In Q3 2018 Nigeria’s current account returned to a deficit, equivalent to -2.9% of GDP, compared with a downwardly revised surplus of 4.4% the previous quarter. The explanation is not the usual slump in oil export earnings, rather a surge in imports to their highest level since Q1 2015. We noted that the National Bureau of Statistics (NBS) explained the surge in its commentary on trade statistics for Q3 as due to imports of drilling platforms for the oil and gas industry (Good Morning Nigeria, 17 December 2018).
- We have therefore a similar trend in the trade (customs) and balance-of-payment (BOP) series for Q3 2018. We note also that the new BOP data incorporates sizeable upward revisions for merchandise imports in both Q1 and Q2.
- The net deficit on services increased from -5.2% to -6.4% of GDP in Q3. In dollar terms, it was the highest deficit since the start of the current series in 2008. The source is a CBN summary with little detail so we suspect that the freight and insurance costs attached to the import of platforms are to blame.
- Net current transfers have remained within a range of 5.0% to 6.5% of GDP for two years but have slipped back since the start of this year.
Trends on the balance of payments (%/GDP)
Sources: CBN; FBNQuest Capital Research
- The BOP data for Q3 are provisional. If this negative trend on the current account is sustained in coming quarters, which is not our expectation, then Nigeria’s external balance sheet, a core selling point in the credit story, becomes much weaker.
- A national BOP committee has been established, chaired by the CBN and including the NBS. We understand that the treatment of transactions emanating from the oil joint-ventures will be covered.
