A robust surplus on the current account

In Q2 2018 Nigeria’s current-account surplus widened from the equivalent of 3.8% of GDP in Q1 to 5.7%, and was the highest in value terms since Q1 2013. Merchandise exports increased by 8.0% on the quarter, and the share of oil and gas exports in GDP reached 13.7%. Non-oil exports, shown by the CBN as overwhelmingly electricity, almost doubled to US$1.76bn, which does not tally with the anecdotal evidence. Merchandise imports declined by 15.3% on the quarter due to a steep fall in imports of energy products which we attribute to shipment timings.

  • Oil and total exports move in tandem, and the rare current-account deficits (such as Q2 and Q3 2016) are caused by oil revenue weakness. Both grew strongly in Q2: prices firmed and the leakages were contained.
  • Nigeria runs structural deficits on services and income, reflecting the failure to diversify the economy. The net services outflow amounted to US$5.15bn, principally other business services (US$2.48bn) and travel (US$1.71bn).
  • The one piece of good news (other than the oil receipts) was the increase in net current transfers, which are predominantly workers’ remittances, to US$6.36bn, their highest for at least ten years and probably highest on record. A frustration we have regularly voiced is that nobody has more than a fragmentary view where these receipts have been deployed.
  • We could be seeing the relative strength of the remitting economies (principally the US, the UK and other OECD members) at work. The trend increase could also be a response to the CBN’s fx reforms.
Trends on the balance of payments (BoP; %/GDP)

Sources: CBN; FBNQuest Capital Research
  • The current-account surplus/GDP ratio is at a level where it can absorb the decline in portfolio inflows in response to the normalization of US monetary policy and the resurgence of the US dollar.



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