January 14, 2024/FBNQuest Research

The Central Bank of Nigeria (CBN) data on Nigeria’s Balance of Payments (BoP) shows that Nigeria’s current account (CA) produced a net surplus of US$6.1bn in Q3 2024, up from a revised net surplus of US$3.9bn in Q2 2024 and US$1.5bn in the corresponding quarter of the prior year. The CA surplus in Q3 2024 marks the eighth consecutive quarter of surplus. In relative terms, the absolute value of the surplus is equivalent to 13.0% of GDP, compared with the 8.7% recorded in the preceding quarter.  This is the highest surplus as a percentage of GDP recorded in the data series, surpassing the record surplus from Q2.

• Positive developments across all its components drove the quarter-on-quarter (QoQ) improvement in the CA.
• Beginning with the merchandise trade, the net credit on the trade account improved to US$4.3bn (9.2% of GDP), up from a revised surplus of US$3.3bn (7.4% of GDP) in Q2 2024.
• Although merchandise exports improved, the trade account’s higher credit was primarily driven by a reduction in imports, which fell from US$8.8bn to US$9.6bn in Q2 2024.
• Oil and gas exports accounted for 86% of merchandise exports, or US$11.2bn, in Q3 2024. However, its share of imports declined to 33%, or US$2.9bn, from US$3.8bn in Q2 2024.
• The services account, which typically runs a net deficit, recorded a lower net deficit of -US$3.2bn from -US$3.5bn in the prior quarter.
• Also, the income account recorded a reduced net deficit of -US$1.1bn, down from -US$1.8bn in Q2 2024, driven by an increase in investment income from US$1.4bn from US$788m in the previous quarter.
• Finally, the net surplus on current transfers in the BoP increased to US$6.1bn from US$5.8bn in Q2 2024, primarily driven by workers’ remittances, totalling US$5.4bn.
• Going forward, we expect the CA to maintain its surplus in the near term, driven by the ramp-up of domestic petroleum product refining.
• Analysts forecast a CA surplus of 7.4% of GDP in 2024. However, despite the gains from domestic refining, we expect the surplus to moderate to 5.7% in 2025 as businesses increase imports in response to the reduced naira exchange rate volatility.

Culled: Proshare