The outbreak of coronavirus in China has adversely affected trade between the country and Nigeria.
Recent data from the National Bureau of Statistics (NBS) showed that the value of Nigeria’s total trade stood at N9.19 trillion in the third quarter of 2019, being exports worth N5.29 trillion and imports worth N3.89 trillion.
However, the recent coronavirus outbreak in China, a country which is Nigeria’s number one trading partner in the world, is threatening the continued positive trade balance of N1.39 trn Nigeria recorded from the country in the third quarter of 2019.
Most traded agricultural goods between the two countries included sesamum seeds, whether or not broken; good fermented Nigerian cocoa beans; cashew nuts (shelled); superior quality raw cocoa beans; frozen shrimps and prawns; natural cocoa butter and cashew nuts (in shell).
The two countries have separately called on travellers to be cautious, and if need be, restrict travels until the sneaky virus is contained.
Though the Nigerian government said there would be no travel restrictions between the two countries and the National Assembly also rejected a motion to evacuate Nigerians from China, there are clear indications that some Nigerian businessmen have started boycotting China until the virus is contained.
Data released by the Embassy of China in Nigeria showed that coronavirus infection had skyrocketed to over 17,205. Over 14,380 cases have been confirmed while over 361 persons had died.
The immediate past president of the Abuja Chamber of Commerce and Industry (ACCI), Mr Tony Ejinkeonye, told Daily Trust Saturday that the outbreak of coronavirus in China and elsewhere had a global impact on business and economy.
Ejinkeonye, a former national vice president of the National Association of Chamber of Commerce, Industry, Mines and Agriculture (NACCIMA), said many imports from, and exports to China from Nigeria had stopped.
The industrialist said a lot of Chinese workers were at home and most of the country’s land borders and air travels were limited.
He said the advisory from China to Nigerians to limit unnecessary travels to China until the virus is contained is “a preemptive measure” to stop the virus from spreading further.
“It has an impact on our imports from China. The impact is there, but of course, it is more on the Chinese economy because it has actually slowed down their industry and production capacity,” he said.
He expressed optimism that the stock of Chinese goods in Nigeria may sustain demand in the next 30 days when the virus may have been contained and full business trips between the two countries restored.
A business consultant, who is also an investment analyst, Dr Franklyn Akinyosoye, told Daily Trust Sunday that fears associated with travelling to China over the virus was only temporary.
On the economic impact, Dr Akinyosoye, who is also the national president of the Association of Business Development Professionals in Nigeria (ABDPIN), said the development would affect prices sooner or later.
“There will, therefore, be an impact on inflation considering that China is our biggest trading partner. But this might not be immediately, maybe in the next few weeks. Anything we see now in the spike of prices of China manufactured goods will just be speculative,” the expert said.
He projected that there would be more patronage for the substitute or complementary goods produced locally, which might increase human capital index because the local manufacturers will be empowered by the increased patronage.
He also projected an increase in Purchasing Managers’ Index (PMI), which might be good for local manufacturers.
The expert said the naira might do well against the dollars as there might be a reduction in the demand for dollars.
“Some traders have perfected their importation process that they don’t have to be there to get their goods into Nigeria. This can help curb the intrinsic impact on inflation in the long run, though this has its disadvantages as most traders get the wrong specifications on delivery,” he said.
Also reacting to the development, the ACCI’S vice president in charge of commerce, Dr Anene Johnson Somadina advised Nigerians to suspend travelling to China until a solution to the coronavirus is found.
Dr Somadina said Nigeria’s economy would be affected but for just a short while.
“Health is wealth, they say, and we cannot sacrifice our people on the altar of quest for economic gains. Chinese nationals and everyone seeking to come into the country should actually be isolated and thoroughly screened before admission of entry,” he said.
The industrialist said Nigeria could not afford to import the disease into the country, especially given that the country’s medical facilities are grossly inadequate with insufficient facilities and manpower to handle any of such outbreak.
An economist, Chijioke Ekechukwu, also backed self-imposed travel restrictions by Nigerian businessmen and travel advisory by the Chinese Embassy in Nigeria, saying that all insignificant travels to China could wait.
“Nigerians may look for alternative markets in other Asian, American and European countries,” the expert said.
Ekechukwu, who was a director-general of the ACCI, said the pressure on foreign exchange market may be reduced, but not significantly because these businesses could still be consummated without travelling.
Meanwhile, an analysis of trade statistics has shown that trade relations between China and Nigeria is heavily to the disadvantage of Nigeria.
Data from the NBS show that Nigeria recorded N6.83 trillion worth of trade deficit with China from 2015 to 2018.
Within the four years, Nigeria imported goods worth N7.65 trn from China and exported N818.46 billion worth of goods, translating into a trade imbalance of N818.46 b.
The analysis showed that in 2015, Nigeria imported N1.57 trn goods from China and exported only N157.49 b goods to the country, leading to a trade deficit of N1.41 trn.
Interestingly, in 2016, Nigeria’s importation from China jumped up while export slumped, further widening the trade imbalance.
With a trade deficit of N1.61 trn in 2016, Nigeria’s export rose to N1.73 trn while import slumped to N122.14 b, compared to 2015.
In 2017, Nigeria’s import and export to China leapt, leaving Nigeria with a trade deficit of N1.57 trn as a result of N1.79 trn spent on imports as against N220.57 b received from exports to China.
Nigeria recorded the highest trade deficit with China in the last four years in 2018, with a trade imbalance of N2.24 trillion.
In 2018, Nigeria exported goods worth N318.26 b to China and imported N2.56 trn goods from the country.
Imports from China has been a major foreign exchange (forex) drain on Nigeria’s economy and this led to forex restrictions for the importation of certain items that Nigeria deems it has advantage to source locally.
However, even the forex restriction for the importation of certain items, such as toothpicks, could not ease the forex burden being exerted on the economy by importers of China’s goods.
To reduce the burden on forex, especially concerning dollars, on July 20, 2018, the Central Bank of Nigeria (CBN) began the sale of foreign exchange in Chinese Yuan (CNY), signalling the consummation of the Bilateral Currency Swap Agreement (BCSA) signed with the People’s Bank of China (PBoC) on April 27, 2018.
The apex bank said the currency swap between Nigeria and China, which would be Special Secondary Market Intervention Sales (SMIS) retail would be dedicated to the payment of Renminbi denominated letters of credit for raw materials, machinery and agriculture.
On several occasions, Nigeria has injected a total of $868.56 m, translating to 141.47 Chines Yuan into the Secondary Market Intervention Sales (SMIS) to reduce the burden of using dollars to import from China.
Meanwhile, Nigeria’s trade imbalance with China is not new because NBS data showed that Nigeria had a trade deficit of about N6 trn with China between 2013 and 2016.
The analysis showed that out of Nigeria’s total import bill of N29.91 trn between 2013 and 2016, China accounted for N6.41 trn.
This is a huge gap when compared with N714.97 b worth of goods Nigeria exported to China within the four years. A subtraction of Nigeria’s exports from imports from China will show a trade deficit of N5.70 trn in favour of China.
The huge trade imbalance is mainly as a result of Nigeria’s moribund manufacturing industry that has left Nigerians depending on China for most consumables; and the latest coronavirus outbreak is obvious impacting on the two countries in terms of trade.