… Dangote, PHC refineries, CBN FX interventions key sustainable factors
By Sam Otuonye
The National Bureau of Statistics (NBS) has reported the impressive trade surplus of N5.81 trillion recorded in the third quarter of 2024, driven by a substantial increase in export earnings, with oil export leading the trail.
According to NBS data, the significant growth in exports was primarily driven by Nigeria’s oil and gas sector, with crude oil exports alone accounting for N13.41 trillion, a 57.06% increase from N8.54 trillion in Q3 2023.
The coming on board of Dangote and Port Harcourt refineries with their various production capacities and sales in naira policy, experts are of the view that the current surge in trade volumes and its attendant positive impact on foreign exchange earnings would be sustained.
The country’s total merchandise trade for Q3 2024 stood at N35.16 trillion, representing an 81.35% increase compared to Q3 2023 and a 13.26% rise from the previous quarter.
Exports accounted for 58.27% of total trade, with a value of N20,486.39 billion, showing a 98% increase from N10,346.60 billion in Q3 2023.
The report read: “Nigeria’s total merchandise trade stood at N35,160.44 billion in Q3, 2024.
“This represents an increase of 81.35% compared to the value recorded in the corresponding period of 2023 and a rise of 13.26% over the value recorded in the preceding quarter.
“In the quarter under review, exports accounted for 58.27% of total trade with a value of N20,486.39 billion, showing an increase of 98.00% over the value recorded in the third quarter of 2023 (N10,346.60) and 16.76% compared to the value recorded in Q2 2024 (N17,545.62).”
The significant growth in exports was primarily driven by Nigeria’s oil and gas sector, with crude oil exports alone accounting for N13.41 trillion, a 57.06% increase from N8.54 trillion in Q3 2023.
Agricultural exports also saw a remarkable increase of 301.87%, reaching N884.07 billion compared to N219.99 billion in Q3 2023.
On the import side, Nigeria’s total import bill for Q3 2024 amounted to N14.67 trillion, a 62.30% rise from N9.04 trillion in Q3 2023. Manufactured goods led the surge in imports, rising by 76.44% to N6.98 trillion.
Experts had observed that the crude-to-naira sale would positively impact key fundamentals of the economy including inflation rate, forex rate, employment, access and cost of stable energy, susceptibility to global fluctuations and general economic growth and stability.
Commenting on the development, a renowned economist, Prof. Sheriffdeen Tella, told a news platform thus: “That’s the right thing to do. If customers are using foreign currencies to pay for good in the country, it will put pressure on the naira and lower its value because those customers will have to buy the foreign currencies with naira to pay for the products.
“So, Dangote and others buying crude oil in naira is the best while those importing crude oil from outside will pay in forex because they will be paying into our foreign account. The implication is that Dangote and others’ fuel will be cheaper than imported fuel in our local market, which is good for our economy in terms of cost of production and cost of living. It will also not add to pressure on naira to cause its depreciation.”
With the current improvements, experts have also cautioned; that while the recent appreciation of the Naira is a positive development attributed to various CBN interventions and external factors, sustaining the momentum required addressing underlying challenges such as high-interest rates, FX reserve management, and improving oil production efficiency, adding that balancing these factors would be crucial for ensuring the stability and resilience of the Nigerian economy in the long run.
The introduction of a new trading system by the Central Bank of Nigeria, called the Electronic Foreign Exchange Market System (EFEMS), was a positive additive to the trade performance.
For instance, last week started at N1,672, the exchange rate closed at N1,535 on Friday, December 6, 2024, gaining 8.9% in one week.
EFEMS essentially consolidates all previous official foreign exchange windows into one unified system, making transactions more transparent.
This consolidation replaces the fragmented structure of multiple windows, such as the Investors & Exporters (I&E) FX Window, the SME Window, and the Invisible Window. But how does this explain why the naira is gaining against the dollar?
According to the CBN, EFEMS is expected to simplify operations and improve price discovery, thereby ensuring that trades are more transparent and easier to monitor.
Experts have observed that the introduction of EFEMS has largely contributed to the positive outcomes currently being recorded in the official exchange rate.
A source familiar with the operation of the market stated that the market is experiencing more supply than demand, adding that with supply outstripping demand, the naira has gained against the dollar.
The new system also mandates a minimum trade value of $100,000 for all interbank FX transactions, which seems to have curtailed speculative activities in the market.