First quarter trade account turns negative as oil prices fall

Nigerias trade account turned negative in the first quarter after exports fell by almost half, the national bureau of statistics said on Monday, as lower prices for crude oil slashed government revenues and caused the economy to contract.

Nigeria, Africa's biggest economy, faces its worst economic crisis in years. The value of its exports, mostly crude, plunged 52 percent to 1.27 trillion naira ($6.4 bln) in the three months to March from a year ago. Much of the hard currency it needs to finance imports evaporated.

With limited manufacturing capacity, Nigeria imports most of what it consumes. First-quarter imports dropped 15.8 percent to 1.45 trillion naira ($7.3 bln), the statistics bureau said, pushing the trade account crossed into the red for the period.

The balance of trade for the first quarter was minus 184.1 billion naira ($925.13 million), down from plus 937.4 billion naira in the same period a year earlier. Net trade balance stood at $14.5 billion for 2015.

"The total value of Nigeria's merchandise trade at the end

of Q1 stood at 2.72 trillion naira. This development arose due to a sharp decline in both imports and exports," the statistics office said.

Nigeria's exports fell 34.6 percent by March from the last quarter and imports declined 7.8 percent. The decline in crude oil exports, which accounted for 64.7 percent of total domestic exports, hit the economy the most.

Nigeria's economy shrank by 0.36 percent in the first quarter, compared with 3.96 percent growth last year, as currency controls started to bite. The limits on currency were imposed by the central bank to support the naira as oil prices fell.

The dollar restrictions have also caused inflation to spike. This month, the statistics office said, annual inflation climbed close to a six-year high of 13.7 percent in April.

Nigeria's central bank said last week it would introduce a flexible currency regime and abandon its naira peg to the dollar, a policy U-turn designed to improve exports, local manufacturing and stave off a recession.

However, the bank has yet to clarify how the new policy would work, spooking foreign investors, long worried about getting caught in the middle of a currency devaluation. Nigeria's stock market posted its biggest daily decline in 16 months on Monday.

President Muhammadu Buhari also has backed central bank's decision to move away from the dollar peg, which is seen as overvaluing the naira, after rejecting earlier calls to devalue the currency.

Nigeria exported mainly to Asia and Europe. Imports were dominated by machinery, petrol, chemicals and related products from Asia, Europe and Americas. Imports within Africa grew by 5.7 percent.