Merchandise imports stubbornly high in Q3'15


Wednesday, January 13, 2016 09:03 AM / FBNQuest Research

Oil exports are the principal determinant of Nigeria’s current-account balance. Since they have slumped from US$20.0bn in Q3 2014 to US$10.1bn one year later, or from 14.0% to 10.1% of GDP over the same period, we should not be surprised that the trade account has deteriorated from a comfortable surplus before the slump in the price to a small deficit.

The three other components of the current account are more stable: services and income (net outflows), and transfers/remittances (net inflow). The chart therefore shows that the small deficit on trade routinely becomes a larger deficit on the current account, which we forecast at 3.5% of GDP for the full year (2015).

There has been some relief from the decline in the net outflow on the income account, which is attributable to a fall in the remittance of dividends and branch profits.    

If the oil price is not to rebound this year, hopes of Nigeria’s current-account (BoP) salvation rest upon import compression. Monthly merchandise imports averaged N830bn over January-September 2015 in the naira BoP series.

While a little lower than the N920bn cited by CBN Governor Emefiele in his press statement in Abuja on Monday, the point to stress is that imports have been slow to adjust to the slump in the oil price.

Trade data from the customs may tell a different story and the BoP data series only runs through to Q3 2015. This is the background, however, to the measures announced in the governor’s statement, which strike us as another stratagem in lieu of devaluation.

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