A Decent Current Account Surplus in Q3 2021


Tuesday, January 11, 2022 / 09:49 AM / by FBNQuest Research / Header Image Credit:


Balance of payments data obtained from the Quarterly Statistical Bulletin (QSB) of the CBN reveals that Nigeria's current account for Q3 '21 swung to a surplus, equivalent to 3.4% of GDP. After nine consecutive quarters of current account deficits, the Q3 surplus represents the second successive surplus (after the revision for Q2 '21). The positive outturn on the current account is mainly attributable to a net surplus of USD1.8bn in the trade account, equivalent to around 1.6% of GDP, and a net inflow of USD6.5bn in current transfers. Lower net outflows on the services and income accounts relative to the prior quarter also contributed to the positive development.


The improvement on the trade account can be linked to positive net proceeds from crude oil exports amounting to USD8bn. However, non-oil imports which declined by c.USD1.6bn had the greater positive effect on the trade account. 


Non-oil exports amounted to c.USD1.5bn. While this is a slight increase over the USD1.4bn in the preceding quarter, they have yet to recover to the pre-pandemic run-rate of over USD2bn. Non-oil exports, which are very low for a country of Nigeria's size, continue to emphasize the need for export diversification.


The services account, which has historically been in deficit, has posted significantly smaller deficits since Q2 '20 at the height of the pandemic, as Nigerian households and companies made minimal use of the allowances offered for health, education, and travel purposes. This has been broadly positive for the current account.


In Q3, the deficit in services shrunk to USD2.5bn from USD3.2bn in Q2 (vs an average pre-pandemic run-rate of cUSD8bn). 


The net deficit on the income account decreased to USD2.0bn from cUSD2.7bn in Q2, mainly because of a reduction in the net outflow on income on investments of foreign companies.


Net current transfers recovered to their highest level since Q4 '19, and slightly surpassed Q1 '20 levels (pre-pandemic). The rise was mostly due to a USD470m increase in net transfers to the general government. Remittances from workers were constant at USD4.9bn.


Notably, the marked improvement in the current account reflects the recovery of oil prices which peaked at over USD80/ barrel in Q3. Oil prices are being sustained by supply restrictions, which are a result of production difficulties, such as a decrease in Russian output over the last several months and political instability in Libya. 


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