Current Account Comfortably in Surplus


Thursday, July 20, 2017 9:40 AM /FBNQuest Research

We observe from the balance of payments for Q1 2017 that the current-account surplus eased gently from the equivalent of 3.5% of GDP to 3.4%.

This recovery from the earlier deficits is explained by a rebound in oil exports, a further compression in merchandise imports and stronger inward transfers.

We see the classic lag between the initial slump in oil export revenues and the crash in imports. Merchandise exports fell sharply from Q4 2014, and the nosedive in imports began in Q4 2015. In a forthcoming daily note we will examine trends on the capital account

The share of oil and gas exports in GDP has crashed from 18.5% in Q4 2012 to just 9.6% in Q4 2016. A modest recovery to 10.8% in Q1 is attributable to a pick-up in oil production and the further contraction in GDP

The compression of import demand does point to some success for the FGN’s substitution policy, one example being rice cultivation. However, the greater influence would have been what we term involuntary substitution. 

Drilling down into the outflow on services in Q1 2017, we find a sharp decline in business travel outflows to US$61m from US$655m two years earlier. Similar trends are discernible for health and education related expenditure. The picture should change now that the CBN is making fx regularly available for the retail segment.


Net current transfers, which are mostly workers’ remittances, have held up better than expected, at more than 5% of GDP for three successive quarters.  

We see current-account surpluses representing 3.1% of GDP this year and 1.2% for 2018, when imports are expected to recover. The forecasts of the IMF from April are 1.0% in both years, and those of Fitch Ratings from March are a deficit of -0.7% this year and a surplus of 0.9% in 2018. 

Related News
1.       CBN Publishes May 2017 Economic Report
2.      CBN Publishes Q1 2017 Economic Report
3.      NBS Annual Abstract of Statistics 2016
4.      Boosting Investments: Nigeria's path to growth
5.      CPI Drops to 16.10% in June 2017, 0.15% Lower Than 16.25% May Rate
6.      Headline Inflation in June 2017 to Decline to 16.1%
7.      Nigerian Economy on a Recovery Path
8.     An Alarming North-South Divide
9.      Inflation Rate to Drop Further to 15.64% - FSDH
10.  The Decent Buffer of Reserves; Declined by US$40m in June
11.   The Mundell-Fleming Trilemma: The Nigerian Experience

Related News