January 03, 2018 /09:09AM / FBNQuest Research
the balance of payments (BoP) for Q3 2017 we see that the current-account
surplus widened from the equivalent of 1.4% of GDP in Q2 to 2.4%. Merchandise
exports increased by 10.8% on the quarter while imports declined by -8.4% as
Nigeria emerged slowly from recession.
11.7% 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, declined from
1.4% of GDP in Q2 to 0.7%. In a forthcoming daily note we will examine trends
on the capital account.
The net deficit on the services account widened
from 3.7% to 4.9% of GDP in Q3. Debits on the account for travel have risen
steeply from US$490m in Q1 to US$1.36bn in Q2 and US$2.23bn.
This is proof of one success 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 this success in the increase of
US$890m in debits for other business services over the same two quarters.
In contrast, the net deficit on the income
account narrowed from 3.3% to 2.7% of GDP in Q3 due to a smaller outflow for
Net current transfers, which are overwhelmingly workers’ remittances,
had another strong quarter, achieving the highest level since Q4 2010 in US
dollar terms (Good Morning Nigeria, 29 December 2017).
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.