Exports to Nigeria affected by oil price

Low oil prices are affecting exports to Nigeria by placing the country’s foreign reserves under pressure. In its statement after a monetary policy committee meeting in May, the Central Bank of Nigeria reported that a deceleration in growth, which commenced in the third quarter of 2014, had intensified in the first quarter of 2015 “in the aftermath of declining crude oil prices”. Adding to the risks for South African exporters is the fact that in April this year South African trade relations with Nigeria were threatened by the xenophobic attacks on Nigerians and other African citizens in South Africa. According to media reports the Nigerian government sent a strongly worded communique to the South African embassy in Lagos threatening to shut down South African businesses operating in Nigeria. These include MTN, Multi Choice and Shoprite, All Progressive Congress (APC) spokesperson Tolu Adesanya is reported as saying. Nigeria is seen as an important market. It is home to roughly 20% of sub-Saharan Africa’s 930 million people and has a population growth of 2-3% a year. Nigeria imports mainly industrial supplies (27% of total in 2014), capital goods (23%), food and beverage (17%), fuel and lubricants (14%), transport equipment and parts (12%) and consumer goods (7%). Some 43% of total imports come from Asia; 34% from Europe; 15% from America and 7% from Africa, according to the National Bureau of Statistics, Nigeria (NBS). The NBS estimated Real GDP growth at 3.96% in the first quarter of 2015, which is significantly lower than the 5.94% and 6.21% in the preceding quarter and the corresponding period of 2014. It is the lowest growth rate since the last quarter of 2012, and the third consecutive quarter of slowdown. Real GDP growth is projected to decline to 5.54% in 2015 from 6.22% in 2014. The main driver of economic growth is the non-oil sector. Services contributed 2.82% to growth, trade 1.27%, and agriculture 1.05%. In its efforts to diversify the country’s economy the government is likely to target agricultural imports in order to support local farmers. Speaking to CNBC Africa on the sidelines of the World Bank and IMF annual meetings in February, Adesina said the region was spending about US$45 billion on food imports annually. “We have a lot of water and we have cheap labour across African economies and what we should be doing is producing our own food so that we become a global powerhouse in food production,” he said. Adesina said the agriculture sector had positive future prospects. “The size of the food and agribusiness will be one trillion US dollars by 2030. “The foreign direct investments that will go into this sector will rise to US$45 billion by 2020 so as Nigeria we are paying attention to this sector.” INSERT 1 In its efforts to diversify the country’s economy the government is likely to target agricultural imports in order to support local farmers. INSERT 2 5.54% Projected GDP growth in 2015.