The Importance of Current Transfers for the BoP


 Thursday, February 13, 2020 09:53 AM / FBNQuest Research/ Header Image Credit: Fulcrum Financial


We note from the latest balance of payments (BoP) data that net current transfers increased by 0.5% y/y to US$6.0bn in Q3 2019, and by 2.6% q/q. Net workers' remittances generally account for more than 90% of net transfers, the exception being Q1 2019 (see below). They peak in the fourth quarter to coincide with the Christmas holiday season. We see from our chart that transfers exceeded portfolio investment each quarter over the past four years. They are the steadier source of fx inflows, and trending upwards.


The CBN is heading a continent-wide initiative to gather data on remittances. It would be useful for policymakers and certain industries to have an accurate idea of the end-use of inflows on this scale. The information is only available anecdotally at present.


Nigeria's BoP is deteriorating, we have often observed, because exports are stable whereas imports are rising due to the demand driven by annual population growth of +/- 3%. Without the fx inflows from transfers, the current account/GDP ratio would be about five percentage points worse. In these circumstances, a FGN strategy for the diaspora (including possible incentives for remittances) is surely warranted. Individual state governments could develop their own planning.


According to some analysts, the US restrictions on the issue of immigration visas to Nigerians (and nationals of five other countries) that take effect from later this month will have a negative impact on remittances. This may be likely although Nigerians can apply for comparable visas elsewhere.


Current transfers and portfolio investment (net; US$ bn)


Proshare Nigeria Pvt. Ltd.


Sources: CBN; FBNQuest Capital Research



The record net inflow of US$7.6bn in Q1 2019 was achieved thanks to a net other transfer of US$1.6bn. We understand that the source was a development agency and the beneficiary was non-profit institutions serving households.


Proshare Nigeria Pvt. Ltd.

Related News

  1. NSR H1 2020 (6) - Balance of Payment - Edge of the Cliff
  2. Steady Upward Trend In Remittances; Net Current Transfer Declined By 2% YoY To $5.93bn in Q2 2019
  3. Leveraging Nigeria's Growing Remittances
  4. MTN Nigeria Resolves Amicably Issues Relating to Foreign Exchange Remittances
  5. Finance Ministry Questions NNPC Remittances To Government, Again
  6. Remittances: A Smoothening Agent
  7. Whither The Substantial Remittances?
  8. A Recovery in Inward Remittances
  9. Ample Scope to Boost Remittances
  10. Untapped Potential of Remittances
  11. Illicit International Money Remittances through the Banking System
  12. NSR H2 2019 (8) - Balance of Payment - Foot On The Pedal
  13. Fragile Balance of Payment Position: Policy Options - FSDH
  14. Overall Balance of Payments Swung Into Deficit of $4542.08m in Q3 2018
  15. NSR H2 2018 (10)- Balance of Payment: CA Surplus Recycled Through Record Portfolio Outflows


 Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Related News