In Q4 2018 Nigeria’s current account returned to surplus, equivalent to 1.0% of GDP, compared with a downwardly revised deficit of -1.4% the previous quarter. The turnaround is largely explained by a sharp fall of US$2.6bn in merchandise imports in Q4, divided between US$700m and US$1.9bn on oil and non-oil transactions respectively. Other positive factors are a small q/q improvement in merchandise exports (2.8%) and a decline in the net income outflow (10.8%), balanced by a sizeable deterioration on the net services account (16.5%).
The data are provided by the CBN in the form of a brief. When we have fuller information, we will provide an analysis on the outflow on services and income.
The ratio for current transfers/GDP, not shown in our chart, has fluctuated within a range of 5.0% to 6.5% over the past two years.
While the current account has returned to surplus in Q4, the long-term trend is one of deterioration. If we look back to the start of the data series in 2008, and so cover periods of high and low oil prices, we see that import growth has outpaced export growth. Imports have risen on the back of the rising population, diversification notwithstanding, while exports have stagnated.
Trends on the balance of payments (%/GDP)
Sources: CBN; FBNQuest Capital Research
The BOP data for Q3 has been revised, with the current-account deficit adjusted from US$3.1bn to US$1.5bn. Imports for the quarter are now US$1.7bn lower than previously reported, which we attribute to more accurate data for the cost of imported drilling platforms and other infrastructure for the oil and gas industry.
An improvement in the reporting of oil industry transactions will be one of the main responsibilities of the new national BOP committee, chaired by the CBN and including the NBS.