Forex pressure worsens as manufactured goods imports rise 39% to N3.96trn

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Naira gains at N1,135/$ in parallel market•Analysts project decline in earnings from manufactured goods in Q4’2

Nigeria’s dependence on importation has continued to mount pressure on the country’s foreign exchange and foreign reserves as the value of imported manufactured goods rose to N3.96 trillion in the third quarter ended September 30, 2023 (Q3’23) .

This is also coming against the backdrop of increased importation of used vehicles in preparation for the yuletide season.

A review of the Report by Vanguard on the Foreign Trade in Goods Statistics for Q3’23 by the National Bureau of Statistics (NBS)Q3’23 showed a 38.84 percent Year-on-Year (YoY) increase, compared to N2.85 trillion recorded in the corresponding period in 2022 and represents 46.8 percent of total imports (N8.46 trillion) for the period.

This also represents a 31.03 percent Quarter-on-Quarter (QoQ) increase against the value recorded in the second quarter of the year (Q3’22), which stood at N3.02 trillion.

Naira fell to N1,035/$

Meanwhile, the pressure on imported goods has further contributed to the fall in the value of Naira.

The Naira fell to N1,035/$ as at the close of trading on Wednesday, January 3, 2024.

This is even as the external reserve recorded a drop by 0.17 percent or $57.18 million to $32.91 billion in December 2023 from $32.96 billion in November 2023 due to the lingering foreign exchange instability in the country.

Figures released by the Central Bank of Nigeria, CBN, showed that Nigeria’s external reserve stood at $32.912 billion as at December 29, 2024. The liquid portion was $32.185 billion, while $727.06 million was not available for use.

The report on foreign trade in goods statistics for Q3’23 indicates that the value of manufactured goods represented the highest import during the period, followed by other oil products and raw materials imports with a total value of N2.85 trillion and N950.93 billion respectively.

Analysis of the data showed that “used vehicles with diesel or semi-diesel engine, of cylinder capacity 2500cc, topped the list of manufactured goods imported into the country during the period at N149.45 billion (mainly from the United states of America and United Arab Emirates), followed by ‘machines for reception, conversion and transmission of voice, images or data.’ imported from China, valued at N68.11 billion.

Motorcycles and cycles fitted with auxiliary motors, petrol fuel, capacity >50<250cc, CKD., worth N61.93 billion and N36.69 billion, were also imported from India and Italy respectively.

“Other goods imported in this category were ‘parts of other gas turbines not specified’ from Italy valued at N36.69 billion.”

Import bills on used vehicles rise YoY by 235% to N939.22bn

Meanwhile, the import bills on used vehicles rose sharply Year-on-Year (YoY) by 274 per cent to N952.85 billion in the first nine months of 2023 (9M’23) from N247.52 billion in the corresponding period of 2022, 9M’22.

The figure rose by 956 per cent to N733.9 billion in the second quarter of 2023 (Q2’23) from N69.49 billion in Q1’23 before declining by 80 per cent to N149.45 billion in Q3’23.

The data, however, showed a 27 per cent YoY decline in import bills on motorcycles to N131.83 billion in 9m’23 from N182.02 billion in 9M’22. Similarly, import bills on motorcycles fell QoQ by 19 percent to N31.3 billion in Q2’23 from N38.6 billion in Q1’23 and increased by 60 percent to N61.93 billion in Q3’23.

Analysts project decline in earnings from manufactured goods in Q4’23

Meanwhile, analysts at Afrinvest Securities have projected a decline in earnings from manufactured goods export, attributing it to pressured manufacturing capacity already being witnessed in the last two months.

According to the analysts, “manufacturing activities had already dropped to the contraction zone given the Purchasing Managers Index (PMI)’s readings of 49.1% and 48.0% index points in October and November respectively.”

Commenting as well, David Adonri, Executive Vice Chairman at Highcap Securities, said: “ Nigeria is an import-dependent country. Most consumer goods, capital goods and their spare parts are imported.

‘’The huge rise in import bill of manufactured goods in Q3 2023 may come from loss of competitive advantage by locally manufactured goods due to the extraordinarily high cost of production precipitated by recent market reforms.

‘’Importers may have taken advantage of this to increase imports and lower prices of competing goods. Some local manufacturers also discontinued local production and imported from their parent companies abroad to fill the the gap.

‘’Also, it may be as a result of seasonal trend as traders beef up inventories to meet the elevated demand of the period of festivities.

‘’Rising importation means rising import bill and shrinking balance of payments position. It worsens external sector of the economy already stressed by shortage of hard currency and attendant depreciation of the naira. ‘’Having effected the much awaited market reforms to manage excessive demand, public policy now needs to focus on supply side to boost local production.’’


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