Forcados export terminal raises scope for sustained gains in exports. However, we expect slightly subdued growth relative to Q1 17, due to recent declines in crude oil prices (-13% YTD to $48.10/barrel). Meanwhile on the import leg, CBN’s extended FX sales, successful foreign borrowings, and the relatively smooth running of the IEW looks set to keep markets well lubricated in dollar supply with the attendant impact expected to revive import growth in the near term.