(Sundiata Post) – Despite a relatively weaker naira, Nigeria’s import bill for the second quarter of 2017 rose for the first time in three years data compiled by BusinessDay has shown.
The increase in import is seen as a sign that the dollar shortage that ravaged the country in most of 2016 and even in early parts of 2017 has eased significantly, allowing businesses to increase their imports of raw materials and other products.
Data from the National Bureau of Statistics (NBS) analysed by BusinessDay and adjusted for exchange rate movements, show that after three straight years of decline, imports into Nigeria rose nine per cent in dollar terms, to US$ 8.5 billion (N2.6 trillion) in the three months ended June 2017 from US$7.7 billion (N2.4 trillion) in the comparable period of 2016.
The increase in imports reflects improved dollar liquidity in the economy, according to Muda Yusuf, director-general of trade advocacy group, the Lagos Chamber of Commerce and Industry (LCCI).
“The introduction of the Investors’ and Exporters’ window, as well as the fact that the naira has actually strengthened in the past six months, have spurred imports,” Yusuf said. The naira closed at N359 per US dollar on the Investors and Exporters window, Monday.
Despite the uptick in the second quarter, imports are still well below the US$12.4 billion (equivalent to N1.98 trillion at an exchange rate of N160/US$) import bill recorded in the second quarter of 2014.
Businesses have struggled after the decline in oil prices cut government revenue and caused a shortage of foreign currency. It led the economy to shrink last year, for the first time since 1991, while the dollar sold for a premium of around N500 at one point this year. But the situation is a lot better now.
The economy has since managed to turn the corner by growing 0.55 per cent in the second quarter (of 2017) for the first time in six quarters and rising imports further point to an economy gradually cranking back to life.
Dollars are flowing again, and although liquidity levels still lag the pre oil price crash level of 2014, businesses are better able to access dollars, compared to a year ago, at the height of the dollar dry-up.
The April-unveiled Investors’ and Exporters’ window which has handled some $9 billion since creation, has been at the centre of improved dollar flows, even as increased oil prices and production volumes have aided the Central Bank to up interventions in the official and retail markets.
The exchange rate at the new window is market determined, which makes it more popular with investors and exporters. In a sign of investors’ approval of the new window, Nigerian stocks hit a three-year high, while portfolio inflows into the country rose 145 per cent, to a year high of $770 million in the three months through June 2017.
“Businesses that found it difficult to import last year, are able to do so again, as dollar shortages abate on the back of the CBN’s improved dollar interventions and creation of the Investors’ and Exporters’ window in April,” said Tajudeen Ibrahim, head of research at Lagos-based investment bank, Chapel Hill Denham.
Despite the improving economic landscape, full recovery remains some way off, with the service sector which houses trade and accounts for 54 per cent of GDP, contracting six times in as many quarters, according to data compiled by BusinessDay and sourced from the NBS.
Services contracted 0.85 per cent (year-on-year) in the second quarter, making it six straight quarters of contraction since second quarter of 2016, when it slowed 1.25 per cent.
Faced with shrinking petrodollars, monetary officials opted to curb imports to reduce dollar demand pressure and conserve scarce dollars.
The apex bank blocked importers of 41 selected goods, including steel and palm-oil, from the interbank foreign-currency market, in a bid to put a lid of the fast depleting external reserves, which had fallen to a decade low of $25 billion.
The drive to curb imports has continued, much to the ire of economists who argue that restricting importation is akin to crippling economic activity.
“Policies aimed at curbing imports into Nigeria are misguided, as the level of imports into an economy reflects the level of productivity of that economy,” said Bongo Adi, an economist at the Lagos Business School, Pan-Atlantic University.
“Nigeria is not import dependent as widely preconceived, not when our import to GDP is one of the lowest in the world,” Adi added.
Nigeria’s import as a percentage of Gross Domestic Product (GDP) was 10.4 per cent in 2015, according to World Bank data.
That percentage is one of the lowest in the world and compares with a ratio of 30.3 per cent for Britain, 33.1 per cent for South Africa, 18.9 per cent for China and 25.5 per cent for India. (BusinssDay)