Data from the Q4-2022 Terms of Trade (TOT) report recently released by the National Bureau of Statistics (NBS) revealed that Nigeria’s Terms of Trade deteriorated in FY-2022. In 2022 TOT declined by 1.04ppts y/y to settle at 101.05%. Planning the data shows that the All-Commodity Export price index rose by 1.87ppt y/y to 111.12%. On the other hand, the Import price index rose by 2.55ppt y/y to settle at 109.97%. Furthermore, breaking the TOT by region, highlights worsening TOT with Asia (-2.41% y/y), Americas (-2.14% y/y) & Europe (-0.87% y/y) and improved TOT in Africa (+3.91% y/y) & Oceania (+2.24%).

During the period under review, the nation saw an increase in both prices of exports and imports. The significant boost in the value of exports could be attributed to the increased production costs & elevated commodity prices, which resulted in a rapid increase in the nominal prices of exports. In addition, export value was bolstered by the efforts of the Export Promotion Council through its Export Expansion Grant Scheme. However, the value of total imports outpaced exports as import prices rose faster due to a combination of factors. Firstly, import prices remained elevated as global inflationary trends continued due to production and energy costs hikes within the period.  Moreover, FX shortages & depreciations, and supply chain shocks to Nigeria’s major trading partners like China, made imports more expensive. Finally, increased tariffs for certain products (vehicle tariffs were hiked in 2022, resulting in a 6.68% increase in the vehicle sub-import index) further worsened TOT. 

The worsening TOT could ultimately affect the nation’s trade balance which may lead to a decrease in foreign exchange reserves. This may further destabilise the currency and increase the risk of external debt. Furthermore, the worsening TOT may discourage capital investments as well as decrease productivity and economic growth in the long run. We encourage the Federal Government to employ further initiatives to improve the value of exports.