Small Decline in the Current-Account Deficit Q3 2019


Tuesday, January 14,  2020 / 10:07 AM / FBNQuest Research / Header Image Credit: CBN, FBNQuest Research


Nigeria's current-account deficit narrowed in Q3 from a revised -3.3% of GDP the previous quarter to -2.3%. The narrowing was the result of a stronger performance on trade. Our chart shows some marked swings because the Nigerian national accounts are not seasonally adjusted.


It neatly shows how Nigeria has an oil economy from a balance of payments (BoP) perspective in the sense that the outcome on trade moves in tandem with that of the current account. Oil and gas still provide close to 90% of merchandise export receipts.


If we look back to the start of the BoP data series in 2008, and so cover periods of high and low oil prices, we see that import growth has outpaced export growth. Imports have risen on the back of the rising population, diversification notwithstanding, while total exports have stagnated.


The net deficit on services has settled on a plateau of US$8.0bn to US$8.5bn over the past four quarters.


For the compilation of the BoP for Q3 2019, the CBN's statistics department would have revised its assumptions for informal cross-border exports and imports following the land border closure in mid-August.


We note that non-oil imports declined from US$11.5bn in Q2 to US$11.0bn. Similarly, exports other than crude oil and gas dropped from US$2.0bn to US$1.3bn, which could reflect the impact of the closure on the flourishing cross-border trade in subsidized petroleum products.


Trends on the balance of payments (%/GDP)

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Sources: CBN; FBNQuest Capital Research


The CBN has made some sizeable data revisions for Q2 2019: the trade deficit has narrowed from 2.2% to 1.3% of GDP and the current-account deficit has widened from -2.5% to -3.3%. The culprit is a rise in oil and gas imports from US$2.2bn to US$3.0bn.

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