From the balance of payments (BoP) for Q4 2017 we see that the current-account surplus widened from the equivalent of 2.1% of GDP in Q3 to 3.6%. Merchandise exports increased by 9.0% on the quarter while imports declined by -11.5%, driven almost entirely by lower imports of crude oil and gas. The 12.0% share of oil and gas exports in GDP was the highest since Q3 2014. That of other exports, which are shown as electricity and non-oil, rose marginally from 0.7% of GDP in Q3 to 0.8%. Data on a customs basis tend to tell a different story.
- The net deficit on the services account widened slightly from 4.5% to 4.6% of GDP in Q4. Debits on the account for travel soared from US$180m in Q4 2016 to US$1.71bn one year later.
- This highlights the success of one of the CBN’s several fx windows: its supply of fx to banks at N357 per US dollar for their onsale to the retail segment at N360 for the payment of invisibles such as travel. We see further evidence in the BoP of the transformation of fx availability in the increase of debits for other business services from US$570m to US$2.42bn over the same one-year period.
- In contrast, the net deficit on the income account narrowed from 3.1% of GDP in Q3 to 2.9% in Q4.
- Net current transfers, which are overwhelmingly workers’ remittances, had a strong quarter, achieving the highest level since Q4 2013 in US dollar terms.
Sources: CBN; National Bureau of Statistics (NBS); FBNQuest Capital Research
- We are comfortable with the current-account surplus/GDP ratio at a low single-digit level because of the FGN’s proven ability in tapping the Eurobond markets and of the return of the offshore portfolio community since the CBN’s opening of new fx windows.