Nigeria’s All-Commodity Terms of Trade Worsens as Imports Rise

According to the NBS Commodity Price Indices and Terms of Trade report for the first quarter of 2024, the All Products Terms of Trade (ToT) Index decreased by 0.12% from January to March 2024. During the same period, the All-Commodity Group Import Index rose by 0.51%.

The increase in the Import Index was mainly due to higher import costs for vehicles, aircraft, and parts (+0.63%), plastic, rubber, and articles (+0.57%), mineral products (+0.89%), construction materials (+0.86%), and paper products (+0.79%). Similarly, between January 2024 and March 2024, the All-Commodity Group Export Index increased by 0.39%, driven by higher export prices for mineral products (+0.75%), chemical and related products (+0.62%), plastic and rubber products (+0.39%), and vegetable products (+0.36%).

The decline in Terms of Trade for Q1 2024 is due to the fact that the increase in the import index (0.51%) is greater than the growth in the export index (0.39%). The All-Commodity Terms of Trade (ToT) Index evaluates a country’s trade power by comparing the prices it receives for its exports to those it pays for its imports. It shows how much a country can purchase in imports from its exports.

A decrease in the Terms of Trade index indicates that either export prices have dropped in relation to import costs or import prices have increased in relation to export prices. To enhance the Terms of Trade, the government should prioritize policies that boost the productivity of export products in order to earn higher prices. Additionally, importers should receive negotiation training to equip them with the skills to keep import prices low. SOURCE: CSEA AFRICA