Nigeria’s current account gains $11b from oil receipts
By Jeph Ajobaju, Chief Copy Editor
Nigeria’s a current account deficit reduced to $424 million in the second quarter of 2021 (Q2 2021), its lowest level in two years, according to Central Bank of Nigeria (CBN) data on balance of payment (BOP).
BOP has been in deficit for 10 quarters running but it dipped 79.8 per cent in Q2 2021 against $2.1 billion in Q1 2021 and 87 per cent against $3.27 billion in Q2 2020.
The increase in BOP rides on the surge in the export of crude oil which shot up 73 per cent from $6.48 billion in Q1 2021 to $11.22 billion in Q2 2021. It rose 116.7 per cent from $4.31 billion in Q2 2020.
Global oil market rally and the reopening of economies and relaxation of lockdown measures are major contributing factors to the surge in Nigeria’s crude export, according to Nairametrics.
However, oil earnings are still below pre-pandemic levels because of the decline in crude oil production.
National Bureau of Statistics (NBS) data shows that oil production has hovered around 1.6 million barrels per day (mbpd) in the past year against an average 2.02 mbpd before the pandemic.
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Q2 2021 highlights
- Goods exports fetched $12.61 billion, a 63.5 per cent rise on Q1 2021.
- Goods imports amounted to $11.55 billion, a net credit of $1.06 billion.
- Services had $4.67 billion negative balance, jumping 58.7 per cent against $2.94 billion in Q1 2021 and 80.6 per cent against $2.59 billion in Q2 2020.
- Nigerians spent $1.54 billion on travel, an increase on Q1 2021, due to the backlog caused by pandemic lockdowns across the world.
Nigeria has seen negative BOP for 10 consecutive quarters since Q1 2019. But the numbers may turn positive soon, hinged on the uptick in global crude oil prices, as the economy reopens amid coronavirus vaccine roll out.
Background
Nigeria’s current account deficit was first reported to be $1.75 billion in Q1 2021, due to a decline in foreign direct investments and diaspora remittances. The CBN later reviewed the data putting the deficit at $2.1 billion, per Nairametrics.
NBS foreign trade data shows that trade deficit dropped to N1.87 trillion in Q2 2021 from N3.94 trillion in Q1 2021.
As BOP has maintained a negative position since Q1 2019, foreign trade balance has also been in deficit since Q4 2019, exacerbated by a huge rise in imports.
Explanation of BOP
Balance of payment records all monetary transactions between residents of a country and the rest of the world in a given period. It is ideal for measuring whether a country has a surplus or deficit of funds.
- It measures the inflow and outflow of goods, services, investment incomes, and transfer payments.
- BOP has three components – current account, capital account, and financial account.
- A BOP statement can help determine whether a country’s currency value is appreciating or depreciating.
- Despite the latest data, the naira is still under pressure, which is why Abuja turned to the international debt market to source funds to boost external reserves and to continue foreign exchange market intervention.
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