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NIGERIA Q4 2020 Trade Report - Trade deficit expands for the fifth time

2020 was clearly a year of disruption in trade, as the COVID-19 pandemic imposed a double-edged shock on demand and supply. In Nigeria, the country recorded its worst deficit outturn since at least 2016. The slump in merchandise trade flows (-10.3% y/y) in 2020 was not as wide as expected due to the surge in imports, despite the devaluation of the naira and the historic fall in crude prices. On a quarterly basis however, trade flows improved by 8.9% q/q in Q4’20, as reopening of economies spurred demand for the country’s exports, alongside the country’s ever-growing import bill. Consequently, the country’s merchandise trade deficit widened to ₦7.4 trillion in 2020, as a result of overdependence on crude oil for exports and inelastic import demand. On a quarterly basis, the country experienced its fifth consecutive quarter of a wider trade deficit, in line with our expectations.
Narrower deficits to ensue
Compared to 2020, the year 2021 began on a lighter note with vaccine distribution in advanced economies spurring recoveries in oil demand. As a result, oil prices continue to ascend beyond $50. With the reopening of the borders in December 2020, there could be much to cheer about in the new year, as intra-African trade is given a boost by the kick-off of the AfCFTA. This is further strengthened by efforts to improve trade measures and eliminate gridlocks at the Apapa port, which handled 93% of exports and 43% of imports in Q4’20. Notwithstanding, European and Asian countries are expected to remain Nigeria’s top trade partners.