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    Nigeria Records N3.94 Trn Trade Deficit, Redeems USD642.43 Mn Foreign Debt in Q1 2021…

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    Recently released data by the National Bureau of Statistics (NBS) on foreign trade statistics showed that total merchandise trade rose by 6.99% to N9.75 trillion in Q1 2021 (from N9.12
    trillion printed in Q4 2020).

    Given the higher import transactions which outweighed exports, Nigeria recorded a merchandise trade deficit of
    N3.94 trillion in Q1 2021.

    Specifically, exports which constitute 29.7% of the total trade fell q-o-q by 8.99% to N2.90 trillion in Q1 2021.

    Imports which accounted for 70.21% of the
    total trade rose by 15.6% to N6.85 trillion.

    Further breakdown of the total exports showed that sale of crude oil accounted for 66.38% (N1.93 trillion), falling from N2.52trn in Q4 2020 – likely due to the country’s compliance with Opec’s production quota as well as difficulty in selling Nigeria’s grades amid competition. Non crude oil exports which represented 33.62% (N0.98 trillion) of the total export grew q-o-q by 45.20%.

    Imports into the country rose q-o-q by 15.6% to N6.85trn in Q1 2021.

    The rise was partly driven by higher agricultural goods imports (+18.37%), solid minerals import (+36.77%), energy goods import (+34.39%) and imported manufactured goods (+18.47%) respectively.

    Major suppliers of goods to Nigeria include China, Netherlands and India respectively as their respective share of total imports stood at 29.57%, 10.20% and 8.56% in Q1 2021.

    Meanwhile, the Debt Management Office (DMO) stated that Nigeria’s total public debt stock jumped year on year (y-o-y) by 15.64% to N33.11 trillion as at March 2021 (from N28.63 trillion as at March 2020).

    The y-o-y increase in the country’s total debt stock was chiefly due to a 24.86% rise in external debt to N12.47 trillion (or USD32.86 billion at N379.50/USD) as at March 2021 from N9.99 trillion (or USD27.67 billion at N361.00/USD) in March 2020.

    Within a year, Nigeria received USD3.48 billion worth of loans from International Monetary Fund. Also, additional loan of USD1.43 billion was gotten from IDA.

    In the quarter under review, Nigeria paid part of its Multilateral (USD81.05 million), Bilateral (USD61.38 million) and Commercial loans (USD500 million) which amounted to USD642 million.

    Hence, external debt service payments fell to N126.02 billion (or USD332.07 million) in Q1 2021 from N170.60 billion (or USD472.57 million) printed in Q1 2020.

    Further breakdown of the total external debt stock in Q1 2021, showed that Multilateral loans accounted for 54.26% (USD17.83 billion) of which loans from International Development Association (IDA) was USD11.09 billion, loan from IMF was USD3.48 billion while others stood at USD3.26 billion.

    Bilateral loan accounted for 12.73% (USD4.18 billion) of which loan from China (Exim Bank of China) was USD3.40 billion and loan from France was USD0.49 billion in Q1 2021.

    Commercial loans accounted for 32.47% (USD10.66 billion) of which Eurobonds was USD10.37 billion while Diasporal bond was USD0.30 billion. Local debt stock increased by 10.71% to N20.64 trillion in Q1 2021 (from N18.64 trillion in Q1 2020).

    Breakdown of the domestic debt figure showed that FG’s domestic debt stock rose to N16.51 trillion in Q1 2021 (from N14.53 trillion in Q1 2020).

    Despite the significant rise in FG’s domestic loan, local debt service payment increased marginally by 0.59% to N612 billion in Q1 2021 from N609.13 billion recorded in Q1 2020.

    We expect Nigeria’s local debt and the annualised implicit interest rate (8.92%) to increase in 2021 given the President’s request to the National Assembly to approve N2.34 trillion new capital raising.

    Also, the rising domestic interest rate environment witnessed in recent times will further exert upward pressure on debt service.

    Meanwhile as Nigeria turns to IMF for more loans, it may have to lean more on market-driven exchange rate policy – which may further have a pass-through effect on inflation rate.

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