Nigerian Trade Deficit Narrows As Exports Surge on Devaluation

Bloomberg: Nigeria’s trade deficit narrowed in the second quarter as the value of exports from Africa’s most populous nation surged after a devaluation of the naira.

The trade deficit narrowed by 44 percent to 196.5 billion naira ($622 million) in the three months through June compared with 351.3 billion naira in the previous three-month period, the Abuja-based National Bureau of Statistics said in a report Tuesday. Exports increased 63 percent to 1.9 trillion naira in the quarter.

“The improvement in export value is largely due to the depreciation in the value of the naira,” the statistics agency said. The total value of trade in the West African country increased to 3.94 trillion naira in the second quarter from 2.7 trillion naira, it said.

The Central Bank of Nigeria removed a peg of 197-199 per dollar on June 20 in a move to end a foreign-currency scarcity that curbed imports and crippled production for more than a year. The move caused the naira to lose more than a third of its value. The nation’s gross domestic product contracted by 2.1 percent in the three months through June from a year earlier, while inflation accelerated to 17.1 percent in July, the highest rate since October 2005. Nigeria recorded its first trade deficit in five years during the first quarter.

“Whenever there is a devaluation of the currency it encourages exporters because they get more naira for the goods sold at the international market or priced in dollar,” Opeyemi Oguntade, analyst at Lagos-based Financial Derivatives Co., said by phone. “For the country and the exporter, the thing to consider is if the benefit of the devaluation is high enough to outweigh the cost of rising inflation.”

Nigeria’s leading export markets include India, the U.S., Spain and the Netherlands.