Nigeria will run a current account deficit of 1.4 percent of GDP in 2015 to 2018 as the country continues to grapple with macro-economic headwinds from the slide in oil prices that has slowed growth.
A country’s current account balance is influenced by numerous factors such as its trade policies, exchange rate, competitiveness, inflation and others. These parametres are taking a one-two blow in the Nigerian situation.
Nigeria had been running a current account surplus in recent times as the value of its exports exceeds imports, although the monolithic nature of exports always meant surplus was probably not sustainable.
We believe that the aforementioned deficit could widen as falling oil price crimps government revenue and also culminate in depleting external reserves.
The persistent fall in oil price left the Central Bank of Nigeria (CBN) with no option than to devalue the naira to slow the reserve slide and stabilise the naira.
External reserves lost a cumulative amount of $3 billion in the last four weeks. Specifically, the foreign reserves tumbled from $33.8 billion on February 5 to $30.8 billion on March 5.
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Inflation rate for the month of January was 8.3 percent, higher than the 8 percent recorded in December as consumer wallets remain pressured.
Nigeria needs to look inwards and tap into the resources at its disposal, which has not been explored as the devaluation of the currency could take a drastic toll if exports are not bolstered.
Natural gas, which has been lying fallow, could be exploited and used as a cheap source of energy for manufacturers and business. This will help reduce cost of production of businesses and boost the country’s export base and also help reduce the current account deficit.
Patrick Atuanya and Bala Augie
