Nigeria’s Commodity Terms Of Trade Declines As Exports Fall By 2.3%

Nigeria’s all commodity terms of trade (ToT) fell by 2.85 percent in the third quarter of 2021 (Q3’21) even as commodity exports declined by 2.3 percent during the period.

This represents the third consecutive quarterly and highest decline in commodity ToT this year. In Q1’21 commodity ToT declined by 0.51 percent and by 0.35 percent in Q2’21.

The National Bureau of Statistics (NBS) disclosed this yesterday in its Commodity Price Indices and ToT for Q3’21. The terms of trade (TOT) represent the ratio between a country’s export prices and its import prices. The ratio is calculated by dividing the price of the exports by the price of the imports, usually in percentage terms.

An increase in the terms of trade between two periods (or when TOT is greater than 100%) means that the value of exports is increasing relative to the value of imports, and the country can afford more imports for the same value of exports. For example, an increase in the price of oil between two periods (with oil production remaining the same) is likely to increase or improve the terms of trade for Nigeria and vice versa.The NBS report stated:

“The all commodity ToT for July, August and September, 2021 stood at 104.17, 101.88 and 101.22. The All commodity group terms of trade declined 2.20 per cent in August and 0.65 percent in September and, on average, decreased by 2.85 percent between July and September, 2021 .

“The average decrease of 2.85 percent was led by decreases in mineral products (-2.88), Animal and Vegetable fats and oil, and other cleavage products (-1.56), vehicles, aircrafts and parts (-0.88).

“The All commodity group import index increased 0.52 percent between July and September, 2021. This was driven mainly by an increase in the prices of products of the chemical and Allied industries (+0.60), wood and articles of wood, wood charcoal and articles (+0.59) Papermaking material; Paper and paperboard articles (+0.56)

“The All commodity group export index averagely decreased by -2.33 per cent between July and September, 2021. This was due to decreases in the prices of mineral products (-2.41), Animal and vegetable fats and oils (-1.09) and vehicles; aircraft and parts thereof; vessels (- 0.33) etc.

“Between July and August, 2021 the All commodity export index decreased by 2.17.This was driven by decreased prices for mineral products (-2.24), Live animals; animal products (-1.28), Animal and Vegetable fats and oil and other cleavage (-1.03).

This was positively affected by products of the chemical and Allied industries (+0.78), Plastic, rubber and articles (+0.28) and Vegetable products (+0.03).”

The NBS also noted that the All region group export index decreased by 2.33 percent mainly due to lower prices for export to all the region and all-region group import index increased by 0.52 percent due to marginal increases in import prices from all the region.

According to the NBS, the major export and import markets of Nigeria in Q3’ 21 were India, Spain, Italy, France and China while the major export to these countries were crude petroleum and natural gas liquefied.

The major imports from these countries were Motorcycles, Vehicles with petrol fuel engine, motor spirits, Polyethylene and instruments, appliances and machines for measuring.