Nigeria’s Q3 ToT decline offset by tech-driven economic growth
Nigeria’s Terms of Trade (ToT) experienced a minor dip of 0.03 percentage points in the third quarter of 2023, continuing a trend of quarterly decreases that have been ongoing since the third quarter of 2022.
The ToT is an economic measure that compares the value of a country’s exports to its imports, with a decrease suggesting that imports are becoming more valuable compared to exports.
Despite this, the rate of decrease has decelerated, raising the possibility that the fourth quarter of 2023 could witness an improvement in the ToT.
According to data from the National Bureau of Statistics (NBS), the drop in ToT in Q3’23 was mainly due to a 0.04 percentage point drop in September. The All Commodity Group Import Index increased by 0.21 per cent l and the Export Index saw a 0.18 per cent rise for the same quarter.
The increase in the Import Index was attributed to higher prices for textiles, mineral products, and wood products, while the price changes in machinery, vehicles, mineral products, and plastics contributed to the rise of the Export Index. Emerging technologies like 5G, Blockchain, AI, IoT, and Big Data have been adopted in various sectors of the Nigerian economy, leading to economic growth and a 2.54 per cent GDP increase in the third quarter of 2023.
These technologies have been used in the banking and finance sectors to develop payment solutions, and have also benefited the e-commerce sector, enabling online sales and job creation.
Nigerian companies entered the final quarter of 2023 with a cash reserve of N2.3 trillion, representing a 27 per cent increase from the previous year. This is the largest cash balance in recent history.
The total revenues of the companies in the period under review were N8.05 trillion. However, these companies appear to have incurred more debt to support their operational and investment activities, with MTN, Dangote Cement, Seplat, and BUA Cement topping the chart with the largest debts. The significant cash reserves can provide a dual advantage: a shield against short-term macroeconomic turbulence and a springboard for long-term strategic investments.
