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Value of total trade will retard in 2016 – NBS

By on March 7, 2016

Even though it has been estimated to increase by 2.1 per cent, the value of total trade is expected to slow in 2016, the Nigerian Bureau of Statistics has said.

NBS, which made this prediction in its Economic Outlook for 2016, however, stated that, “beyond 2016, both import and exports are expected to increase and Total Merchandise trade is expected to Average 15.61 per cent growth during the period.”

Recalling that, in recent quarters, economic growth had been significantly less than in previous years, NBS noted that, “growth in the third quarter of 2015 was 2.84 percent, slightly higher than in the second quarter but still well below the average growth rate of 5.32 achieved between 2011 and 2014.”

“This decrease can be attributed to the decline in the oil price as well as non-oil sectors that suffered setbacks during the year as political uncertainty coupled with supply shocks weighed on economic activity. In particular however, Nigeria depends heavily on oil for both exports and government revenues, and therefore movements in the oil price have a large effect on the economy,” it pointed out.

The statistics bureau, however, added that, “the sectors most exposed to oil price movements (crude oil production and oil refinery) are not the only sectors to have recorded a decrease in their growth rates in recent quarters.”

NBS analysis showed that much of the decrease in growth rate had been a result of fewer sectors experiencing rapid growth, as well as some sectors (such as crude oil production) seeing a decline. “In the first quarter of 2014, the percentage of the economy that grew by more than 5 per cent was 70.40, but this figure has declined consistently, and in the third quarter of 2015, only 16.69 percent of the economy grew by more than 5 per cent on the year.”

Meanwhile, NBS acknowledged that the government is using the 2016 budget as an opportunity to reset and redirect the macroeconomic dynamics of the country. According to the bureau, “the attempt to consolidate expenditure using the Treasury Single Account to plug leakages (even if this is only at the federal level) is a welcome first step.

The proposed 1.6 trillion to be invested in capital projects, and other initiatives in particular in Power, Works and Housing are likely to bode well for the economy.

In addition, the establishment of the Efficiency Unit to identify and surgically eliminate inefficiencies without hampering productivity is also another development.”

It however, pointed out that , “in the near term, the reset may not yield fruits as quickly as Nigerians expect. Economic growth in 2016 is expected to increase to 3.78 per cent from 2.97 per cent in 2015, an increase of less than 100 basis points.”

The bureau added: “Beyond 2016 however, growth is expected to jumpstart averaging 5.41 per cent yearly between 2017 and 2019 as infrastructure developments take shape and provide support for both the oil and non-oil sectors.

“While upward pressure on inflation is expected, meaning that the Headline index may rise from 9.55 per cent to 10.16 per cent in 2016, rates are expected to moderate beyond this period and average 9.01 per cent between 2017 and 2019.”

In its review of 2015, NBS stated, the Gross Domestic product of the country in 2015 has displayed a drop in the rate of growth than in previous years.

“A year on year comparison shows that the growth rates in each quarter of 2015 were consistently lower than the corresponding quarters of 2014. In the third quarter of 2015, the GDP growth rate was 2.84 per cent and forecasted as 2.78 per cent in the fourth quarter2 which was 3.38 per cent points and 3.16 per cent points lower than its corresponding quarters of 2014 which stood at 6.23 per cent and 5.94 per cent respectively.

“Further analysis show that the growth rate in Q4 of 2015 is 0.07 per cent points lower than Q3 of the same year implying a drop both in the year on year and quarter on quarter performance of the economy. “

“This sluggish growth,” the bureau pointed out, “ was partially due to the decline in price of crude oil which constitutes the major source of income for the government.

Other factors responsible for this decline include the dominance of political activities in 2015 due to the general elections, shocks in the domestic supply of refined petroleum products, insurgency in the Northeast and the pressure/restrictions on foreign exchange transactions in the later part of 2015 bearing in mind that Nigeria imports a considerable amount of goods both through formal and informal channels.”