February 19, 2024/FBNQuest Research

According to the most recent Quarterly Statistical Bulletin (QSB) from the Central Bank of Nigeria (CBN), Nigeria’s current account improved to a surplus of USD3.3bn in Q3 ’23, higher than a revised surplus of USD808.9m in Q2 ’23. In standardised terms, the figure represents a surplus of 4.0% of GDP in Q3 ’23. This compares favourably with a revised surplus of 0.8% of GDP in the previous quarter. The current account has now recorded surpluses for two consecutive quarters. Also, it is worth noting that the data is provisional and is subject to revisions in subsequent QSB.

A striking observation is that the balance of payments (BOP) data series for Q3 ‘23 contains significant revisions to the initial data provided for Q2 ‘23.

For instance, the latest BOP data show a smaller current account surplus of 0.8% of GDP in Q2 ’23 compared with a surplus of 2.8% previously.

Similar to the previous quarter, the positive development on the current account reflects an improvement in the trade account, whose surplus improved to USD3.2bn during the quarter, from USD155.2m in Q2 ’23.

Although trade exports increased by +7% q/q to USD13.7bn, the positive outturn on the trade account was primarily driven by a reduction of -17% q/q in the value of imported goods to USD10.5bn.

We had anticipated the lower value of Nigeria’s merchandise imports given the prevailing challenges with fx liquidity which have resulted in a sharp depreciation of the Naira currency.

The net deficit on the income account increased to -USD3.3bn from -USD3.2bn in Q2 ’23. Meanwhile, the current transfers account showed a slightly smaller surplus of USD5.3bn compared with USD5.6bn in Q2 ’23.

Looking ahead, we believe that the current account will remain in surplus in 2023 due to reduced imports resulting from fx liquidity challenges. As such, we project a current account surplus of 0.2% of GDP in 2023.

We expect the current transfers account, which has historically been supportive of the current account balance, to maintain its trend of surpluses, thanks to inbound diaspora remittance inflows