Commodity terms of trade in three straight quarterly declines
By Jeph Ajobaju, Chief Copy Editor
All commodity terms of trade (ToT) dipped 2.85 per cent in the third quarter of 2021 (Q3 2021) and commodity exports slashed 2.3 per cent, according to the latest National Bureau of Statistics (NBS) report.
This is the third consecutive quarterly and highest decline in commodity ToT this year. It declined 0.51 per cent in Q1 and 0.35 per cent in Q2.
TOT is the ratio between a country’s export prices and its import prices. The ratio is calculated by dividing the price of exports by the price of imports in percentage terms.
An increase in ToT between two periods (or when TOT is greater than 100 per cent) means 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, the NBS explained, an increase in the price of oil between two periods (with oil production remaining the same) is likely to increase or improve the ToT for Nigeria and vice versa, per reporting by Vanguard.
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ToT breakdown in Q3
“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 per cent in September and, on average, decreased by 2.85 per cent between July and September 2021,” the NBS said.
“The average decrease of 2.85 per cent 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 per cent 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).”
All-region group exports, imports
All-region group export index decreased 2.33 per cent mainly due to lower prices for export to all the regions. All-region group import index increased 0.52 per cent due to marginal increases in import prices from all the region.
The major export and import markets of Nigeria in Q3 2021 were India, Spain, Italy, France, and China.
Major exports to these countries were crude oil and natural gas liquefied.
Major imports from them were motorcycles, vehicles with petrol fuel engine, motor spirits, polyethylene, instruments, appliances, and machines for measuring.