Surge in import levels experienced in Africa’s biggest economy has been said to deplete the current account of the country into a negative zone.
In Q3 2018, Nigeria’s current account returned to a deficit, equivalent to -2.9 percent of GDP. This is however against the downwardly revised surplus of 4.4 percent the previous quarter.
According to the National Bureau of Statistics (NBS), the deficit in Nigeria’s current account is not majorly as a result a slump in oil export earnings, “rather a surge in imports to their highest level since Q1 2015.
“Total imports of N4,172.3 billion in Q3 2018 was 73.8 percent higher than Q2 2018 value of N2,400.14 billion due to importation of submersible drilling platforms in August, which was quite expensive and of course occasional importation,” according to the NBS report.
According to report by FBNQuest, “We have therefore a similar trend in the trade (customs) and balance-of-payment (BOP) series for Q3 2018. We note also that the new BOP data incorporated sizeable upward revisions for merchandise imports in both Q1 and Q2.”
The net deficit on services increased from -5.2% to -6.4% of GDP in Q3. In dollar terms, it was the highest deficit since the start of the current series in 2008.
Although the CBN source summary provided little detail, the suspicion is that the freight and insurance costs attached to the import of platforms are to blame.
Net current transfers have remained within a range of 5% to 6.5% of GDP for two years but have slipped back since the start of this year.
The BOP data for Q3 are provisional. If this negative trend on the current account is sustained in coming quarters, then Nigeria’s external balance sheet, a core selling point in the credit story, becomes much weaker.
A national BOP committee has been established, chaired by the CBN and including the NBS. We understand that the treatment of transactions emanating from the oil joint ventures will be covered.
