Thursday, July 16 , 2020 / 08:45
AM / by FBNQuest Research / Header Image Credit: FBNQuest
We see from the CBN's latest Quarterly Statistical Bulletin that debits on the services account decreased by close to US$1.5bn in Q1 2020 to US$8.9bn. A rise for travel almost matched the fall for transportation but debits for other business services, which capture all transactions not posted under other headings, fell by close to US$1.0bn. The bulletin reinforces the view that Nigeria produces very little in the way of services for its population of about 200 million. Transportation, travel and other business services together comprised 95% of total debits.
Travel debits of US$3.55bn in Q1 were far more personal (US$3.15bn) than business (US$0.40bn). Nigerians enjoy a wide range of fx allowances. They spent US$1.58bn on education, US$0.68bn on healthcare and US$0.89bn on 'others', which we take to be holidays. Annualized, these are substantial outflows on the balance-of-payments.
Credits on the services account of US$1.12bn were unchanged from the previous quarter.
Looking ahead to the data release for Q2, we would expect a sharper fall in debits to reflect the domestic and external impact of the current pandemic. For at least part of the quarter, there were few, if any flights in and out of Nigeria: foreign schools and universities were closed due to the virus; and many foreign hospitals were only admitting Covid-19 cases.
Over time, Nigeria could replicate the prominent services industries in other EMs such as transportation (Ethiopia), recreational tourism (Kenya, Egypt, Morocco and South Africa), medical tourism (India) or IT and outsourcing (India).
Transactions on the services account (US$ bn)
Sources: CBN; FBNQuest Capital Research
Progress in this direction would make a dent in Nigeria's structural current-account weakness, evident in its seven deficits in succession.