Deterioration on the services account

The current account returned to surplus in Q4 2018, equivalent to 1.0% of GDP (Good Morning Nigeria, 13 March 2019). However, the improvement in the trade surplus from 3.4% the previous quarter to 5.9% was offset by a deterioration in the services-account deficit from -6.5% to -7.2% over the same period. The deficit in the year-earlier period (Q4 2017) amounted to -4.6% of GDP. The release of balance of payments data in the CBN’s latest Quarterly Statistical Bulletin enables us to drill down in more detail.

  • Total merchandise imports declined from US$12.44bn in Q3 2018 to US$9.86bn due largely to a non-recurring item (an oil platform from Japan for the offshore Egina oilfield). The services debit for freight fell in tandem from US$0.80bn to US$0.60bn.
  • Total services debits increased from US$8.64bn in Q3 to US$9.66bn. For personal travel, the debits rose US$2.52bn to US$2.81bn: these included combined health and education costs of US$1.70bn and US$2.02bn respectively. Fx has been available to meet the retail demand for invisibles for two years. We might also wish to draw some conclusions about the provision of private health and education in Nigeria.
  • The main reason for the rise in debits on services in Q4 is less informative: debits for miscellaneous business, professional and technical services increased from US$3.27bn to US$4.32bn.
  • Credits on the services account in Q4 amounted to just US$1.38bn, consisting principally of travel and transportation.
  • Transactions on the services account (US$ bn)

    Transactions on the services account

    Sources: CBN; FBNQuest Capital Research
  • There is no ready solution to the widening deficit on services. Nigeria cannot create overnight, for example, a healthy tourism industry, an IT outsourcing hub or a Pan-African insurance business.

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