A Net Surplus of USD3.7bn on the Financial Account in Q3 2023

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March 6, 2024/FBNQuest Research

In our concluding discussion on the Central Bank of Nigeria’s balance of payments (BOP) data, we examine the trend on the financial accounts. According to the recently released BOP data, the financial account recorded a higher net surplus of USD3.7bn in Q3 ’23 compared to a revised net surplus of USD1.3bn registered in the past quarter. In standardised terms, the net surplus in Q3 is equivalent to 4.6% of GDP, compared with 1.2% of GDP in Q2 ’23.

The significant improvement in the net surplus can be attributed to a higher net inflow of USD2.9bn from financial liabilities, compared to the USD2.2bn it recorded in the previous quarter.  

The improved surplus in financial liabilities was driven by a higher inflow from portfolio investments of USD3.4bn vs. USD1.9bn in Q2 ’23.

Driving the inflow from foreign investors was investments in debt securities, which amounted to USD3.1bn, an improvement from the USD1.2bn it reported in the previous quarter.

Foreign investors have remained cautious in recent years largely due to the difficult macroeconomic situation in Nigeria and concerns related to fx liquidity.

However, it appears that foreign investors’ confidence is gradually being restored in the Nigerian market.

For instance, the CBN reported that foreign investors dominated the recent OMO auction issued on the 1st of March 2024 with a total bid of NGN821bn (USD530m). 

As a result, the total subscription amounted to NGN1.14trn, with a record sale of NGN1.06trn. The renewed foreign interest in government securities can be attributed to monetary policy tightening by the CBN, which has resulted in an elevated yield environment.

During the Q&A session of the recent MPC meeting, the CBN Governor disclosed that the bank has settled about USD400m of the existing fx backlog of USD2.2bn. This action further signalled the bank’s commitment to clearing the outstanding fx backlog and restoring offshore investors’ confidence in Nigeria’s financial markets.

Looking ahead, we believe that elevated level of fixed-income yields and the recent moves by the CBN to improve FX liquidity will serve as a catalyst in attracting investment inflows to the country.


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