From the balance of payments (BoP) for Q3 2017, we see that the current-account surplus widened from the equivalent of 1.4% of GDP in Q2 to 2.4%. Merchandise exports increased by 10.8% on the quarter while imports declined by -8.4% as Nigeria emerged slowly from recession. The 11.7% share of oil and gas exports in GDP was the highest since Q3 2014.
That of other exports, which are shown as electricity and non-oil, declined from 1.4% of GDP in Q2 to 0.7%. In a forthcoming daily note, we will examine trends in the capital account.
The net deficit on the services accounts widened from 3.7% to 4.9% of GDP in Q3. Debits on the account for travel have risen steeply from US$490m in Q1 to US$1.36bn in Q2 and US$2.23bn.
This is proof of one success of the CBN’s several fx windows: its supply of fx to banks at N357 per US dollar for their on sale to the retail segment at N360 for the payment of invisible such as travel. We see further evidence in the BoP of this success in the increase of US$890m in debits for other business services over the same two quarters.
In contrast, the net deficit on the income account narrowed from 3.3% to 2.7% of GDP in Q3 due to a smaller outflow for investment income.
Net current transfers, which are overwhelmingly workers’ remittances, had another strong quarter, achieving the highest level since Q4 2010 in US dollar terms.
We are comfortable with the current-account surplus/GDP ratio at a low single-digit level because of the FGN’s proven ability in tapping the Eurobond markets and of the return of the offshore portfolio community since the CBN’s opening of new fx windows.
